How Do I Finance My Third House WITHOUT W2 Income?

Question

Hi Everyone,

I bought my last 2 properties while I still had a W2 job. One property is a condo (in CA) that I rent out, and the other property is a house (in NV) that I live in and rent out the other rooms.

I quit my W2 job last year to start a business, which is slightly profitable today, but I reinvest everything back into the business.

I have a bunch of cash saved up and am comfortable deploying $100K into another property in Las Vegas ($80K down payment + $10K furnishing + $10K margin).

The only problem is that I’m not sure how to finance my next house without W2 income.

I talked to a few lenders about DSCR loans, and most say they calculate rental income based on the entire house, instead of by the room.

I would love to get the creative knowledge of the BP community on how to fund my next home 🙏🏼

I'm also open to any lender referrals 😊

Stephen DeThample · Answer

Ask the lenders if they take MTR rent rates if you can show comps. Furnished rents are much higher.

Gregorio Villar · Answer

Just sent you a message 🙏🏼

Bill B. · Answer

If you have 2 years of landlord tax returns you should be able to count 70% plus of that income. If you only have 1 year then quickly file thsi year’s taxes.

Sienna Keillor · Answer

Hi Gregorio,

Please message me and we might be able to quote you for a loan.

Gregorio Villar · Answer

great idea...i should be more specific on the terms with what i plan to rent to see what can be worked out by the lender

Gregorio Villar · Answer

ooo thanks great advice...thank you!

Brittany Minocchi · Answer

That's correct, most lenders do calculate income based on the entire property as a long term rental...is it possible that you could find a property where this isn't an issue? I'm sure your income would be higher renting by the room vs renting the whole home, but as long as there are comps to support a value high enough for a DSCR ratio of 1.00+, you should be in the clear. So for instance, maybe you have a 4 bedroom home you can rent for $600/room. That's $2400/mo. As long as your monthly PITI(A) on that property is $2400/mo max, you're good. Qualifying for the lowest rate possible and putting a large down payment are a couple of ways to navigate the potential ratio issue and get closer to the number you need to make it work.

Also depends on the term - will you have 12-month leases in place for each room? If so a lender may be more open to that. I hope that helps, feel free to connect!

Brenna Hoberg · Answer

DSCR loan options will qualify you based on the market rent for the property - this can be helpful if you can support projected rent above the mortgage payment. It will depend a bit on comps, similar to an appraisal.

There are other non-QM loan options for self-employed individuals that can use your bank statements (biz) to show cash flow versus, tax returns for income. Or depending on your total assets, including invested, qualify you on assets and credit alone. This typically requires 125% of the mortgage debts in available assets.

I am a lender and happy to answer any questions you may have!

How Do I Finance My Third House WITHOUT W2 Income?

How Do I Finance My Third House WITHOUT W2 Income?

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