Yonkers, NY · Member since 2017 · 4 posts · 0 votes
Hi,
I'm trying to get my first rental property but don't have a w2 that shows substantial income. I'm self employed and I barely even pay myself on paper so I'm wondering how I can actually get my first mortgage. I tried to get a VA mortgage but they said since I don't have a w2 that shows much they can't do much.
What can I do to make this work? I have enough cash in pocket to put down as a down payment but still won’t be able to get a mortgage.
Investor · Lakeland, FL · Member since 2017 · 1k+ posts · 1k+ votes
6y
Obviously you are at the mercy of the lending criteria of your lender. They want to know how they are going to get paid back. Many can work with self employed, and they will ask for a year's worth of bank statements to document how much comes in on a regular basis.
Part of this might be shopping around for the right mortgage broker. I would try reaching out to a mortgage broker (versus a straight up bank)... they usually have more lenders to pick from... you can't be the first one to have this issue, and somewhere is going to have a solution for you. As long as you can show them consistent income to their liking, I don't think income will be a problem... all the other pieces have to of course fall in line... debt to income, credit, etc.
I'm pretty sure what they will say is "prove to us you make that much consistently" when it comes to documenting income.
It's easy to get caught in the "Look poor to the IRS for tax purposes, even though you have a lot coming in" situation. So it will likely depend on how you recognize your income. If you don't run it through your bank, you may be stuck. If you can show that your business pays for all your bills, that's different. Our business pays for a crazy amount of our monthly expenses... cars, car insurance, health insurance, phone, internet, etc. If that is what you do as well, make sure you show them that... because they may be able to switch that to the "income" column for you as those would be things they would normally expect you to pay personally.
PM me if you would like a referral to one we use that might be able to help you pull it off.
Rental Property Investor · Minneapolis, MN · Member since 2020 · 540 posts · 285 votes
6y
@Bogdan Kosilov
You could buy a Rent to Own for 3.5% down, and then sub-lease it out as long as the owner is OK with that. They get paid either way but some owners may not be because some plan on getting the house back again & again, just trying to get that 3.5% down as many times as possible.
Another option is to get a partner and go in 50/50 with their name on the lease since you don’t have the W2 income. Half of a watermelon is better than a whole grape. Or just save up and wait. Good luck either way.
@Bogdan Kosilov - how much down money do you have? I work with lenders that don't require W2s.
Hey,
Sorry for the long wait. My business partner and I are looking to play with around $150,000 - $200,000 each. We want to jump straight into commercial multifamily.
Lender · Chicago, IL · Member since 2016 · 653 posts · 313 votes
6y
@Bogdan Kosilov If you guys are going into multifamily with 150k-200k a piece, you roughly have 300k to close a deal (down payment + closing costs). Multifamily finance is generally based on the cashflow on the asset. Don't go to big banks for multifamily, unless you want 900+ questions and close in 12 months. Shoot me a PM, let's set up a call would be happy to give you the low-down !
I would suggest you look in to going the owner financing route. This will allow you to avoid the W2 issue and get yourself into a cash flowing investment.
However, it will take more leg work on your part. You will need to find an off market deal and then pitch a owner finance offer that will appeal to the seller. Even if they are opposed to the idea at first, it seems you have enough of a down payment to make them feel more comfortable. Great thing about owner financing, is that it gives you a alot of power to play around with terms( down payment, interest rate, maturity, etc) With all of the options available, you can find something that will work for you and the seller.