Great Credit, Good Assets- no "income" how do I get financed??

16 Replies

Like the title says, I have good credit, lots of liquid assets and no debt. Problem is I just sold my business and am going into real estate full time so I have no income. I have cash to buy some houses, but not enough to meet my cashflow goals and need some leverage- even if I can only get 50-70% LTV, it's better than all cash- any suggestions from the group??

If your liquid asset is real estate, then used it as collateral.

Joe Gore

Will traditional banks lend on real estate with no income under the new Dodd Franks "guidelines"??

@Mike Campion  have you looked into using Hard Money lenders? They don't care about your income. They look at the value of the property.. And you'll need a down payment. The fact that they use the value of the property will help you, as it will valid your numbers. They won't loan if they don't think it will work. Anyways, that's what most investors here use. Either hard money or private lenders (who also loan on value of property, not your credit or income).

Thanks for the response Gary- I have looked at hard money lenders, and I think they are a good fit for short term/ expensive money, whereas I am looking for long term/ inexpensive money as I do have good credit and good income (verifiable via bank statements), I just don't have good W-2 income as I sold my business and banks will no longer count income from a business I don't have. I don't mind paying a little extra as I am non conforming, but HML are hard to make work with buy and hold.

I have the same problem. Banks don't color outside the lines as a general rule. The people doing the loan are checking of boxes, not thinking. You can form an LLC and pay yourself (my salary is crazy low, but I have no debt so DTI still works). You can do one or two then use that income to qualify for the next one.

Commercial lending isn't nearly as by the book. You can buy multi family or storage or something and use the income from the asset as the qualifier.

Other option is to get a credit partner. I'm about to buy up some rentals with one of my private lender. My work, his credit, split profits.

Great insight- thank you for the contribution!!

If you have no income how will you repay the loan and how are you paying your other bills at this time.

Joe Gore

I have averaged quite a bit of income over the last 10 years through real estate, starting, running and selling businesses and I have quite a bit of cash reserves. Income has never been the problem, income that the bank will recognize is the issue. 

So you don't pay taxes and work under the table. Most banks will do a 4506.

Joe Gore

@Mike Campion  , I think @Darrell Shepherd idea is spot on. What you really need is a Private Lender to lend on your long term deals. They are private individuals with cash to invest. There are those who have IRA money in self directed funds solely for this purpose. There are whole strategies on how to find these folks.. Perhaps BP has some threads on this.. I don't know as I've not checked..

Some banks (not the big names) will also do portfolio loans. These are kept and serviced by the bank. The rates are higher than FNMA backed loans, because they don't have all the restrictions. Ask some investors in your area what lenders do portfolio loans. Your cash and other assets may be enough to qualify you.

I agree with some others that have mentioned the Private Lenders above. There is a LOT of information here, and elsewhere too, on this topic. I have not really looked into what I would call the Hard Money side of things too much as the rates seem to high for what I want to do - build a portfolio of buy-and-hold rentals. 

In my own case, I bought my first unit as a 'fix and flip' that turned into my own house as I really like the location and was ready to downsize too. It was from a Professional Flipper that had too many on his hands at once who I do work for (I am in the cabinet and counter top business full time) so we had a prior relationship. He sold is on a 6 month Land Contract @ 6% interest and a balloon at the end. For the fix up money, I approached my first Private Lender - someone that I knew personally and knew them well enough to know that had a lot of cash in CDs. I proposed 6% for a year, they counter offered 3% for 3 years in case I wanted to rent it for a while. He felt he was still getting a good deal. 

I have started putting out 'feelers' and making a list of other potential Private Lenders and have several that are interested in at least hearing about what I am doing. These are all people I know personally - some friends, past customers, etc..... 

Dan Dietz

@Joe Gore

Where do you get that he works under the table and doesn't pay taxes??? I see that he has some real estate and bought and sold businesses.... All legitimate ways of making money and all taxable. Did I miss something?

As for the OP if you still want to do some fixers in addition to your buy and hold you could use hard or private money to buy some fixers and do the repairs then after they are done refinance with a more traditional lender based on the new value of the property which will give you a lower % borrowed therefore less income needed to repay. Also, if you rent it before the refi they should use a portion of the rents you are receiving as 'income' to repay the loan. You may still need some other income but the amount needed would be reduced by these other factors. I would look into something like this to find out exactly what I would need. Just my two cents worth.

If you can find highly motivated sellers with equity, you may be able to get into the property with equity built into the deal. That would potentially give you the opportunity for your LTV to cover all of the purchase price. It's contingent on finding the right deals, but it's possible. The other option is to start with wholesaling to drive some income.

@Mike Campion  Who do you bank with?  Have you talked with them?  Banks will see your assets and tax returns and quickly decide.  I don't think you will have a problem getting some loans.  Lenders will be your best friend.

You’ve got a few options here, some are better than others (you decide which is which), in no particular order, here they are:

  • Cash Purchases: With this option, you’d buy several properties using all cash. Using this strategy, some banks will consider the income from the property as acceptable income. They may want to see you own these properties for 6 months – 2 years (depending on the bank) to ensure that you can sustain yourself on this type of income. Then you could acquire more properties using barrowed funds.
  • Options: Assume control of the property using an “Option to Purchase”. With this strategy you’d have the seller sign an Option to Purchase agreement giving you full control over the property including the ability to collect rents. Ensure that the agreement allows a portion of your monthly payments to the seller going toward your down payment. This will also show the bank that this is an income producing asset and that will make them more comfortable loaning you money against that property.
  • Seller Financing: Find a property that has some seller equity. Put down some of your cash and have the seller hold a note for the rest. After you’ve owned it for a while, refinance.
  • Equity Partners: Form an entity such as an LLC with a partner that has the W2 income that they're looking for. With their income and your cash & credit, you shouldn't have much of a problem getting a loan with a portfolio lender such as a local small bank or credit union.
  • Private Lenders: Check with family, friends and anyone that you know that you think might have a large portion of money in savings, IRAs, 401k (if they can roll it over into a Self-directed IRA) or even HELOCs. Ask them if they'd be willing to loan you 25% of the money secured against the property. Then work your way up from there. The next property ask them to loan you 50%. Then the next 75% etc etc. Ofcourse you'd refinance out of their loans as soon as possible to cash them out before you move to the next property.

With a little ingenuity, I’m sure that you could see how you can mix & match these strategies to make any deal work.

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