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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Tim Nelson
Menomonie, WI · Member since 2015 · 25 posts · 5 votes
9y
@Brian Garrett, if your partner's income or incomes are high enough, it will compensate for your lack of income and they will lend to your LLC! No doubt!
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Jaymie S.
Investor · Peoria, IL · Member since 2015 · 23 posts · 38 votes
9y
I purchased my first property with cash. Second property was 25% down with a conventional mortgage using my W-2 income. Third property we did a refi on first property pulling out enough money to pay cash. I then formed an LLC and went commercial. As long as I bring 20% to closing my banker doesn't care how many I purchase from this point on. We just closed on #6 and are looking for more deals. I have moved all properties into the LLC and have 75% LTV mortgages on all 6 properties. This left us with enough cash for the next four properties at 20% down.
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Lesley Resnick
Real Estate Agent · Jacksonville, FL · Member since 2015 · 1k+ posts · 1k+ votes
9y
You need to start looking for non bank lenders. Credit unions and banks are not going to fit your situation. Hard money that only want to consider the deal, the money will be more expensive and you may need to keep a higher LTV, but you can find the money. Google hard money / private money and just start calling. The programs change almost daily.
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Marcus Maloney
Rental Property Investor · Queen Creek, AZ · Member since 2013 · 368 posts · 191 votes
9y
Brian, what bank is your current funds being held in. Try using them first. They see a pattern of deposit and withdrawals they may be inclined to do it. I also suggest setting up an LLC and haw funds funneled through there. It's always good to start with a smaller community bank, there lending requirements are a little more loose. I haven't done it myself yet but I've heard where lending institutions will finance you based on the income production of the property along with your credit score and down payment. This maybe an option for you however they normally will not do it on SFR you will need to purchase a plex of some sort
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Ian Hoover
Bridgeville, PA · Member since 2013 · 395 posts · 105 votes
9y
Go to small local banks and start building a relationship, for me as long as my property is cash flowing I can typically get a refi.
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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 @Jay Hinrichs:
@Brian Stewart check with Peak lending in KC they have this product a lot of people try to resell their product .. so you can go straight to the source if you wish
Jay does Peak only do refinancing or purchase as well? Do they lend out of state? Thanks!
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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 @Percy N.:

Brian Garrett couple other things to try that I have not seen mentioned yet (or perhaps I missed them):
- Get a partner with a job and good credit who can do the refinance. You provide the initial capital for the purchase and finance and they refinance
- Depending on the cash you have at hand, some brokerages like Merrill Lynch allow you to borrow against it at a nominal rate. This can at least help you get started but not "tie up" your cash. Not exactly completely liquid either.
Percy thank you for these suggestions. I would prefer to not have a partner if possible but of course I would explore that option if need be. As for the second recommendation do you know what type of cash is typically required for those deals or what the terms look like?
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Brian Garrett Peak lends all over the south I don't know about FLA though
they are in KC just google and call.. JP Soeur is an owner if you can get him on the phone or who ever answers.. they have purchase and refi..
and they have non recourse product but of course you pay a premium for those products but they do them.. just like I do them.
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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 @Account Closed:

Originally posted by @Brian Garrett:

Originally posted by @Account Closed:
Originally posted by @Brian Garrett:

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.
Do what I do and use other people's money.
You can buy "Subject To", rehab, Sell, rinse, repeat, or buy "Subject To", Rent, rinse, repeat.
Or, find a doctor, dentist or businessman with lots of cash to invest and pay them an interest rate you are both happy with. No bank, no credit needed. It has worked in all markets for me for the last 20 years. Before that, I was a loan officer, so yes, I can qualify for bank loans, but why do that when my way is so much more profitable? Ken
Would you mind explaining this part of your post a bit more?
You can buy "Subject To", rehab, Sell, rinse, repeat, or buy "Subject To", Rent, rinse, repeat.
I'd love to understand the strategy but I'm not following it as is. Thank you!
Hi @Brian Garrett: In response to your question:
1) Sure. Last month I bought a 4 bed 2 bath for $100 down "Subject To" the existing loan. It was NOT a foreclosure, all payments were current. Basically, I took over the loan and payments. I sold it on a Wrap for $25,000 down and a higher monthly payment giving me a positive cash flow of $750 a month in addition to the $25,000 I received. (Not including the equity I'll get at payoff). I spent $500 and 30 days getting the placed cleaned up while I looked for a buyer. I made one month's mortgage payment. In this case I actually SOLD the property so I don't have a "Tenant", I have a "Tenant Buyer".
I did another, better one, simultaneously with one of my partners that I am training. We will net about $40,000 after expenses on an $8,000 investment. (Not including the equity I'll get at payoff)
2) A couple of months ago I got a Seller to Lease Option to me a totally paid off property for $100 down and payments of $850 a month. I did a Sandwich Lease Option to my Tenant who has the Option to buy, where I got $10,000 down and $1250 a month for positive cash flow of $450 a month. (Not including the equity I'll get at payoff). This is more of a rental (Rent to Own / Lease Option).
Either of these two can be repeated over and over. I've been doing Subject To's for twenty years. I've also done them as flips, but these are faster, and more profitable, less risky and less hassle.
Since BP doesn't allow me to put my email address here you'd need to PM me for more info, which I'd be happy to give. Most people don't want to wade through details as they read the thread.
Ken
As a new investor, I don't understand what "Subject To" is so I guess that's where I'm not following. I sent you a request to connect so please shoot me a PM. The strategy sounds intriguing and sounds like it has phenomenal returns so I'm definitely interested in learning more. Thanks Ken!
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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 @Albert Bui:

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.
HI Brian,
The below is with regards to conventional financing for BRRR not portfolio money, private money, or hard money.
I've done files for RE investors with purely real estate rental income so in your hypothetical if you had zero other debt (car, credit cards, student loans, no nothing or all $0.00 balance) then you could qualify for a cash out or regular rate/term refinance "if," the net rental income on your hypothetical rental (75% of gross rents since this is a recent purchase of a BRRR strategy) exceeds the PITIA ( principal/interest/taxes/insurance/assessments) of your property.
So in essence, if your BRRR property "cash flows," with respect to how fannie mae or freddie mac calculates your income and you have no other obligations or housing expenses (AKA you live at home with mom and dad) then yes its possible to qualify with no regular W2 income or self employment income.
Rental income is the fastest income to use with out seasoning or history of it being received. All you need is a rental lease agreement signed and dated + copy of a security deposit and you can use 75% of it - PITIA right away.
All other income types require extended periods of time to use in a conventional financing scenario such as:
- note or interest income or dividends from stocks - receipt for min of 2 years as shown on tax returns + 3 years of continuance on the note and stocks are assumed to provide income into the future
- self employment income - min 1 years of history and 2 years in the same industry with no significant gaps of employment
- W2 income or salary - min 2 years working in the industry or higher education(college) in a related field with no significant gaps of employment and min 1 paystub to use income to qualify
- Bonus income at W2 job - min 2 years of receipt (off chance to use 1-2 years of receipt)
- over time income at W2 job - mins 2 years of receipt (off chance to use 1-2 years of receipt)
- contractual income like sandwich leases, land contracts, is similar to the note or interest income above
- royalties use for qualification is like contractual income - min receipt on tax returns for 2 + years to average for use to qualify
- alimony is min 6 months of receipt to use the income as a reliable income source for qualification purposes
- child support income 6 months of receipt plus min 3 years of continuance or 36 months left till the child is 18 years of age or you cannot use it
- automobile allowance from employer W2 - needs to have been received for 2 + years to use
- many other types of income.
Very good information here Albert. Would you mind shooting me a PM to discuss a bit further? I fit the situation you described with ZERO debt. My credit cards carry a $0.00 balance and I have no other debt of any sort so this strategy sounds like it could be great for me. Thank you!
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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 @Ashton Sharp:

Brian Garrett maybe find someone with the W-2 income to consign for you?
Yes that would be a last resort option. I'd prefer to be into the deals myself if possible.
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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 @Tim Nelson:

@Brian Garrett, if your partner's income or incomes are high enough, it will compensate for your lack of income and they will lend to your LLC! No doubt!
Understood but I'm not planning on having any partners.
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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 @Jaymie S.:

I purchased my first property with cash. Second property was 25% down with a conventional mortgage using my W-2 income. Third property we did a refi on first property pulling out enough money to pay cash. I then formed an LLC and went commercial. As long as I bring 20% to closing my banker doesn't care how many I purchase from this point on. We just closed on #6 and are looking for more deals. I have moved all properties into the LLC and have 75% LTV mortgages on all 6 properties. This left us with enough cash for the next four properties at 20% down.
Great job but in your case you had W-2 income which obviously changes everything.
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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 @Lesley Resnick:

You need to start looking for non bank lenders. Credit unions and banks are not going to fit your situation. Hard money that only want to consider the deal, the money will be more expensive and you may need to keep a higher LTV, but you can find the money. Google hard money / private money and just start calling. The programs change almost daily.
Thanks Lesley I will obviously try going through the banks and credit unions first (there's no harm in trying the worst they can tell me is no) and after I exhaust those options (assuming none will qualify me given my situation) then I will start digging into the suggestions here in this thread.
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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 @Marcus Maloney:

Brian, what bank is your current funds being held in. Try using them first. They see a pattern of deposit and withdrawals they may be inclined to do it.
I also suggest setting up an LLC and haw funds funneled through there. It's always good to start with a smaller community bank, there lending requirements are a little more loose. I haven't done it myself yet but I've heard where lending institutions will finance you based on the income production of the property along with your credit score and down payment. This maybe an option for you however they normally will not do it on SFR you will need to purchase a plex of some sort
Hey Marcus I'm planning to try banks and credit unions first for conventional lending for obvious reasons it's just unlikely given my scenario they will lend to me but you never know. The LLC is always a backup plan if I do need to structure it that way for lending purposes. Thanks!
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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 @Ian Hoover:

Go to small local banks and start building a relationship, for me as long as my property is cash flowing I can typically get a refi.
That's the plan Ian. I'm looking for purchase as well though not just refinance.
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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 @Jay Hinrichs:

@Brian Garrett Peak lends all over the south I don't know about FLA though
they are in KC just google and call.. JP Soeur is an owner if you can get him on the phone or who ever answers.. they have purchase and refi..
and they have non recourse product but of course you pay a premium for those products but they do them.. just like I do them.
Great information yet again. Thank you Jay!
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Isiah Ferguson
Investor · Charlotte, NC · Member since 2017 · 321 posts · 157 votes
9y
@Brian Garrett You're on the right path but I suggest you educate yourself a little more as I'm doing. Books, podcast, & local REI seminars. You don't have to do partnerships' with people but just to get the information so you can understand the terms etc and leverage yourself for more options before you make a move like I didn't do.
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Brian Garrett
OP
Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
9y
@Isiah Ferguson That's exactly what I've been doing and what the purpose of a thread like this is for. To learn, educate and get real world first hand feedback from those more experienced.
1 Reply
Joshua Martin
Investor · Milwaukee, WI · Member since 2016 · 389 posts · 193 votes
9y
How do you have lots of cash but no income? A lender might be willing to consider income even if it's not W-2. I'm having the same problem to some degree, but I have just enough W2 and low enough debt that I could get to about 100k. Not a ton of property where I'm all in at 75k. Talking to a commercial broker might help as they might have non-traditional products that could be used for investment properties given a particular situation. Best of luck, JTM
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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 @Joshua Martin:

How do you have lots of cash but no income? A lender might be willing to consider income even if it's not W-2. I'm having the same problem to some degree, but I have just enough W2 and low enough debt that I could get to about 100k. Not a ton of property where I'm all in at 75k.
Talking to a commercial broker might help as they might have non-traditional products that could be used for investment properties given a particular situation.
Best of luck,
JTM
Joshua I've been self employed in a different industry for the past 11 years and was financially disciplined enough to save, save, save. I've since retired from that field and have not been working for the past 2 years hence the reason there is no income to show. Now I'm diving into REI.
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Joshua Martin
Investor · Milwaukee, WI · Member since 2016 · 389 posts · 193 votes
9y
Ahh I see. Better get creative ;)
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Timothy Beauford
Wholesaler · Baltimore, MD · Member since 2016 · 8 posts · 3 votes
9y
http://www.ccpbusinessloans.com/ try this company you also can try lima1 capital as well
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Jacob Murphy
Contractor · Cincinnati, OH · Member since 2015 · 92 posts · 75 votes
9y
@Brian Garrett thanks for asking this question. Great thread! I have been looking into this question myself as I am on my 6th BRRRR property now. But I am seeing how difficult it is to have all your cash tied up in a project and then not being able to put offers in on good deals since all my money is in my rehab. Frustrating.
I don't work for lima one capital nor have I used them yet, but here is an email I got from them regarding bridge financing like you are wanting:
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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 @Timothy Beauford:

http://www.ccpbusinessloans.com/ try this company you also can try lima1 capital as well
Thank you for the recommendations I will certainly check out both of these.
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