Real Estate Investor · Raleigh, NC · Member since 2012 · 427 posts · 297 votes
Hi,
I have two properties I bought and rehabbed with cash and want to do a cash out refi. Originally I planned on reselling them on the MLS but I would rather do a hold if I can refi them at a reasonable rate and get my cash out. If I can get 70% of appraised value for each one out I am fine with that, but more would be better on one of them for sure.
The two houses would appraise for 120k and 100k. I would like to do them individually. 30 year amortization, reasonable interest, etc.
Where I have some trouble is I do not have a W-2 job anymore. I also do not the income track record in real estate to apply for my refis "the normal way." I am sure other full time investors here understand this problem.
@Eric F., if you have no job, then landlording is your job. That means actual rental income from actual tenants needs to be in place. Hypothetical leases & hypothetical tenants cannot be used any more than hypothetical paystubs for someone who has a hypothetical W2 job can be used. It's not 2006.
Two years of rental income on tax returns is not required.
That being said, you weren't actually clear about what you do. You said that you didn't have a W2 job. There are millions of contractors, 1099 salespersons, etc, out there merrily getting mortgages, without any W2s to show.
You need to talk to a REI-friendly mortgage person local to you, and don't expect any firm answers that mean anything until you've coughed up all the tax returns, all the bank statements, et cetera.
Start reaching out to your local banks in your area. Typically regional banks and other credit unions. Put a package together that focuses more on the numbers and explaining why this is a good deal from the banks perspective. Even though you don't have a W2, they may make an exception considering you are coming to the banks prepared, which is typically more than most people do when going to a bank. Other things to think about is if this path doesn't work, you can also do a refi with B2R finance which looks at the numbers of the property more than at your specific W2 income.
I hope this helps out, have a great rest of your day.
I read your FAQ. I want to lock down my refi first before I put a tenant in it since I could sell these properties just fine. I appreciate the time, but I don't think your product is what I would be looking for.
I don't have any suggestions @Eric F. but I am very interested to hear what some others come up with. I am always looking to learn about finance and financing options (That don't take you to the cleaners)
hi @Eric F. think you are on the right track looking for an asset based lender. I think some lenders may question why the property is not cash flowing if you present it as a stabilized rental asset. I believe that would be the only challenge, with the strategy of waiting to place a tenant, until after financing. Lenders like to see the asset producing or at least that there is a signed lease with tenant waiting to occupy the property. Good luck with your business and congrats on the 2 rehabs.
I totally understand why a lender would want a tenant in place. It just doesn't work for me in these situations because I need to know exactly what terms I could get for a loan and know for a fact I could be approved before I place a tenant. Without this I'd rather just sell the properties when I'm done.
The worst case scenario is I get a tenant in there and then a bunch of lenders tell me "Hey, you don't have a W-2 job or 2+ year track record of X income in your real estate company...DENIED" and all my cash is tied up in 2 properties I cannot sell.
@Eric F., if you have no job, then landlording is your job. That means actual rental income from actual tenants needs to be in place. Hypothetical leases & hypothetical tenants cannot be used any more than hypothetical paystubs for someone who has a hypothetical W2 job can be used. It's not 2006.
Two years of rental income on tax returns is not required.
That being said, you weren't actually clear about what you do. You said that you didn't have a W2 job. There are millions of contractors, 1099 salespersons, etc, out there merrily getting mortgages, without any W2s to show.
You need to talk to a REI-friendly mortgage person local to you, and don't expect any firm answers that mean anything until you've coughed up all the tax returns, all the bank statements, et cetera.
As @Chris Mason points out, not having a W-2 isn't a problem if you are making enough money elsewhere. That's true even with Fannie Mae traditional loans, but you need to verify where your obtain your income. Using stated or pro-forma income declaration to obtain a loan is very rare these days... except for friends and family or 'inside' loans.
A few data points.
A commercial lender is not an asset based lender. The commercial lender still wants to see some history of your 'business' and consistency of income if you are a new customer. Things change once you get going and build a relationship with the bank. They will, on a deal-to-deal basis, tend to give you the benefit of the doubt... assuming you have collateral or income to keep the bank in their comfort zone.
Wake county area commercial banks generally will lend with 20 yr amortization with 5-7 year calls at rates (last I checked early this year) at 3/4 to 1 point above government subsidized (Fannie Mae traditional) rates.
But, honestly, the scenario you have will make a lender nervous. So I can't recommend any bank I've used since I know their commercial side underwriting process. See also which may be applicable here and another alternative where I posted on .