Self employed borrower with low after deduction income

8 Replies

I'm in the Tampa, FL area. Looking to get into real estate by doing an Owner occupied property while I rehab for 6-12 months and then rent it out. The problem I am facing is that my wife and I have been self employed for 6 years and have low reported income because of deductions (100K annual business income but only 40k after deductions). Does anyone have advice for routes I could take to go about securing a loan based on these circumstances? Do any lenders actually look at an entire tax schedule and not just the bottom line?

Wesley,

I've talked with several people in a similar position.  They've told me that instead of banks, they rely upon their reserves or private money (individuals who are willing to lend on a project). 

If that's something you'd like to discuss in more depth & learn more about, send me a PM and we can discuss further offline.

Forrest Baumhover

Originally posted by @Forrest B. :

Wesley,

I've talked with several people in a similar position.  They've told me that instead of banks, they rely upon their reserves or private money (individuals who are willing to lend on a project). 

If that's something you'd like to discuss in more depth & learn more about, send me a PM and we can discuss further offline.

Forrest Baumhover

 Thanks Forrest. Message sent.

@Wesley Weber

Yes, lenders will look at all schedules, and in some instances will add expenses back in or not hit you for one time losses, etc. but its very rare.  There are lenders out there that will use your business bank statements and give you credit for deposits to calculate your income instead of the reported adjusted gross income reflecting on your 1040s.  Without looking at your returns its difficult for me to speak specifically about your situation, but that's an answer to your question.  

Originally posted by @Forrest B. :

instead of banks, they rely upon their reserves or private money

I agree, the OP needs to look for private money sources in his area. Banks are very hard on self-employed people.  I have been paying my bills since 1998 but the banks do not think I have any income.

Originally posted by @Neil Aggarwal :
Originally posted by @Forrest B.:

instead of banks, they rely upon their reserves or private money

I agree, the OP needs to look for private money sources in his area. Banks are very hard on self-employed people.  I have been paying my bills since 1998 but the banks do not think I have any income.

 Thanks Neil, I agree private money would be great. The only issue I can think of is (aside from actually finding the lenders) finding a lender who has an appetite for buy&hold/owner occupied as I have heard most don't like to tie up money long term. Any suggestions (aside from just Googling) as to where to start to find private lenders?

Originally posted by @Wesley Weber :
 Thanks Neil, I agree private money would be great. The only issue I can think of is (aside from actually finding the lenders) finding a lender who has an appetite for buy&hold/owner occupied as I have heard most don't like to tie up money long term. Any suggestions (aside from just Googling) as to where to start to find private lenders?

You have two strikes against you:
1. This will be owner occupied
2. It will be long term
Most private money people would like to stay away from both of those things.

Like I said, you will have to talk to everyone.  It will be a needle in a haystack problem, but nothing worthwhile is ever easy.

Thanks Neil. FWIW I actually have a couple of other properties I'm considering making deals on (a fix & flip in addition to a non owner occupied) so maybe I will have more luck with them.

Some times automated findings from fannie mae's underwriting engine will allow self employed borrower's to use one year of tax returns.  In that case you could bite the bullet for  one year, show a higher AGI, pay the taxes and now you've opened up an entire new world for financing.  How much money would you save over say 3 deals, using conventional financing instead of hard money compared to the amount of taxes you paid for the higher reported income.  these are the questions and numbers you must run in order to determine the appropriate course of action.