Can we get financing for flip if most of our income is from mutual funds?

2 Replies

Hello. This is my first post to any of this website's forums.  My husband and I are seriously considering buying a house to rehab and flip as a start to a real estate investment business. (Love the helpful podcasts here and J Scott's Flipping book!) I'd really appreciate it if anyone could tell me if we would be able to get any kind of financing in our unique financial situation ( mutual fund reserves, but little "earned" income), or if we would likely have to pay all cash for our first flip. Any ideas what kind of mortgage or loan we could get?  (Should this be posted under the creative financing forum?)

  Here is our financial situation:

--Our combined gross income last year was over $100k, (mainly from IRA and 401k disbursements) but.....

--Husband has been an unemployed aerospace engineer since two years ago; he is 60 and unlikely to get rehired, but can withdraw from the IRA's without penalty) He recently started doing math tutoring, but isn't making much yet.

  --I am a former architect, but then was a stay-at-home mom for the last 20 years (I've done a lot of small jobs on the side for myself and friends, but I only know how to hand-draft; now-a-days you need to be proficient in two or three CAD programs to get a job in an architecture firm!) I've been substitute teaching almost full-time the last few years, but this is more like a part-time job in earnings.

-- We have $330+ K in stock mutual fund IRA's --this is what we have been primarily living off of. Thank goodness that the stock market has been doing well! (And hubby does a good job of managing and analyzing the numbers, etc.)

-- We have $80-100K in equity on our own home, but the stipulation on our last refi-mortgage (5 years ago?) was that we freeze the home-equity line of credit!

My husband used to work as a painter to make money to put himself through college, and has lots of DIY experience, so he would plan to use those skills to put in some sweat equity in our first flips, and I of course, would design and draw the construction plans, if necessary, but I don't think lenders would take that into consideration, would they?

Thanks in advance for any advice!

It will probably be hard to get conventional funding for this not only because of the unique income situation, but also because you are first-time rehab and sell investors. This isn't to say that it would be impossible, but you might find that you get an unfavorable interest rate or are required to make a much larger down payment than you like.

I'm certainly no expert in this area, but what experience I do have myself is that, even with earned income combined with other sources, qualifying for investment loans can be difficult if that earned income alone isn't sufficient to meet the lender's guidelines.

Wow--that was a very quick response! Thanks, Lance! I was going to add another question:

We also were thinking about possibly selling our home and downsizing and/or buying one with an income apt. If it was owner occupied would we have an easier time getting a loan? I forgot to add that we have great credit and no outstanding debt other than our mortgage.

Thanks.

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