Financing through rental income and nothing else?

14 Replies

Looking to finance a purchase- it will either be a flip or rental. Currently don't have any income and my tax returns don't offer anything that would help qualify. Having a hard time finding a lender that will lend based solely on anticipated rental income for this property (which already has a tenant in place I could keep). Have a great credit score, no debt, a history of managing/owning rental properties, able to put 40% down and still have a few years living expenses liquid. Hoping to avoid hard money lenders- Any suggestions as to other viable lending sources?

"Non-qm" loans are what occupy the space in between HML and Fannie Mae.

They are a hassle, unreliable, and slow. You might save 2% to rate and 1.5 points, relative to HML (both scale up and down in rates/fees with how good the deal is).

Not at all clear to me that it's worth the brain damage. 

No loan docs, there are a few lenders here that will lend. Have to have an account with them, their credit card history etc. Not sure about non-owner occupied. 

@Hen Ley commercial lending is based on this entire premise.  Most commercial loans usually don't care about your personal income at all.  All we need to do is find a good commercial or portfolio lender for you that follows these types of lending rules.  Try posting that you are looking for this type of a lender in the state forum here in Bigger Pockets.  They usually have some good locals that monitor each state forum.  Might help find a good lender for you there.  Hope this helps!

@Hen Ley ...where's the property?  To answer your question, there are lenders that will do this all day long, but don't expect the lowest rates, but if you are open and credit is good, and it's rental, then you should be able to expect rates in the 5s to 6s, depending on particular lender.  

Originally posted by @Cameron Tope :

Get income. No reputable lender with decent interest rates would loan anyone money that doesn't make any money. 

Sorry but that's the truth. 

That's kind of out there don't you think?  Just because interest rates for lenders that occupy the space between banks and hard money aren't as low as Fannie or Freddie makes them disreputable?

I would think companies like Lima One, Lending Home, Athas, Civic, Angel Oak, Deephaven, Silver Hill, Velocity, MoFin, Finance of America Commercial and the (list goes on and on) would disagree.  All of them have no income verification loans available for 1-4 units, mixed use, 5+ units and other property types and do a combined volume of at least a few hundred million dollars per month specifically for investors.  No, they're not Fannie rates, but they help investors close deals they wouldn't otherwise close every day.

Stephanie

Originally posted by @Stephanie P. :
Originally posted by @Cameron Tope:

Get income. No reputable lender with decent interest rates would loan anyone money that doesn't make any money. 

Sorry but that's the truth. 

That's kind of out there don't you think?  Just because interest rates for lenders that occupy the space between banks and hard money aren't as low as Fannie or Freddie makes them disreputable?

I would think companies like Lima One, Lending Home, Athas, Civic, Angel Oak, Deephaven, Silver Hill, Velocity, MoFin, Finance of America Commercial and the (list goes on and on) would disagree.  All of them have no income verification loans available for 1-4 units, mixed use, 5+ units and other property types and do a combined volume of at least a few hundred million dollars per month specifically for investors.  No, they're not Fannie rates, but they help investors close deals they wouldn't otherwise close every day.

Stephanie

Thanks for the response Stephanie. Sorry I wasn't clear. I wasn't saying any other lenders besides Fannie & Freddie are "disreputable". As I have used hard money, commercial debt and private money to close many deals. However, there are still qualifications - personal guarantee, personal financial statements, etc.  

Commercial lending serves a purpose, however for a person just starting out (with absolutely no money) advising them to just go to a different lender to get a property is bad advice. They have a bigger personal finance problem to resolve before they get into real estate. 

I wouldn't in good faith lend a person with no income money on a SFR let alone a multi-million dollar complex, and I don't think any reputable lender would either.

Originally posted by @Cameron Tope :
Originally posted by @Stephanie P.:
Originally posted by @Cameron Tope:

Get income. No reputable lender with decent interest rates would loan anyone money that doesn't make any money. 

Sorry but that's the truth. 

That's kind of out there don't you think?  Just because interest rates for lenders that occupy the space between banks and hard money aren't as low as Fannie or Freddie makes them disreputable?

I would think companies like Lima One, Lending Home, Athas, Civic, Angel Oak, Deephaven, Silver Hill, Velocity, MoFin, Finance of America Commercial and the (list goes on and on) would disagree.  All of them have no income verification loans available for 1-4 units, mixed use, 5+ units and other property types and do a combined volume of at least a few hundred million dollars per month specifically for investors.  No, they're not Fannie rates, but they help investors close deals they wouldn't otherwise close every day.

Stephanie

Thanks for the response Stephanie. Sorry I wasn't clear. I wasn't saying any other lenders besides Fannie & Freddie are "disreputable". As I have used hard money, commercial debt and private money to close many deals. However, there are still qualifications - personal guarantee, personal financial statements, etc.  

Commercial lending serves a purpose, however for a person just starting out (with absolutely no money) advising them to just go to a different lender to get a property is bad advice. They have a bigger personal finance problem to resolve before they get into real estate. 

I wouldn't in good faith lend a person with no income money on a SFR let alone a multi-million dollar complex, and I don't think any reputable lender would either.

So here's where we differ.  I always tell my husband that he has to read for comprehension.  Here's what I read from the OP.  

  • He has a history of owning and managing rental properties.  
  • He still has a "few years liquid living expenses".  
  • He said he "doesn't have income and his taxes won't help" but that could be construed as his tax returns won't support income or his debt ratio is too high from write off's.

If a borrower came to me today and said I have great credit, a history of profitably managing properties, with significant cash reserves I would do that loan all day and twice on Sunday.  No reason not to.  He obviously values his credit so  won't default.  He has a history of managing properties so he won't get caught up in not knowing what he's doing and to do the loan, he would have to show that he has significant cash reserves.

You read it as a guy who is just starting out.  I saw an investor that has been getting conventional financing and all of the sudden didn't qualify.  I will say you are right though when you wrote about not lending to someone with no money, no experience regardless of the property.  I wouldn't either.  I just don't think that's the case here.

Best of luck

Stephanie

Originally posted by @Stephanie P. :
Originally posted by @Cameron Tope:
Originally posted by @Stephanie P.:
Originally posted by @Cameron Tope:

Get income. No reputable lender with decent interest rates would loan anyone money that doesn't make any money. 

Sorry but that's the truth. 

That's kind of out there don't you think?  Just because interest rates for lenders that occupy the space between banks and hard money aren't as low as Fannie or Freddie makes them disreputable?

I would think companies like Lima One, Lending Home, Athas, Civic, Angel Oak, Deephaven, Silver Hill, Velocity, MoFin, Finance of America Commercial and the (list goes on and on) would disagree.  All of them have no income verification loans available for 1-4 units, mixed use, 5+ units and other property types and do a combined volume of at least a few hundred million dollars per month specifically for investors.  No, they're not Fannie rates, but they help investors close deals they wouldn't otherwise close every day.

Stephanie

Thanks for the response Stephanie. Sorry I wasn't clear. I wasn't saying any other lenders besides Fannie & Freddie are "disreputable". As I have used hard money, commercial debt and private money to close many deals. However, there are still qualifications - personal guarantee, personal financial statements, etc.  

Commercial lending serves a purpose, however for a person just starting out (with absolutely no money) advising them to just go to a different lender to get a property is bad advice. They have a bigger personal finance problem to resolve before they get into real estate. 

I wouldn't in good faith lend a person with no income money on a SFR let alone a multi-million dollar complex, and I don't think any reputable lender would either.

So here's where we differ.  I always tell my husband that he has to read for comprehension.  Here's what I read from the OP.  

  • He has a history of owning and managing rental properties.  
  • He still has a "few years liquid living expenses".  
  • He said he "doesn't have income and his taxes won't help" but that could be construed as his tax returns won't support income or his debt ratio is too high from write off's.

If a borrower came to me today and said I have great credit, a history of profitably managing properties, with significant cash reserves I would do that loan all day and twice on Sunday.  No reason not to.  He obviously values his credit so  won't default.  He has a history of managing properties so he won't get caught up in not knowing what he's doing and to do the loan, he would have to show that he has significant cash reserves.

You read it as a guy who is just starting out.  I saw an investor that has been getting conventional financing and all of the sudden didn't qualify.  I will say you are right though when you wrote about not lending to someone with no money, no experience regardless of the property.  I wouldn't either.  I just don't think that's the case here.

Best of luck

Stephanie

I 100% agree with you - if someone meets those qualifications you listed then by all means lend, lend, lend. However, if he's successfully invested in real estate then why does he not have any income and banks aren't lending to him? 

Originally posted by @Cameron Tope :
Originally posted by @Stephanie P.:
Originally posted by @Cameron Tope:
Originally posted by @Stephanie P.:
Originally posted by @Cameron Tope:

Get income. No reputable lender with decent interest rates would loan anyone money that doesn't make any money. 

Sorry but that's the truth. 

That's kind of out there don't you think?  Just because interest rates for lenders that occupy the space between banks and hard money aren't as low as Fannie or Freddie makes them disreputable?

I would think companies like Lima One, Lending Home, Athas, Civic, Angel Oak, Deephaven, Silver Hill, Velocity, MoFin, Finance of America Commercial and the (list goes on and on) would disagree.  All of them have no income verification loans available for 1-4 units, mixed use, 5+ units and other property types and do a combined volume of at least a few hundred million dollars per month specifically for investors.  No, they're not Fannie rates, but they help investors close deals they wouldn't otherwise close every day.

Stephanie

Thanks for the response Stephanie. Sorry I wasn't clear. I wasn't saying any other lenders besides Fannie & Freddie are "disreputable". As I have used hard money, commercial debt and private money to close many deals. However, there are still qualifications - personal guarantee, personal financial statements, etc.  

Commercial lending serves a purpose, however for a person just starting out (with absolutely no money) advising them to just go to a different lender to get a property is bad advice. They have a bigger personal finance problem to resolve before they get into real estate. 

I wouldn't in good faith lend a person with no income money on a SFR let alone a multi-million dollar complex, and I don't think any reputable lender would either.

So here's where we differ.  I always tell my husband that he has to read for comprehension.  Here's what I read from the OP.  

  • He has a history of owning and managing rental properties.  
  • He still has a "few years liquid living expenses".  
  • He said he "doesn't have income and his taxes won't help" but that could be construed as his tax returns won't support income or his debt ratio is too high from write off's.

If a borrower came to me today and said I have great credit, a history of profitably managing properties, with significant cash reserves I would do that loan all day and twice on Sunday.  No reason not to.  He obviously values his credit so  won't default.  He has a history of managing properties so he won't get caught up in not knowing what he's doing and to do the loan, he would have to show that he has significant cash reserves.

You read it as a guy who is just starting out.  I saw an investor that has been getting conventional financing and all of the sudden didn't qualify.  I will say you are right though when you wrote about not lending to someone with no money, no experience regardless of the property.  I wouldn't either.  I just don't think that's the case here.

Best of luck

Stephanie

I 100% agree with you - if someone meets those qualifications you listed then by all means lend, lend, lend. However, if he's successfully invested in real estate then why does he not have any income and banks aren't lending to him? 

Write off's.  His debt ratio is too high.

@Stephanie P. Are you sure? My income is high from my real estate but on my net taxable income each year is low due to write-offs like depreciation, mortgage interest, etc.. As long as my rentals are cashflowing (ie have a solid debt coverage), I've never had a problem getting loans - fannie/freddie or private. 

Originally posted by @Cameron Tope :

@Stephanie P. Are you sure? My income is high from my real estate but on my net taxable income each year is low due to write-offs like depreciation, mortgage interest, etc.. As long as my rentals are cashflowing (ie have a solid debt coverage), I've never had a problem getting loans - fannie/freddie or private. 

Of course this is speculation because it's not my client, but my very educated guess is his debt ratio is high.  Maybe his rentals don't cash flow as well as yours.  Hard to tell.

I'd take it portfolio and close it and move on instead of worrying about income qualification, but that's me.