Lets hear from the self employed
Broker / Investor · Tewksbury, MA · Member since 2008 · 1k+ posts · 351 votes
Lets hear from the self employed
Most Popular Reply
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
7yOriginally posted by @Rich Hupper:
@Natalie Kolodij do you know what lenders look for on a self employed person's tax return to make their calculations? Is it adjusted gross income, net income, or gross income, or something else I am missing?
Is it true that paying more taxes translates into more borrowing power?
It's none of that. You can sneak preview for yourself here. There is a lot not covered at that link, that's just to give you an idea. One thing that you will not see at that link is the presumption that it's the same source of income over those couple of years. Meaning if "ABC Carpet Cleaning" had income in 2016 and then closed, and "XYZ Car Wash" opened in 2017, you don't get to average or mix those two -- "XYZ Car Wash" needs to be open for two tax years, "ABC Carpet Cleaning" will be calculated at $0 per year.
It's also the case that restructuring your business can in some cases reset that two year clock. Who is to say that "XYZ Car Wash" the Schedule C sole proprietorship (2016 tax returns) is the same business as "XYZ Car Wash LLC" (2017 tax returns)? It's "underwriter discretion" on that one, and "underwriter discretion" is a bad place to be, since you as the borrower have zero control over if the underwriter's milk went bad ruining her breakfast that day, and you (presumably) don't want a half million dollar real estate transaction dependent on the expiration date on a $4 carton of milk.
This is part of why CPAs and mortgage lenders are constantly at odds with each other, since great advice from a CPA focused on saving you tax dollars is often simultaneously horrible advice if you're goal is to buy a house next year and don't plan to pay cash.
81 Replies
- Rock Hill, SC · Member since 2015 · 1k+ posts · 597 votes7y
@RichHupper
I have been self-employed for 17 years now. Yet my wife has always worked a w2 job. Investing was not for her. I always tried to warn folks. Don't go and quit your job as your going to make it big in real estate. Passive income is about replacing your income down the road,
Too many folks jump ship than realize without the W2 income they can't get financing for anything.
Just my two cents@Mindy Jensen opps probably advertising again talking about my past ??????
Originally posted by @Rich Hupper:On this forum ive noticed a good chunk of people have w2 income who are investing for the first time or becoming seasoned investors almost ready to give up their w2 job.
It seems like it is easier to get started in the rei world if you have w2 income.
Can any of the 100% self employed people share their experiences? What lenders gave you loans?. What challanges did you face applying for loans? were you a single member llc or sole proprietor or some other entity? What other creative strategies got you into your first house or investment property?
- 7yCarl FischerPro MemberRental Property Investor · Ambler, PA · Member since 2015 · 2k+ posts · 1k+ votes
Lenders and lending rules change over time. Owner financing, buying properties with IRAs, 401ks, and HSAs have helped me in the real estate purchases as it does not show up on my credit report, is non recourse, and is made specifically based on the strength of the property.
I also have manipulated my w2 salary with rental income when looking to refinance. I have brought in private lenders when needed. Find good deals and the money will show up. From 2009 until 2015 it was very hard, next to impossible, to get a loan. Things have eased a bit lately. Look at home equity lines. I converted Ira money to a Roth IRA and banks count that as income. I even started a mortgage company at one point to understand the process. Hope this helps.
- Broker / Investor · Tewksbury, MA · Member since 2008 · 1k+ posts · 351 votes7y
@Alex Franks and @Carl Fischer so it appears I should probably get a w2 job again.
- Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes7y
It's my understanding that fannie will lend if you have 1 year of self employed income.
IF
You're in the same field you were in as a w2 employee for 3+ years prior
AND
your self employed income is greater than/ equal to what you earned as a w2 employee.
- 7yCarl FischerPro MemberRental Property Investor · Ambler, PA · Member since 2015 · 2k+ posts · 1k+ votes
Today you have to ask the banks what they want to see? It use to be the banks asked what you wanted.
It appears income is more important than savings in today’s environment. Rental income, interest income, dividends, 1099 income, w2, etc is what banks want to see. Rental income is reduced to 75% of “actual rental income” just because the banks think it safer. I would get an accountant/financial advisor to get your financial statement in order then make the decisions to how best make it fit the lending institutions requirements. Banks are risk adverse, entrepreneurs take on risk. Being self employed gives you certain tax benefits. Maybe Up your w2 income paid from your business and pay the associated SS/Medicare tax. And then the banks will like it. Check with different banks usually smaller regional banks and build a relationship.
I also do owner financing with the seller. Finance other assets with real low LTVs (50%).
- Broker / Investor · Tewksbury, MA · Member since 2008 · 1k+ posts · 351 votes7y
@Natalie Kolodij do you know what lenders look for on a self employed person's tax return to make their calculations? Is it adjusted gross income, net income, or gross income, or something else I am missing?
Is it true that paying more taxes translates into more borrowing power?
- Broker / Investor · Tewksbury, MA · Member since 2008 · 1k+ posts · 351 votes7y
@Carl Fischer when you say being self employed gives me certain tax benefits can you elaborate on this? From my experience I have not been able to figure out what those benefits are. Self employment tax is 15.3% on top of my federal income tax bracket. This kills me.
- 7yCarl FischerPro MemberRental Property Investor · Ambler, PA · Member since 2015 · 2k+ posts · 1k+ votes
Talk to your accountant. If you are paying 15.3% on everything then that should help get the loan. Others use dividends and salary this bypassing SETAX on the dividend portion. Expenses in a business are taken out before taxes.
Your business structure and plan should be comprehensive to include liability concerns, state/fed/local taxation, asset protection, borrowing, retirement, insurance, exit strategy to name a few. Get ideas from the BPforums but use professionals to help design your overall plan.
- Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes7y@Rich Hupper I am 100% self employed, 10 years, no W2... And it's a complete nightmare... Just forget about getting a conventional loan....that's my summary... Move your focus to other creative strategies...
- 7yDaniel DietzPro MemberRental Property Investor · Reedsburg, WI · Member since 2011 · 1k+ posts · 857 votes
I have not had trouble getting conventinal loans being self employed. My situation might be a little different as we have a family business and I am less than 50% owner, and I have many years of income data to back up the stableness of the business.
There are 3 siblings in my town that blended their construction businesses into one, as their accountant said it would have several benefits, one being with getting loans for houses (They build houses and 'house hack' them by living in them for about 3 years and then selling).
As to the other benefits of SE, if you make enough there is an option of sheltering some of your income from SE taxes with an S Corp. There are many item you can 'write off' as small business expeneses (Get the book here on BP about taxes, it is GREAT). You can potentially pay for things like health insurance, medical bills, and the like pre tax. And a big one is you can potentially set up a SOLO401K for retirement funding that has limits WAY above IRAs.
Dan Dietz
- 7yLinda WeygantPro MemberInvestor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
Originally posted by @Rich Hupper:
@Carl Fischer when you say being self employed gives me certain tax benefits can you elaborate on this? From my experience I have not been able to figure out what those benefits are. Self employment tax is 15.3% on top of my federal income tax bracket. This kills me.
Have you considered converting to an S-Corp? They are designed to save a significant amount on the SE Tax.
I started real estate investing when I still had a significant W-2 job. But I rage-quit one day, figuratively flipping tables over on the way out and became self employed almost by accident.
Qualifying for loans since then has been difficult. I have a great credit score, but it's all about the DTI. My debt remains low, but building revenue when you're self employed can be difficult, so on my end it's the I part of the DTI scenario that is now screwing me. Banks are fine with my source of income - it's the quantity that they don't like.
So if you're self employed, you'll want to show all of your income and valid expenses on your tax return and really focus on keeping the debt down and the income up while maintaining your good credit score.
PS - I wouldn't change a thing. While the real estate investing has been tough, I am way happier now, even at a fraction of my W-2 income, than I ever was under the oppressive weight of being a cog in a wheel that was soul crushing.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
I bet @Chris Mason can shed some light on this.
from my perspective and i have been 1099 or self employed from day one of getting in real estate 44 years ago. when i am making good money that shows positive net income on my tax returns I can get a loan for my personal resi ( best rates) and investment loans 10 mortgages like most folks.. after that its community banks.. and again no problem as long as your profitable.
Your community banker is more adroit and fully analyzing your returns adding back into your earnings your depreciation.. were conventional lenders have a much harder time..
but with a 740 fico and above some cash in the bank and 1 or 2 years tax returns showing positive income and your DTI is good then no problem..
the issue comes when you tax returns show no or negative income.. thats were you simply are going to have a hard time.
if your not paying income tax.. its tough. you pay a lot of income tax its easier. its a fine line there.
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes7y
I found myself arguing with my lender last fall when I refi'd a rental. She kept trying to put me in the self-employed category. I maintain I am a business owner and investor." I've never paid SE tax! Ever!" I yelled to the wind as if it mattered...
Getting a loan is a pain for me, but would be worse if not for k-1 income from my 3 business entities that go back quite a few years. The smartest thing I did was establish proper entities. My wife and I are members/shareholders so they have allowed us to qualify for loans separately, keeping our credit from being double-burdened.
I found it funny how little assets (including cash) played in the conforming loan approval process. As unleveraged as I am, I had to pay off another loan to get my DTI ratio lowered. Granted it was $64k with a $1700 pmt, but I was still surprised. I had to use an asset they didn't care about (cash) to pay against something they did (liabilities). Get loans while you still have a w2 if possible!
Chris, thank you for below. Interesting that Form 1120/s (corp/s-corp) income is separated from 1065 (LLC/partnership) income. I thought all k-1s were added up on the same line.
- Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes7y
Originally posted by @Rich Hupper:
@Natalie Kolodij do you know what lenders look for on a self employed person's tax return to make their calculations? Is it adjusted gross income, net income, or gross income, or something else I am missing?
Is it true that paying more taxes translates into more borrowing power?
It's none of that. You can sneak preview for yourself here. There is a lot not covered at that link, that's just to give you an idea. One thing that you will not see at that link is the presumption that it's the same source of income over those couple of years. Meaning if "ABC Carpet Cleaning" had income in 2016 and then closed, and "XYZ Car Wash" opened in 2017, you don't get to average or mix those two -- "XYZ Car Wash" needs to be open for two tax years, "ABC Carpet Cleaning" will be calculated at $0 per year.
It's also the case that restructuring your business can in some cases reset that two year clock. Who is to say that "XYZ Car Wash" the Schedule C sole proprietorship (2016 tax returns) is the same business as "XYZ Car Wash LLC" (2017 tax returns)? It's "underwriter discretion" on that one, and "underwriter discretion" is a bad place to be, since you as the borrower have zero control over if the underwriter's milk went bad ruining her breakfast that day, and you (presumably) don't want a half million dollar real estate transaction dependent on the expiration date on a $4 carton of milk.
This is part of why CPAs and mortgage lenders are constantly at odds with each other, since great advice from a CPA focused on saving you tax dollars is often simultaneously horrible advice if you're goal is to buy a house next year and don't plan to pay cash.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Steve Vaughan:
I found myself arguing with my lender last fall when I refi'd a rental. She kept trying to put me in the self-employed category. I maintain I am a business owner and investor." I've never paid SE tax! Ever!" I yelled to the wind as if it mattered...
Getting a loan is a pain for me, but would be worse if not for k-1 income from my 3 business entities that go back quite a few years. The smartest thing I did was establish proper entities. My wife and I are members/shareholders so they have allowed us to qualify for loans separately, keeping our credit from being double-burdened.
I found it funny how little assets (including cash) played in the conforming loan approval process. As unleveraged as I am, I had to pay off another loan to get my DTI ratio lowered. Granted it was $64k with a $1700 pmt, but I was still surprised. I had to use an asset they didn't care about (cash) to pay against something they did (liabilities). Get loans while you still have a w2 if possible!
Chris, thank you for below. Interesting that Form 1120/s (corp/s-corp) income is separated from 1065 (LLC/partnership) income. I thought all k-1s were added up on the same line.
bankers look at contingent long term liabilities that's why I have been saying on this site.. max leverage over time while fun to build up doors.. it is not going to get you to the next level with bankers that want to see a more positive on your balance sheet and not massive amounts of debt..
- Lender · Los Angeles, CA · Member since 2018 · 95 posts · 16 votes7y
Private Money Lenders work best for the self employed. I know personally that income verification and employment history is irrelevant when it comes to those type of clients. The banks work best if you can provide documentation up to 2 yrs back but if not Private Money, the business purpose loans, hard money will fill your need.
- Property Manager · Bend, OR · Member since 2018 · 14 posts · 4 votes7y
Hey Rich,
I am self employed with no W2, and it was pretty rough trying to get a traditional loan on my first rental as I had been under the 2 year mark. And it was a non-warrantable condo.
Traditional banks wouldn't even talk to me really- so I ended up calling multiple brokers in my town over and over until I found one who really believed in what I was doing.He set me up with a Portfolio loan I believe.
On this loan they averaged out my last year of Business Income over 2 years to get a rough estimate, or alternative income verification- they also looked at my savings, stocks, IRA, other assets, and debt.
I also had to have a cosigner who is a part owner in the property. ( It was my mother ).
So it ended up being a 30/yr loan, with 15% down, and 5% interest. However, the contract let's me refinance the loan once I hit the 2 year mark under my own name, with no refinance costs.
So it took about 20 phone calls before I was able to find someone. Also learned a bit about the condo buying game and non-warrantable condos. - Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes7y
Originally posted by @Chris Mason:
Originally posted by @Rich Hupper:
@Natalie Kolodij do you know what lenders look for on a self employed person's tax return to make their calculations? Is it adjusted gross income, net income, or gross income, or something else I am missing?
Is it true that paying more taxes translates into more borrowing power?
It's none of that. You can sneak preview for yourself here. There is a lot not covered at that link, that's just to give you an idea. One thing that you will not see at that link is the presumption that it's the same source of income over those couple of years. Meaning if "ABC Carpet Cleaning" had income in 2016 and then closed, and "XYZ Car Wash" opened in 2017, you don't get to average or mix those two -- "XYZ Car Wash" needs to be open for two tax years, "ABC Carpet Cleaning" will be calculated at $0 per year.
It's also the case that restructuring your business can in some cases reset that two year clock. Who is to say that "XYZ Car Wash" the Schedule C sole proprietorship (2016 tax returns) is the same business as "XYZ Car Wash LLC" (2017 tax returns)? It's "underwriter discretion" on that one, and "underwriter discretion" is a bad place to be, since you as the borrower have zero control over if the underwriter's milk went bad ruining her breakfast that day, and you (presumably) don't want a half million dollar real estate transaction dependent on the expiration date on a $4 carton of milk.
This is part of why CPAs and mortgage lenders are constantly at odds with each other, since great advice from a CPA focused on saving you tax dollars is often simultaneously horrible advice if you're goal is to buy a house next year and don't plan to pay cash.
I just had a client whose return I amended with this issue.
2016 was their 2nd year in business
CPA made them into an S Corp (didn't do salary or any thing else but ignore that for now)
CPA then also made up $50k in completely bogus expenses because "my clients typically like getting a refund"
They were trying to buy a house.
He screwed them because they now didn't show enough to qualify.
AND
I had to work with the lender a ton to show the new S corp was a continuation of the previous Sole prop since a new EIN was utilized.
- Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes7y
Originally posted by @Natalie Kolodij:
Originally posted by @Chris Mason:
Originally posted by @Rich Hupper:
@Natalie Kolodij do you know what lenders look for on a self employed person's tax return to make their calculations? Is it adjusted gross income, net income, or gross income, or something else I am missing?
Is it true that paying more taxes translates into more borrowing power?
It's none of that. You can sneak preview for yourself here. There is a lot not covered at that link, that's just to give you an idea. One thing that you will not see at that link is the presumption that it's the same source of income over those couple of years. Meaning if "ABC Carpet Cleaning" had income in 2016 and then closed, and "XYZ Car Wash" opened in 2017, you don't get to average or mix those two -- "XYZ Car Wash" needs to be open for two tax years, "ABC Carpet Cleaning" will be calculated at $0 per year.
It's also the case that restructuring your business can in some cases reset that two year clock. Who is to say that "XYZ Car Wash" the Schedule C sole proprietorship (2016 tax returns) is the same business as "XYZ Car Wash LLC" (2017 tax returns)? It's "underwriter discretion" on that one, and "underwriter discretion" is a bad place to be, since you as the borrower have zero control over if the underwriter's milk went bad ruining her breakfast that day, and you (presumably) don't want a half million dollar real estate transaction dependent on the expiration date on a $4 carton of milk.
This is part of why CPAs and mortgage lenders are constantly at odds with each other, since great advice from a CPA focused on saving you tax dollars is often simultaneously horrible advice if you're goal is to buy a house next year and don't plan to pay cash.
[...]
I had to work with the lender a ton to show the new S corp was a continuation of the previous Sole prop since a new EIN was utilized.
Some huge percentage of tax professionals refuse to do anything aside from writing a letter saying they did XYZ person's taxes, meaning your client in less friendly hands simply wouldn't have been able to purchase a home at all.
- 7yLinda WeygantPro MemberInvestor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
Originally posted by @Chris Mason:
Originally posted by @Natalie Kolodij:
Originally posted by @Chris Mason:
Originally posted by @Rich Hupper:
@Natalie Kolodij do you know what lenders look for on a self employed person's tax return to make their calculations? Is it adjusted gross income, net income, or gross income, or something else I am missing?
Is it true that paying more taxes translates into more borrowing power?
It's none of that. You can sneak preview for yourself here. There is a lot not covered at that link, that's just to give you an idea. One thing that you will not see at that link is the presumption that it's the same source of income over those couple of years. Meaning if "ABC Carpet Cleaning" had income in 2016 and then closed, and "XYZ Car Wash" opened in 2017, you don't get to average or mix those two -- "XYZ Car Wash" needs to be open for two tax years, "ABC Carpet Cleaning" will be calculated at $0 per year.
It's also the case that restructuring your business can in some cases reset that two year clock. Who is to say that "XYZ Car Wash" the Schedule C sole proprietorship (2016 tax returns) is the same business as "XYZ Car Wash LLC" (2017 tax returns)? It's "underwriter discretion" on that one, and "underwriter discretion" is a bad place to be, since you as the borrower have zero control over if the underwriter's milk went bad ruining her breakfast that day, and you (presumably) don't want a half million dollar real estate transaction dependent on the expiration date on a $4 carton of milk.
This is part of why CPAs and mortgage lenders are constantly at odds with each other, since great advice from a CPA focused on saving you tax dollars is often simultaneously horrible advice if you're goal is to buy a house next year and don't plan to pay cash.
[...]
I had to work with the lender a ton to show the new S corp was a continuation of the previous Sole prop since a new EIN was utilized.
Some huge percentage of tax professionals refuse to do anything aside from writing a letter saying they did XYZ person's taxes, meaning your client in less friendly hands simply wouldn't have been able to purchase a home at all.
Really? Like Natalie, I work with my clients' lenders to make sure they "get it"
- Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes7y
Originally posted by @Linda Weygant:
Originally posted by @Chris Mason:
Originally posted by @Natalie Kolodij:
Originally posted by @Chris Mason:
Originally posted by @Rich Hupper:
@Natalie Kolodij do you know what lenders look for on a self employed person's tax return to make their calculations? Is it adjusted gross income, net income, or gross income, or something else I am missing?
Is it true that paying more taxes translates into more borrowing power?
It's none of that. You can sneak preview for yourself here. There is a lot not covered at that link, that's just to give you an idea. One thing that you will not see at that link is the presumption that it's the same source of income over those couple of years. Meaning if "ABC Carpet Cleaning" had income in 2016 and then closed, and "XYZ Car Wash" opened in 2017, you don't get to average or mix those two -- "XYZ Car Wash" needs to be open for two tax years, "ABC Carpet Cleaning" will be calculated at $0 per year.
It's also the case that restructuring your business can in some cases reset that two year clock. Who is to say that "XYZ Car Wash" the Schedule C sole proprietorship (2016 tax returns) is the same business as "XYZ Car Wash LLC" (2017 tax returns)? It's "underwriter discretion" on that one, and "underwriter discretion" is a bad place to be, since you as the borrower have zero control over if the underwriter's milk went bad ruining her breakfast that day, and you (presumably) don't want a half million dollar real estate transaction dependent on the expiration date on a $4 carton of milk.
This is part of why CPAs and mortgage lenders are constantly at odds with each other, since great advice from a CPA focused on saving you tax dollars is often simultaneously horrible advice if you're goal is to buy a house next year and don't plan to pay cash.
[...]
I had to work with the lender a ton to show the new S corp was a continuation of the previous Sole prop since a new EIN was utilized.
Some huge percentage of tax professionals refuse to do anything aside from writing a letter saying they did XYZ person's taxes, meaning your client in less friendly hands simply wouldn't have been able to purchase a home at all.
Really? Like Natalie, I work with my clients' lenders to make sure they "get it"
Yup, a lot of them think that if they write a letter attesting to anything more than "I did Joe's taxes" and then Joe goes into foreclosure, the lender is going to sue them. Some say it's "illegal." Some say "I'll lose my license." And some are totally cool with it, "give me 5 minutes and I'll attest to anything short of my ability to predict the future." Zero consistency.
(Not being willing to "guarantee" or "attest to" the future profitability of someone else's business is of course a 100% reasonable objection, not sure why some underwriters at some lenders even ask for such nonsense.... there's sillyness to go around, to be sure)
- 7yLinda WeygantPro MemberInvestor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
@Chris Mason - Yeah, I get it. E&O Insurance is a closely guarded thing. I usually start my letters out with something on the order of "client represented and I prepared the taxes indicating that this business, blah, blah, blah.
Because, let's face it... if somebody were in it for the long con, they could open an entity and just create a set of financial statements stating anything on the planet. Because the preparer doesn't audit prior to tax prep, we really don't have any way of guaranteeing that there's a real, legitimate business operating out there.But by stating "client represented and I prepared the taxes indicating...." that's really all I can attest to. Unless I've actually been a customer of their business, there's no other way I can verify they are actually running a legit business.
- Broker / Investor · Tewksbury, MA · Member since 2008 · 1k+ posts · 351 votes7y
@Mark Fries it appears one problem the self employed have is their ability to deduct more expenses from their taxable income. However when doing this you lose your ability to borrow money from banks. Is this what you have found?
@Daniel Dietz thank you for these insights.
@Linda Weygant " rage quit" hahaha that is funny. I have a great credit score too 800+ but no one seems to care about that. My income is so inconsistent banks are always scared. However I always make sure I have enough money in reserves for my on going expenses.
@Jay Hinrichs thank you for sharing your experience. this helps. It appears my problem is I have been writing off too many expenses.
@Chris Mason "This is part of why CPAs and mortgage lenders are constantly at odds with each other, since great advice from a CPA focused on saving you tax dollars is often simultaneously horrible advice if you're goal is to buy a house next year and don't plan to pay cash."
- this seems to be the crux of the problem for self employed. We want to save on taxes but when we expense too much we then do not have the ability to borrow.
@Exavier Hamilton thankfully i have private money for my deals I don't know where I would be without it.
@Dean Dutro You seem to be in the same boat as I am. When you say they averaged out your income, did they look at your adjusted gross income, net income, gross income, or something else I am missing?
@Natalie Kolodij thats nice that you are willing to work with your clients lender to help facilitate them getting a loan.
You mentioned their previous accountant made up bogus expenses....
Do you know what would happen if someone deducted zero expenses and state a gross income higher than what they actually made that year just to qualify for a loan?
- Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes7y
Originally posted by @Rich Hupper:
@Mark Fries it appears one problem the self employed have is their ability to deduct more expenses from their taxable income. However when doing this you lose your ability to borrow money from banks. Is this what you have found?
@Daniel Dietz thank you for these insights.
@Linda Weygant " rage quit" hahaha that is funny. I have a great credit score too 800+ but no one seems to care about that. My income is so inconsistent banks are always scared. However I always make sure I have enough money in reserves for my on going expenses.
@Jay Hinrichs thank you for sharing your experience. this helps. It appears my problem is I have been writing off too many expenses.
@Chris Mason "This is part of why CPAs and mortgage lenders are constantly at odds with each other, since great advice from a CPA focused on saving you tax dollars is often simultaneously horrible advice if you're goal is to buy a house next year and don't plan to pay cash."
- this seems to be the crux of the problem for self employed. We want to save on taxes but when we expense too much we then do not have the ability to borrow.
@Exavier Hamilton thankfully i have private money for my deals I don't know where I would be without it.
@Dean Dutro You seem to be in the same boat as I am. When you say they averaged out your income, did they look at your adjusted gross income, net income, gross income, or something else I am missing?
@Natalie Kolodij thats nice that you are willing to work with your clients lender to help facilitate them getting a loan.
You mentioned their previous accountant made up bogus expenses....
Do you know what would happen if someone deducted zero expenses and state a gross income higher than what they actually made that year just to qualify for a loan?
That would be filing a fraudulent tax return. And maybe also be mortgage fraud.
- Real Estate Appraiser · Isabella lake, CA · Member since 2018 · 628 posts · 491 votes7y
@rich hupper
Do you know what would happen if someone deducted zero expenses and state a gross income higher than what they actually made that year just to qualify for a loan?
Sounds like mortgage fraud.
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