Plenty of money to invest but no personal income, am I crazy to think I can get a mortgage?

Question

I've been reading these forums for a few weeks now and I'm starting to get a feel for things but I'm very new to all this so please forgive my ignorance.

Hopefully someone will be kind enough to point me in the right direction. I have a few hundred thousand dollars in various stock accounts, mutual funds, bonds, etc. I'd like to get some of this money out and invest it in to a multiunit property (seems like there are great deals out there) but I'm nervous that I wont be able to find a mortgage because I don't meet the lending standards of most banks. I'm looking in to buying in cash but that limits what I can buy and since I live in NYC the buy in is very high unless I go 1 1/2 - 2 hours drive away from home.

For the past  2 & 1/2 years I've been living off my cash reserves (my expenses are under 2k monthly) so I don't have any income to show. From what I gather "Stated Income" based mortgages are history (or nearly impossible to find).. My fiance is willing to co-sign a loan but she doesn't make a ton of money so that limits us as well.

I've been talking to banks but all the big ones pretty much laugh in my face, except Wells Fargo but I've heard they run you around (and the guy has been really flaky). I'm going to start talking to my local smaller banks but I don't have any relationships with them.

Am I being unrealistic in looking for a mortgage or should I concentrate on a cash purchase instead? I don't mind doing the work but I don't want to waste my time either.

Any advice would be very much appreciated.

Thanks

Nathan Emmert · Answer

Why not go with a non-recourse loan... they would be loaning against the income of the property instead of your personal credit and income.  You'll pay higher interest (1 - 1.5%) and have to put more down (40% vs 25%) but it still gets you leveraged...

Another option is to look in the commercial arena.  With $500k, you have a hefty down payment towards a larger complex or industrial/retail space.  Again, they'll be far more interested in the property itself and it's income potential versus you personally.

Sometimes the easiest way to defeat a problem is simply to shop for things where the problem doesn't exist.

Steve Babiak · Answer

Some smaller banks will even consider a line of credit secured by stocks and bonds that you already hold, so that you don't need to sell.  Just another approach to try.

Jon Holdman · Answer

Look for an owner financed deal.  Assuming you have a nice down payment, an owner that wants out will be your best bet for the loan.

Do some reading in the rental property forum to learn the realities of rentals.  With your existing negative cash flow you sure don't want to buy a property that's also negative.  A big hint:  Cash flow is MUCH less than what's left from the rent after you pay the mortgage.

Michael Seeker · Answer

Most of the time, the people that are actively looking for it will advertise it.  You can always ask though.  I would find the type/location of property you want and then narrow it down to a handful.

Then if any of them offer owner financing, start with them, if not...then ask all of them if they'll consider it.

Do not get stuck with a poor quality property simply because the financing is easy...at the end of the day, the building, neighborhood and potential rents should be what you base your decision on.

Dusty Ny · Answer

How would I go about finding seller financing? Is this something I ask for when I make an offer or is there a market of some sort where these opportunities can be found?

Sam Sagor · Answer

Seller financing in the commercial sphere is still an option you want to consider - they don't have the same rules and you have cash. They will work with you.

Dusty Ny · Answer

Just wanted to say thank you again for the excellent advice. I've spent the last few days researching and discussing financing with various lenders. I looks like the money is out there, now I just need to find a property and see what happens.

Dusty Ny · Answer

Excellent.. I'm so excited to see these suggestions.

I'm not familiar with a non-recourse loan, looks like I have a lot of work to do this weekend.

Casey Carroll · Answer

I've heard of a portfolio based type of loan that will lend like this, but it's private money... and not a conventional mortgage. Have you thought bringing someone else as the credit donor? You can do so it you create an LLC where both of you are officers and have signing authority. They check the credit and income of your donor and not you, and the LLC technically owns the property. Then you give that person 1-2 points for helping you out and keep that LLC open as long as you own the home.

Darryl Dahlen · Answer

I think I can safetly say that a non-recourse loan is a no-go. Lenders require experience and they still look at a borrower's income and assets on non-recourse loans.

Plenty of money to invest but no personal income, am I crazy to think I can get a mortgage?

Most Popular Reply