I want to use the brrrr strategy to buy my first property, but I don’t have a w2 history. The work I do is for a waterslide company and they don’t report anything, and I cut grass as well while being a full time college student. I have a 755 credit score, 20k saved. What are my options?
I want to use the brrrr strategy to buy my first property, but I don’t have a w2 history. The work I do is for a waterslide company and they don’t report anything, and I cut grass as well while being a full time college student. I have a 755 credit score, 20k saved. What are my options?
Yes for sure - you should definitely check out hard money loans to assist with the purchase and then "DSCR Loans" for the cash-out refinance (DSCR Loans are made particularly for investors like you - no DTI or W2 considered at all)
Published an article last year on BP on this exact topic (BRRRR method financing options) hope it helps!
Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
2y
Jalen, I don't have an answer, but I just want to extend KUDOs to you for having so much foresight and ambition to be thinking and planning like this. You are distinguishing yourself among your peers! I wish you good luck and I'll follow the answers here. My 2 cents, Mike
Lender · Ann Arbor, MI · Member since 2021 · 664 posts · 226 votes
2y
Hey Jalen! Not sure if these would work but a couple of options. The best option in your case is probably a DSCR loan with 15% down. This way you wouldn't need to provide paystubs, W-2s, tax returns etc. You would qualify based on the potential rent of the property. Note that this is extremely hard to do with BRRRR deals since the rental amount you qualify for is for the property as-is and you would not be able to finance any repairs. Maybe not exactly what you were looking for, but maybe a way to get you into a property regardless.
I want to use the brrrr strategy to buy my first property, but I don’t have a w2 history. The work I do is for a waterslide company and they don’t report anything, and I cut grass as well while being a full time college student. I have a 755 credit score, 20k saved. What are my options?
Hard money loan to acquire and rehab, then refinance into a DSCR loan!
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
2y
DSCR which has awful rates unless 25-30 down is an option. A better option though when you are young is to buy low down house hack but you need a salary to get conventional mortgages. I work with many fresh grads and even an offer letter can get you a conventional mortgage.
I want to use the brrrr strategy to buy my first property, but I don’t have a w2 history. The work I do is for a waterslide company and they don’t report anything, and I cut grass as well while being a full time college student. I have a 755 credit score, 20k saved. What are my options?
Yes for sure - you should definitely check out hard money loans to assist with the purchase and then "DSCR Loans" for the cash-out refinance (DSCR Loans are made particularly for investors like you - no DTI or W2 considered at all)
Published an article last year on BP on this exact topic (BRRRR method financing options) hope it helps!
Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
2y
Couple options that might be viable for you (I don't know all of your circumstances)
- BRRRR into a DSCR by creating equity; partner closely with a lender before starting on this to cover seasoning and other requirements - also this will only work for an investment property, not a primary
- bank statement loan/1099 loan may work if you can put at least 10% down and want a primary residence - will depend on how you're operating and a few other variables
- seller financing; find a seller willing to carry a note for a few years
- co-borrower; someone with decent income and credit who will be on the loan with you
- DSCR purchase; be prepared to put down at least 75% or your rate/pricing will be horrible (70% is better); many lenders will have experience requirements; investment property only
- find a private lender willing to fund the loan you need
- get a salaried job relevant to your college coursework; your fico is strong and you have some cash, so househacking could be within reach via Fannie/Freddie multifamily purchase; get a solid workup from a competent lender before going this route as employment history will be touchy with this route
Hard money can be used for an acquisition and rehab, but make sure your takeout financing plan is bulletproof before getting hard money.
I'm originally from Baton Rouge. Let me know if I can help in any way.
Lender · Member since 2022 · 1k+ posts · 497 votes
2y
Lending options depend on if you're going to live in the property or not. If you're going to live in the property, depending on your income, you can do a bank statement loan if you don't have a W2 job.
If you aren't going to live in the property and it's an investment property, you can do a DSCR loan. DSCR loans won't use your income to underwrite the loan.
DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.
Here's a bit more in detail about how rates are calculated for DSCR loans:
1. Credit score- the higher the best. 760-780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.
2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.
3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.
4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.
I've included an example below to help illustrate this.
So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.
See example below:
DSCR < 1
Principal + Interest = $1,700
Taxes = $350, Insurance = $100, Association Dues = $50
Total PITIA = $2200
Rent = $2000
DSCR = Rent/PITIA = 2000/2200 = 0.91
Since the DSCR is 0.91, we know the expenses are greater than the income of the property.
DSCR >1
Principal + Interest = $1,500
Taxes = $250, Insurance = $100, Association Dues = $25
Total PITIA = $1875 Rent = $2300
DSCR = Rent/PITIA = 2300/1875 = 1.23
If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable). If a cash out refinance, many lenders will allow the cash out to satisfy the reserves requirement.
DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.
Hey Jalen! Not sure if these would work but a couple of options. The best option in your case is probably a DSCR loan with 15% down. This way you wouldn't need to provide paystubs, W-2s, tax returns etc. You would qualify based on the potential rent of the property. Note that this is extremely hard to do with BRRRR deals since the rental amount you qualify for is for the property as-is and you would not be able to finance any repairs. Maybe not exactly what you were looking for, but maybe a way to get you into a property regardless.
Could you possibly get a deal if you have private money?
Hey Jalen! Not sure if these would work but a couple of options. The best option in your case is probably a DSCR loan with 15% down. This way you wouldn't need to provide paystubs, W-2s, tax returns etc. You would qualify based on the potential rent of the property. Note that this is extremely hard to do with BRRRR deals since the rental amount you qualify for is for the property as-is and you would not be able to finance any repairs. Maybe not exactly what you were looking for, but maybe a way to get you into a property regardless.
Could you possibly get a deal if you have private money?
Yes private money or hard money is potentially an option if you have the avenues for it.
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