BRRRR without proof of income?

Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes

How would I be able to buy a property initially and cash out refinance utilizing the BRRRR strategy if I cannot prove income right now? That's the biggest hurdle I'm experiencing in planning for my future cash flow properties at the moment. I have a decent amount of cash saved up but even if I used that to buy a property outright I'm still going to run into the problem of getting my cash back out to reinvest into the next property, correct? Is there anyway around this? Creating an LLC and getting a commercial loan instead of trying to get a conventional loan in my personal name? HELOC? What should my strategy be? I just don't want to end up stuck with the one property without being able to roll that cash over into the next one to keep growing my portfolio.

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Jeff Wallace

Rental Property Investor · The Woodlands, TX · Member since 2014 · 345 posts · 288 votes

@Brian Garrett

This is why the W-2 income is so important when just getting started -

With most rental property price points - and since you have good credit, money in the bank, and no debt - you could qualify for a mortgage with a decent part time job at Lowe's or Home Depot -- W-2 income will carry a ton of the weight you are struggling so hard to lift and make financing the property pretty painless... Once you are an established investor, with multiple properties showing income, it still isn't easy to qualify for conventional mortgages as a self employed borrower -- Lenders LOVE to see the W-2 --

Remember when you played Monopoly as a kid - "Passing Go" was the key to getting started - Later you were making so much money from rental income that you didn't need to Pass Go (collect a salary). Real life investing is exactly the same.

Good Luck

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Brian Garrett
OP
Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
9y
I forgot to mention that my credit score is solid somewhere in the 760-780 range. There's got to be a way for those of us without proof of income to still implement the BRRRR strategy.
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Chris MasonPro Member
Moderator
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
9y
Hi @Brian Garrett,
If you have no income, including no rental income, you generally cannot get an Agency 30YF mortgage... what's missing here?
1 Reply
Brian Garrett
OP
Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
9y
@Chris Mason What happens in the scenario where I have a tenant in place and there is rental income? Would I have to wait 2 years to show that rental income before I would qualify for any sort of conventional loan or be able to cash out refinance? There's got to be a way for those of us who can't show proof of income (but have solid credit scores, have cash and/or assets, have no debt) to still be able to implement the BRRRR strategy. Or at least I'm hoping so?
P.S. I'm not specifically asking for a 30YF mortgage I'm just looking to see what options I would have in general, if any, so I can determine if BRRRR will even work for me or not.
1 Reply
Thomas S.
Member since 2016 · 13k+ posts · 12k+ votes
9y
Highly unlikely you will get financing. Proof of income is a requirement for anyone to loan you money.
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Brian Garrett
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Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
9y
@Thomas S. What would you suggest for my particular situation? Buying the house cash doesn't make sense because if I can't do a cash out refinance then I'd have my money parked there with no way to get it out. Do I need to scratch the BRRRR method completely and just do all cash flip deals for now to start showing income? Thank you in advance I appreciate your input.
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Chris MasonPro Member
Moderator
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
9y
Originally posted by @Brian Garrett:

@Chris Mason What happens in the scenario where I have a tenant in place and there is rental income? Would I have to wait 2 years to show that rental income before I would qualify for any sort of conventional loan or be able to cash out refinance? There's got to be a way for those of us who can't show proof of income (but have solid credit scores, have cash and/or assets, have no debt) to still be able to implement the BRRRR strategy. Or at least I'm hoping so?
P.S. I'm not specifically asking for a 30YF mortgage I'm just looking to see what options I would have in general, if any, so I can determine if BRRRR will even work for me or not.
There we go. :)
Rental income is qualifying income. Even without two years of tax returns, if/when it makes sense why there are no tax returns.
It might be doable. You need to find a REI lender licensed in your state to run the numbers particular to your scenario, and not just shut you down right off the bat.
1 Reply
Megan S.
Saugerties, NY · Member since 2017 · 81 posts · 33 votes
9y
I'm in the same boat as @Brian Garrett. I have one rental property (was my primary residence before I started traveling long-term) with a positive cash flow of $1900/mo. But that's my only income right now, and it's nowhere near enough to qualify for a loan. Any suggestions for finding lenders who would consider financing another sf or mf property if I can prove the numbers are there?
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Brian Garrett
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Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
9y
Originally posted by @Chris Mason:

Originally posted by @Brian Garrett:
@Chris Mason What happens in the scenario where I have a tenant in place and there is rental income? Would I have to wait 2 years to show that rental income before I would qualify for any sort of conventional loan or be able to cash out refinance? There's got to be a way for those of us who can't show proof of income (but have solid credit scores, have cash and/or assets, have no debt) to still be able to implement the BRRRR strategy. Or at least I'm hoping so?
P.S. I'm not specifically asking for a 30YF mortgage I'm just looking to see what options I would have in general, if any, so I can determine if BRRRR will even work for me or not.
There we go. :)
Rental income is qualifying income. Even without two years of tax returns, if/when it makes sense why there are no tax returns.
It might be doable. You need to find a REI lender licensed in your state to run the numbers particular to your scenario, and not just shut you down right off the bat.
The problem even with this scenario is I would still have to pay cash on the front end for the property assuming I wouldn't be able to get a conventional loan without proof of income. Then even after I rehab the property and place a tenant in it I would have to cross my fingers I'm able to find somewhere to cash out refinance after 6 months which at that point I'll have only had a tenant in the property producing rental income for a very short time since most of the time will be performing the rehab. If I can't find a cash out refinance at that point then I have a lot of my cash stuck in this one property which is a big problem for me to scale up. Follow me? This is where I'm having a hard time.
1 Reply
Brian Garrett
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Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
9y
Originally posted by @Megan S.:

I'm in the same boat as @Brian Garrett. I have one rental property (was my primary residence before I started traveling long-term) with a positive cash flow of $1900/mo. But that's my only income right now, and it's nowhere near enough to qualify for a loan. Any suggestions for finding lenders who would consider financing another sf or mf property if I can prove the numbers are there?
You're way ahead of me since at least you own a property already and have some sort of income to show. I don't own a home and have never purchased a home so the first flip or BRRRR property I buy will be my very first home purchase. Trying to figure out how to navigate this and make it work. It's frustrating because I have cash, I have great credit and I have no debt.
0 Reply
Avi Garg
Rental Property Investor · Concord, CA · Member since 2016 · 499 posts · 219 votes
9y
Brian Garrett u will need to find private lenders. Lenders like B2R will do the loan with tenants already in place. They will require higher LTV and a higher interest rate close to 7%
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Brian Garrett
OP
Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
9y
Originally posted by @Avi Garg:

Brian Garrett u will need to find private lenders. Lenders like B2R will do the loan with tenants already in place. They will require higher LTV and a higher interest rate close to 7%
No private lenders will do the loan from the beginning? It just doesn't make sense to me that a lender wouldn't give me a loan to start even though my credit score is good and I have the down payment but then just because I've had a tenant in there for a month or so paying rent all of a sudden they'll do a cash out refinance at that point?
0 Reply
Avi Garg
Rental Property Investor · Concord, CA · Member since 2016 · 499 posts · 219 votes
9y
@Brian Garrett your issue of refinancing the property is taken care of. Other idea is to call every bank/credit union within 100 miles and ask if they would do the loan.
1 Reply
Brian Garrett
OP
Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
9y
Originally posted by @Avi Garg:

@Brian Garrett your issue of refinancing the property is taken care of. Other idea is to call every bank/credit union within 100 miles and ask if they would do the loan.
Stop complaining? I was unaware that asking questions to gain knowledge through due diligence is called complaining these days. No my issue is not taken care of whatsoever hence the reason I'm trying to find a solution and get advice on the best way to proceed.
Update: I see you've edited your post and removed the unnecessary remarks. Thank you.
4 Reply
Avi Garg
Rental Property Investor · Concord, CA · Member since 2016 · 499 posts · 219 votes
9y
yes I misread your earlier comment
0 Reply
Jeff Wallace
Rental Property Investor · The Woodlands, TX · Member since 2014 · 345 posts · 288 votes
9y
@Brian Garrett
This is why the W-2 income is so important when just getting started -
With most rental property price points - and since you have good credit, money in the bank, and no debt - you could qualify for a mortgage with a decent part time job at Lowe's or Home Depot -- W-2 income will carry a ton of the weight you are struggling so hard to lift and make financing the property pretty painless... Once you are an established investor, with multiple properties showing income, it still isn't easy to qualify for conventional mortgages as a self employed borrower -- Lenders LOVE to see the W-2 --
Remember when you played Monopoly as a kid - "Passing Go" was the key to getting started - Later you were making so much money from rental income that you didn't need to Pass Go (collect a salary). Real life investing is exactly the same.
Good Luck
21 Reply
Brian Garrett
OP
Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
9y
Originally posted by @Jeff Wallace:

@Brian Garrett
This is why the W-2 income is so important when just getting started -
With most rental property price points - and since you have good credit, money in the bank, and no debt - you could qualify for a mortgage with a decent part time job at Lowe's or Home Depot -- W-2 income will carry a ton of the weight you are struggling so hard to lift and make financing the property pretty painless... Once you are an established investor, with multiple properties showing income, it still isn't easy to qualify for conventional mortgages as a self employed borrower -- Lenders LOVE to see the W-2 --
Remember when you played Monopoly as a kid - "Passing Go" was the key to getting started - Later you were making so much money from rental income that you didn't need to Pass Go (collect a salary). Real life investing is exactly the same.
Good Luck
Well said Jeff and that all makes perfect sense. I'm just not planning on getting a W-2 job anytime soon (hopefully ever) so that's where the problem lies. I'm focusing all of my efforts and time into REI now so this will be my new "full-time job" which means I've got to find a workaround and solution since I'll technically still be "self employed" moving forwards even with my REI aspirations.
2 Reply
Michaela G.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
9y
If it's a fixer upper and you're getting a great deal, you could try to go with crowdfunding through Groundfloor or similar platforms. Purchase and fix-up and then you can refinance, while you still have funds in the bank
0 Reply
Brian Pulaski
Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
9y
What do you think past 2 years of race returns look like? You must have filed and showed something, correct? There has to be some kind of income coming in, and that's what the mortgage broker will ask for (along with other things).
0 Reply
Brian Garrett
OP
Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
9y
Originally posted by @Michaela G.:
If it's a fixer upper and you're getting a great deal, you could try to go with crowdfunding through Groundfloor or similar platforms. Purchase and fix-up and then you can refinance, while you still have funds in the bank
I'm trying to get lending from the beginning not only on the refinance.
Otherwise I would just use my own cash to buy outright but even then I'm still not sure how I would be able to cash out refinance because I'd be in the same shoes as now.
Can you please explain your suggestion a little further so I can understand better?
0 Reply
Michaela G.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
9y
That's what ground floor and others do: They lend on purchase and fix, if your LTV is low enough, so that you don't have to use your cash. And when it's finished you'll refinance and pay off the loan.
0 Reply
Brian Garrett
OP
Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
9y
Originally posted by @Brian Pulaski:
What do you think past 2 years of race returns look like? You must have filed and showed something, correct? There has to be some kind of income coming in, and that's what the mortgage broker will ask for (along with other things).
Yes I did file like I do every year but no there was no income. I did not work the last 2 years therefore I don't have any proof of income to show. Otherwise there would be no issue and this discussion would not be taking place. The problem lies in the fact I cannot show proof of income.
1 Reply
Isiah Ferguson
Investor · Charlotte, NC · Member since 2017 · 321 posts · 157 votes
9y
I'm currently almost in the same siuation as you. I had the funds save up from playing professional sports only for 1 year and released. Initially I was going to banks and trying to get a loan. No bank would give me the loan because l only played for 1 year and I only had 1 year of W2. Most banks reqiure 2 years of W2. I went ahead an cashed out on a duplex for 100k. Probably wasn't the smartest decision but I'm determind to get the ball rolling. I'm looking to refinance to get my cash back out and to start the BRRRR strategy to expand my protfolio. Now, I'm collecting monthly rent for about 7 months up to date and also I started a full time job which is a little above minimum wage, which I've been working for 4 months. Hopefully after 1 year instead of 2 years of working and collecting rent I can refinance, get my cash back at 75% or 80% LTV and start to expand my portfolio. The only other option I knew of was Lima One Captial bank. They will lend to lenders based on their assets they have. Lima One will do a 30Y/F but their interest rates are at 8% in which I asked the BP family and people responded saying that was too high of a rate.
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Brian Garrett
OP
Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
9y
Originally posted by @Michaela G.:

That's what ground floor and others do: They lend on purchase and fix, if your LTV is low enough, so that you don't have to use your cash. And when it's finished you'll refinance and pay off the loan.
Refinance how and through who when it's finished with rehab?
That's the whole problem. I need to make sure I can cash out refinance WITHOUT having to prove income in order to utilize the BRRRR strategy and not end up getting stuck in one property.
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Isiah Ferguson lima's rate is only too high if you can actually get a loan at a better rate if you cannot.. then at least you have an option to pull cash without waiting you have to analyze lost opportunity costs as it relates to a 5% loan and a 8% loan....
it could be you find a smoking deal and the difference in interest rates are simply the cost of doing business to secure your next great deal.
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Michaela G.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
9y
@Isiah Ferguson

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