I recently purchased my first property, a 3 bed/3 bath zero lot line (shares a wall with another house but no HOA) in Nashville. I'm fixing it up and planning on renting it. I'm self employed, and had a co-signer on it - ideally, I want to refinance at some point in the next two years, get the co-signer off, hopefully get some cash out of it and do this again.
My question is… what steps do y’all think I should I take today to get there? Mostly with taxes and stuff like that - qualifying for a loan is definitely the biggest obstacle because of the whole self-employed thing. I’d prefer not to pay a ridiculous amount in taxes just to qualify, but it seems like that might be the only option.
I’m still new at the whole real estate thing but really enjoying fixing up the house and I’m just looking to the future. Any help is much appreciated!
New to Real Estate · Lehigh Valley, PA · Member since 2021 · 352 posts · 120 votes
3y
I claim all my income, deduct all my expenses, work with an accountant, and pay my taxes. It's no different than what you would be doing working a W2, except with the the bonus of being self employed and being able to take deductions and get smart with your taxes. The benefit of self-employment should be being your own boss not tax evasion lol. You utilize the wonders of tax dollars every day, even if some percentage of taxes are spent on nonsense. And still much lower than many counties, though the free healthcare and education seems like a plus :)
Maybe look into nonQM lenders, DSCR loans, bank statement loans, that kinda thing. What you save in taxes you lose by not being able to obtain financing or paying higher rates and down payments.
I claim all my income, deduct all my expenses, work with an accountant, and pay my taxes. It's no different than what you would be doing working a W2, except with the the bonus of being self employed and being able to take deductions and get smart with your taxes. The benefit of self-employment should be being your own boss not tax evasion lol. You utilize the wonders of tax dollars every day, even if some percentage of taxes are spent on nonsense. And still much lower than many counties, though the free healthcare and education seems like a plus :)
Maybe look into nonQM lenders, DSCR loans, bank statement loans, that kinda thing. What you save in taxes you lose by not being able to obtain financing or paying higher rates and down payments.
Yeah, you’re totally right. Just trying to figure out the whole real estate thing step by step - definitely gotta do this the right way. The last line is a really good perspective to hear!
I claim all my income, deduct all my expenses, work with an accountant, and pay my taxes. It's no different than what you would be doing working a W2, except with the the bonus of being self employed and being able to take deductions and get smart with your taxes. The benefit of self-employment should be being your own boss not tax evasion lol. You utilize the wonders of tax dollars every day, even if some percentage of taxes are spent on nonsense. And still much lower than many counties, though the free healthcare and education seems like a plus :)
Maybe look into nonQM lenders, DSCR loans, bank statement loans, that kinda thing. What you save in taxes you lose by not being able to obtain financing or paying higher rates and down payments.
Yeah, you’re totally right. Just trying to figure out the whole real estate thing step by step - definitely gotta do this the right way. The last line is a really good perspective to hear!
For sure! Trust me, I was very sad when I got my first tax bill bahaha. But keep in mind that once you're all set up, you'll probably be making quarterly estimated payments, so it's really not that bad! Just set aside the proper amount each month in a separate spot and you won't even think about it. I made the decision to do everything the right way so I could get loans :)
Contractor · Nashville, TN · Member since 2014 · 1k+ posts · 1k+ votes
3y
You're going to need to show as much income as possible on tax returns between now and the refi. They will average your last 2 years income at the time of underwriting.
Real Estate Consultant · Nashville · Member since 2020 · 70 posts · 22 votes
3y
Getting acquainted with the non QM stuff is key. Every investor has to get creative once their portfolio gets past a certain point. Make relationships with lenders who have copious programs for your potential circumstances.
I'm a big fan of partnering up with other investors. There are a ton of people who have funds but don't want to do any work. Cultivate relationships with them and offer to be the sweat equity while they're the financing partner.