Is it possible to get loans after stop earning W2?

Question

Hi guys, I have always worked but would like to stop at one point. Would it be still possible to buy real estate through conventional methods without W2s?

Lets say one makes 100K in a corporate America on W2 (which is about 6K per month after taxes). Lets say this person has 6-7 properties that cash flow and make that 6K per month. So the person quits his/her job and has this 6K cashflow per month. Will banks lend? Or no?

Lesley Resnick · Answer

You can probably live a better life style on 6k of w2 because of  Benefits  (health care being the big one)  Conventional loans are going to be tough, your income is going to be scrutinized more.  You will take a hit on income because of depreciation.  You can still use portfolio/commercial loans.  Keep the w2 income as long as you can.

Mary Jay · Answer

Thank you!

Brian Garrett · Answer

Correct they must actually produce income to be counted.

Mary Jay · Answer

So how does it work? Does it have to show positive cash flow? Or as long as it breaks even?

For example, if a person has 3 houses that break even, no W2 job. Lives off of , not sure what, but for simplicity lest say lives with parents, or house hacks... So, then this person cant buy another rental, right? Because if 3 houses break even, lender counts 75% of rental income, then its not going to work, right?

Jim Goebel · Answer

@Mary Jay

It's difficult to get started without access to capital.  Much of the following depends on your capabilities and cash position, but I've always given people the advice to buy their first home with a 'safe' outlook with regards to appreciation, and schools.

I don't know where you are at in life - if you've already made your first purchase, etc - but so far so good on those that have taken my advice.

I think later on in life, if someone so desires and/or has the knack, is when it's appropriate to get into what a lot of folks on these forums do - the more aggressive projects where there's more money to be made.

This is a round about answer but yes it's possible.  Banks have told me that a couple years of income statements when self employed is needed.

Also, yes, rental income would count towards income.  I think every bank is going to treat these situations differently.  I know someone that owns 160+ SFHs and he's got commercial financing.  His cash flow justifies all that but obviously you need the scale to accomplish this.  Starting out is a lot harder because of debt service ratios/etc.

Brian Garrett · Answer

Yes banks will count I believe it's 75% of rental income when qualifying for conventional loans.