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Updated over 7 years ago on . Most recent reply

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25
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Christian Cody
  • Orange County, CA
8
Votes |
25
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Finding loans with a 1099

Christian Cody
  • Orange County, CA
Posted

My fiance and I are looking to acquire our first REI. We are looking to do a house hack to get started in investing. The main problem we are facing is financing. We have the money for a down payment and the basic items needed (closing costs, fees, etc..). The problem we face is that we are both independent contractors and do everything through 1099. As the tax time comes, we are very good with our right offs. This makes our income seem far less on paper than it actually is. In turn, finding a financial institution that will give us a loan is extremely difficult. We are looking to buy and hold this initial multi-family property. I am sure with many investors it isn't unusual to have dealt with this before. I know many entrepreneurs are 1099. What advice can the BP community give in this situation?

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41
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21
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Kenny Lee
  • Fort Worth, TX
21
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41
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Kenny Lee
  • Fort Worth, TX
Replied

Kind of an ongoing issue since the crash.  We've been exclusively 1099 for over 20 years and it was simple before, but changed dramatically after 2008-2010.  In the rush to correct the mistakes, the pendulum swung all the way and the 1099'ers got left behind.  Although I do understand it is getting easier lately.  I remember when buying a home in 2010, one of the lenders I was shopping told me that I could easily get approval if I didn't have so many write-offs, all of which were legal and legit.  Of course I informed him if I did that, he would be willing to lend me money when I had less income and less capital since I'd be paying more in taxes.   Basically give away more of my money and get a loan in return.  Doesn't make sense.

Anyway, one option would be to maybe look to use an asset-based hard money program to get in initially.  Then once the tenants are in place and rental income is coming in, that should be enough extra to justify a conventional loan from a lender.  I'd run it by your lender first with the approximate numbers of both expected rental income and the amount of the loan you will need, but I know several investors who have done that very thing.     

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