Investing as 1099 employee
Member since 2022 · 7 posts · 3 votes
Investing as 1099 employee
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Real Estate Agent · Asheville, NC · Member since 2020 · 68 posts · 39 votes
3yTry a local credit union! I'm having success with this right now.
16 Replies
- 3yJosh GreenBusiness MemberRealtor · Tampa/St Pete/Clearwater/Bradenton · Member since 2020 · 396 posts · 353 votes
@Dina Joseph
You won't get an owner occupant, conventional loan with the 1099 and current amount of work history. At the fastest, you can obtain one on 1 year of tax returns but the lender will take say 50% of that income toward your DTI ratio so your buying power will be hit hard.
Only other option to buy will be to use a non-owner occupant loan (which technically you can't intend to occupy) such as a DSCR OR maybe a non-conventional portfolio loan like a bank loan or asset-based loan.
All those types of loans will typically require higher down payments and interest rates than a Fannie Mae/Freddie Mac backed loan.
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Suncoast Vacation Homes4.959 Reviews - Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes3y
Quote from @Dina Joseph:
You need to build the work history. However, there are opportunities through different types of loans if you are willing to put significantly more down (50% or more). You could also consider a hard-money lender, but rates will be very high. Owner financing? Subject To?
Read "How to Invest with Low (and No) Money Down" by Brandon. That has quite a few creative ideas you probably haven't thought of. You need to get creative or be patient.
The DIY Landlord Book4.7248 Reviews - Member since 2022 · 7 posts · 3 votes3y
Quote from @Josh Green:
@Dina Joseph
You won't get an owner occupant, conventional loan with the 1099 and current amount of work history. At the fastest, you can obtain one on 1 year of tax returns but the lender will take say 50% of that income toward your DTI ratio so your buying power will be hit hard.
Only other option to buy will be to use a non-owner occupant loan (which technically you can't intend to occupy) such as a DSCR OR maybe a non-conventional portfolio loan like a bank loan or asset-based loan.
All those types of loans will typically require higher down payments and interest rates than a Fannie Mae/Freddie Mac backed loan.
Thank you for responding Josh! I agree, I think at minimum it does help to be patient and wait at least a year to save more money to secure my financial position. I'm considering a DSCR as well, perhaps a portfolio lender might help. Thanks again for your response!
- Member since 2022 · 7 posts · 3 votes3y
Quote from @Nathan Gesner:
Quote from @Dina Joseph:
You need to build the work history. However, there are opportunities through different types of loans if you are willing to put significantly more down (50% or more). You could also consider a hard-money lender, but rates will be very high. Owner financing? Subject To?
Thank you for responding Nathan ! I may be able to leverage the more money down option if the numbers work - great idea. A hard money lender is a thought to consider. I have read Brandon's book "How to Invest with Low..." and I agree, its an excellent resource. I'm currently reading his other book "Managing Rental Properties" ! Thank you Nathan !
- Real Estate Agent · Asheville, NC · Member since 2020 · 68 posts · 39 votes3y
Try a local credit union! I'm having success with this right now.
- Lender · Member since 2020 · 331 posts · 209 votes3y
Quote from @Dina Joseph:
Question: How can I invest as a NEW 1099 employee (Ex. independent insurance agent commission only)? My last two years of taxes are from a different W2 job. How can I prove to the bank I can afford a property? I would like to house-hack FHA on a duplex, but if that's not applicable based on my new employment, I would purchase a single with 20% down. Is that my best option to get started? What are some strategies 1099 employees use to avoid waiting on the sidelines while they don't have 2 years of taxes to show? - Dina Joseph
Hey Dina! How long have you been self employed? Depending on timing, you could do a bank statement loan. It allows for owner occupied and max 90% LTV.
With DSCR, while it doesn't look at your income/DTI/work history it does NOT allow for owner occupancy.
Good luck!
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Dina Joseph:
Quote from @Josh Green:
@Dina Joseph
You won't get an owner occupant, conventional loan with the 1099 and current amount of work history. At the fastest, you can obtain one on 1 year of tax returns but the lender will take say 50% of that income toward your DTI ratio so your buying power will be hit hard.
Only other option to buy will be to use a non-owner occupant loan (which technically you can't intend to occupy) such as a DSCR OR maybe a non-conventional portfolio loan like a bank loan or asset-based loan.
All those types of loans will typically require higher down payments and interest rates than a Fannie Mae/Freddie Mac backed loan.
Thank you for responding Josh! I agree, I think at minimum it does help to be patient and wait at least a year to save more money to secure my financial position. I'm considering a DSCR as well, perhaps a portfolio lender might help. Thanks again for your response!
Here's another tips: It's better to invest (the DSCR fund) in the market where only DSCR loan is accepted in that market, rather than investing in the market that could accept QM loan also.
- Member since 2022 · 7 posts · 3 votes3y
Quote from @Carlos Ptriawan:
Quote from @Dina Joseph:
Quote from @Josh Green:
@Dina Joseph
You won't get an owner occupant, conventional loan with the 1099 and current amount of work history. At the fastest, you can obtain one on 1 year of tax returns but the lender will take say 50% of that income toward your DTI ratio so your buying power will be hit hard.
Only other option to buy will be to use a non-owner occupant loan (which technically you can't intend to occupy) such as a DSCR OR maybe a non-conventional portfolio loan like a bank loan or asset-based loan.
All those types of loans will typically require higher down payments and interest rates than a Fannie Mae/Freddie Mac backed loan.
Thank you for responding Josh! I agree, I think at minimum it does help to be patient and wait at least a year to save more money to secure my financial position. I'm considering a DSCR as well, perhaps a portfolio lender might help. Thanks again for your response!
Here's another tips: It's better to invest (the DSCR fund) in the market where only DSCR loan is accepted in that market, rather than investing in the market that could accept QM loan also.
Carlos, that is a clever idea !
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Dina Joseph:
Quote from @Carlos Ptriawan:
Quote from @Dina Joseph:
Quote from @Josh Green:
@Dina Joseph
You won't get an owner occupant, conventional loan with the 1099 and current amount of work history. At the fastest, you can obtain one on 1 year of tax returns but the lender will take say 50% of that income toward your DTI ratio so your buying power will be hit hard.
Only other option to buy will be to use a non-owner occupant loan (which technically you can't intend to occupy) such as a DSCR OR maybe a non-conventional portfolio loan like a bank loan or asset-based loan.
All those types of loans will typically require higher down payments and interest rates than a Fannie Mae/Freddie Mac backed loan.
Thank you for responding Josh! I agree, I think at minimum it does help to be patient and wait at least a year to save more money to secure my financial position. I'm considering a DSCR as well, perhaps a portfolio lender might help. Thanks again for your response!
Here's another tips: It's better to invest (the DSCR fund) in the market where only DSCR loan is accepted in that market, rather than investing in the market that could accept QM loan also.
Carlos, that is a clever idea !
That's the trick, the appreciation in DSCR-only area has exceeded QM-accepted area : the buyer is stronger.
- Member since 2022 · 7 posts · 3 votes3y
Quote from @Lyndsay Zwirlein:
Quote from @Dina Joseph:
Question: How can I invest as a NEW 1099 employee (Ex. independent insurance agent commission only)? My last two years of taxes are from a different W2 job. How can I prove to the bank I can afford a property? I would like to house-hack FHA on a duplex, but if that's not applicable based on my new employment, I would purchase a single with 20% down. Is that my best option to get started? What are some strategies 1099 employees use to avoid waiting on the sidelines while they don't have 2 years of taxes to show? - Dina Joseph
Hey Dina! How long have you been self employed? Depending on timing, you could do a bank statement loan. It allows for owner occupied and max 90% LTV.
With DSCR, while it doesn't look at your income/DTI/work history it does NOT allow for owner occupancy.
Good luck!
Hi Lyndsay, thank you for your insight ! This is my first week as a 1099 employee. I want learn about my options so that I can plan and set goals accordingly. Your response is super clear and helpful. I'll look into it the bank statement loan for owner occupied and DSCR for tenant occupied, thanks !!
- 3yBasit SiddiqiBusiness MemberAccountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
It is hard to get a conventional loan with new 1099 income.
You would need to wait 2 years before lenders start counting that income.
You can potentially look at getting a Portfolio Loan / DSCR Loan.
Best of luck
Basit Siddiqi CPA4.979 Reviews - Investor · Spokane, WA · Member since 2015 · 238 posts · 133 votes3y
I was in a similar position; had the cash I needed for down etc. but couldn't get a loan. I got my dad to cosign for me then I refinanced the property into my name year or so later once I had the W-2 history.
- Real Estate Broker · New York, NY · Member since 2020 · 2k+ posts · 1k+ votes3y
Hey @Dina Joseph - I recently came across a lender that can work with your background, please DM me and I'm happy to forward you their info thanks.
- Real Estate Agent · Miami, FL · Member since 2022 · 238 posts · 102 votes3y
Quote from @Dina Joseph:
Quote from @Josh Green:
@Dina Joseph
You won't get an owner occupant, conventional loan with the 1099 and current amount of work history. At the fastest, you can obtain one on 1 year of tax returns but the lender will take say 50% of that income toward your DTI ratio so your buying power will be hit hard.
Only other option to buy will be to use a non-owner occupant loan (which technically you can't intend to occupy) such as a DSCR OR maybe a non-conventional portfolio loan like a bank loan or asset-based loan.
All those types of loans will typically require higher down payments and interest rates than a Fannie Mae/Freddie Mac backed loan.
Thank you for responding Josh! I agree, I think at minimum it does help to be patient and wait at least a year to save more money to secure my financial position. I'm considering a DSCR as well, perhaps a portfolio lender might help. Thanks again for your response!
I was about to say DSCR can be an option for you. Try to work with investor-friendly lender and agent. We know the loopholes as independent contractors ourselves.
- Member since 2022 · 7 posts · 3 votes3y
Quote from @Manco Snead:
I was in a similar position; had the cash I needed for down etc. but couldn't get a loan. I got my dad to cosign for me then I refinanced the property into my name year or so later once I had the W-2 history.
Thank you Manco, its great that you got creative and made that partnership. I'm considering that option as well.
- Member since 2022 · 7 posts · 3 votes3y
Quote from @Ecaterina Katerina Morosan:
Quote from @Dina Joseph:
Quote from @Josh Green:
@Dina Joseph
You won't get an owner occupant, conventional loan with the 1099 and current amount of work history. At the fastest, you can obtain one on 1 year of tax returns but the lender will take say 50% of that income toward your DTI ratio so your buying power will be hit hard.
Only other option to buy will be to use a non-owner occupant loan (which technically you can't intend to occupy) such as a DSCR OR maybe a non-conventional portfolio loan like a bank loan or asset-based loan.
All those types of loans will typically require higher down payments and interest rates than a Fannie Mae/Freddie Mac backed loan.
Thank you for responding Josh! I agree, I think at minimum it does help to be patient and wait at least a year to save more money to secure my financial position. I'm considering a DSCR as well, perhaps a portfolio lender might help. Thanks again for your response!
I was about to say DSCR can be an option for you. Try to work with investor-friendly lender and agent. We know the loopholes as independent contractors ourselves.
Hi Ecaterina. Yes, I think investor friendly is key !!
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