How to get financing for BRRR for 1099 (self-employed)

Question

Sorry if this question has been asked but I couldn't find a clear answer in what I've read. I have enough to buy and rehab my first house but I am worried about getting the financing when I'm done. I have a lot of write-offs and show little income. Can you offset this in any ways other than claiming more income and waiting the two years? I would be happy to put more in a savings account to cover mortgages for say 6 months or a year, but would that make a difference? Does this issue just depend on the bank? How do other people who are 1099 get around this issue?

Tom Shallcross · Answer

Hi @Joshua Farren. Typically, my long-term financing is in my LLC's name so it's commercial financing where they care more about the actual deal.  I'm the guarantor so they do care that I have reserves and good credit, but they never ask for paystubs/income like a residential loan.

Find a local portfolio lenders or an experienced broker in your area as you rightfully pointed out that your situation would make a typically Freddie/Fannie loan tough.  Also make sure this is all lined-up in advance so you don't put yourself in a tough spot with the clock ticking.

Alex Bekeza · Answer

Hi @Joshua Farren @Sean McDonald Is Correct.  Most self employed/full-time investors show little on the bottom line of their tax returns if their truly taking advantage of all the write offs available to them. There are asset-based products from commercial and portfolio lenders out there designed for investors with high DTI, the desire to vest in a LLC, 10 + mortgages, unique scenarios, etc etc. Obviously, the risk profile from the lender's standpoint is different and rates are a bit higher. However, you can still find 30 year fixed terms in the 5% and 6% range that are based mainly on FICO and the subject property's cash flow (DSCR). If your property will cash flow at 1.15 or above you should be able to cash out refi as high as 75% LTV (based on new appraised value). No tax returns or personal income verification required of any kind. Typically, they'll want to see 6 months of P & I reserves but most lenders are allowing cash out proceeds from the transaction to meet that requirement.

Sean McDonald · Answer

There are many programs for investors in your situation that don’t look at tax returns or income for investment properties. Instead they look at the investment itself to see if it can debt cover. In other words, if the rental income can cover the principal interest taxes and insurance (PITI), you can get approved for loans with rates in the 5-6 range, depending on your credit score.

Joshua Farren · Answer

@Alex Bekeza @Sean McDonald Thank you both for the replies. Those idea seems to fit my needs a bit more. I will look into them. Thank again.

How to get financing for BRRR for 1099 (self-employed)

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