Taxes and Loans for self-employed

4 Replies

Hi everyone, this is my first post after reading the forums for quite some time. I've been trying to get into the rental business for a couple years, but I've never been able to get approved for a loan. I'm self employed with a restaurant. My business is in it's 5th year operating as a LLC. The first 4 years my AGI had been around $12,000-18,000. Basically I was deducting everything I legally could, which never mattered until I started looking into the rental business a couple years ago and realized I wasn't going to get approved for any loan at that income level. This year I decided I want to make a lot less deductions and get my income and AGI increased. My income for 2017 is currently at $42,000 and my AGI at $35,000. My taxable income is about $15,000. When applying for a mortgage or loan, which of those numbers is the most important? I'm currently looking at buying a duplex or other multifamily in the $80-120K range. My home is paid off and was appraised by Discover Bank at $180,000 when I applied for a home equity loan, which was denied, the person I talked to said my income (not sure what they meant) really should be at least $30K to get approved for anything. A local bank appraised it for $150,000.

Thanks

Originally posted by @Matthew T. :

Hi everyone, this is my first post after reading the forums for quite some time. I've been trying to get into the rental business for a couple years, but I've never been able to get approved for a loan. I'm self employed with a restaurant. My business is in it's 5th year operating as a LLC. The first 4 years my AGI had been around $12,000-18,000. Basically I was deducting everything I legally could, which never mattered until I started looking into the rental business a couple years ago and realized I wasn't going to get approved for any loan at that income level. This year I decided I want to make a lot less deductions and get my income and AGI increased. My income for 2017 is currently at $42,000 and my AGI at $35,000. My taxable income is about $15,000. When applying for a mortgage or loan, which of those numbers is the most important? I'm currently looking at buying a duplex or other multifamily in the $80-120K range. My home is paid off and was appraised by Discover Bank at $180,000 when I applied for a home equity loan, which was denied, the person I talked to said my income (not sure what they meant) really should be at least $30K to get approved for anything. A local bank appraised it for $150,000.

Thanks

 Hi Matt,

Neither gross, taxable, nor AGI numbers, are what underwriters look at. 

If you want to roughly ballpark things yourself, take a look here: http://www.freddiemac.com/learn/lo/forms/form_91.html 

Originally posted by @Chris Mason :
Originally posted by @Matthew T.:

Hi everyone, this is my first post after reading the forums for quite some time. I've been trying to get into the rental business for a couple years, but I've never been able to get approved for a loan. I'm self employed with a restaurant. My business is in it's 5th year operating as a LLC. The first 4 years my AGI had been around $12,000-18,000. Basically I was deducting everything I legally could, which never mattered until I started looking into the rental business a couple years ago and realized I wasn't going to get approved for any loan at that income level. This year I decided I want to make a lot less deductions and get my income and AGI increased. My income for 2017 is currently at $42,000 and my AGI at $35,000. My taxable income is about $15,000. When applying for a mortgage or loan, which of those numbers is the most important? I'm currently looking at buying a duplex or other multifamily in the $80-120K range. My home is paid off and was appraised by Discover Bank at $180,000 when I applied for a home equity loan, which was denied, the person I talked to said my income (not sure what they meant) really should be at least $30K to get approved for anything. A local bank appraised it for $150,000.

Thanks

 Hi Matt,

Neither gross, taxable, nor AGI numbers, are what underwriters look at. 

If you want to roughly ballpark things yourself, take a look here: http://www.freddiemac.com/learn/lo/forms/form_91.html 

 Thanks for the link. I'm going to take some time, fill it out, and I'll probably have some more questions!

@Matthew T.

You may want to look into a 12 or 24 month bank statement program for income.  It works for self employed borrowers on their owner occupied properties.  PM me and I'll refer a broker to you.  We don't do owner occupied at US Commercial, so it's not a solicitation, but I may be able to send you to someone that can.

Stephanie

Originally posted by @Matthew T. :

Hi everyone, this is my first post after reading the forums for quite some time. I've been trying to get into the rental business for a couple years, but I've never been able to get approved for a loan. I'm self employed with a restaurant. My business is in it's 5th year operating as a LLC. The first 4 years my AGI had been around $12,000-18,000. Basically I was deducting everything I legally could, which never mattered until I started looking into the rental business a couple years ago and realized I wasn't going to get approved for any loan at that income level. This year I decided I want to make a lot less deductions and get my income and AGI increased. My income for 2017 is currently at $42,000 and my AGI at $35,000. My taxable income is about $15,000. When applying for a mortgage or loan, which of those numbers is the most important? I'm currently looking at buying a duplex or other multifamily in the $80-120K range. My home is paid off and was appraised by Discover Bank at $180,000 when I applied for a home equity loan, which was denied, the person I talked to said my income (not sure what they meant) really should be at least $30K to get approved for anything. A local bank appraised it for $150,000.

Thanks

It is possible to qualify even with a low income as long as your monthly debt is also low. If you only have $400 a month in overhead - property taxes, insurance, etc. since your home is paid off, you will only need $1k in income give or take given the ability to use projected rental income on the new acquisitions. Keep in mind that your most recent year income wont be taken at face value and generally a 2 year average will be used.  Direct message me if you need further information.

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