How can I maneuver around the obstacle of low reported income as a new investor

Question

Hello folks,Long time lurker who has decided that it's time to stop making excuses and being held back by fear, and get moving on my goal to become a real estate investor.Part of that is confronting the one obstacle that I've allowed to hold me back; I have very low reported income. Long story short, I have sort of been off the grid for a while from a professional/tax standpoint, making a good living albeit one that has been "off the books". If I could do a few things over, I would, but since you can't change the past, I'm looking for the best way to move forward.I have the financial resources to come up with your typical down payments, maybe even a little larger, and have a very good credit score and payment history but can't presently substantiate a steady w-2 type income. To be honest, I really don't want to even consider trying to jump back into the conventional job market but would prefer to explore any other avenues to get around my situation.I realize this is probably an out-of-the norm type of question, but was hoping I could pick the collective brains and see if there was a direction I could head. The strategy I am considering is trying to buy a multi-unit property (2-4) of which I would live in one: are there some sort of owner-financing strategies I should familiarize myself with? Are hard money lenders the way to go in a situation like mine? Is a money partner the only way to go? Am I totally screwed? Hope not! : PThank you in advance for any help you guys can provideSteve

Tim Davis · Answer

Steve....Private lenders are the way to go. Private lending is based on relationship and the property you are purchasing not a credit score or how much money you made on last years tax return. In the last 2 years I have purchased $2,500,000 worth of real estate without filling out one loan application or setting foot in a bank. I am not talking about hard money either. Some of my loans are 2%. There are a lot of people out there that are tired of Wall Street or .5% on a CD. You just have to find them.

Franklin Romine · Answer

@Steve Frost If you want to create a long term plan of investing you should get on the grid. Being off the grid and buying properties will eventually catch up and turn into a irs mess.Frank

Lucas P. · Answer

Holy moneybags Batman! I will pay you to find me some of these contacts! :)Seriously, though. I would.

J Scott · Answer

Self-employment income is viewed no differently than W2 income, as long as you have two full tax years worth of filings. One option -- if your previous two years of tax returns don't accurately reflect your income -- is to revise your tax returns to be more accurate... :-)

Steve Frost · Answer

Great stuff, everyone. I really appreciate it! I will certainly get started on those networking avenues. I would also welcome any suggestions on how to learn to "talk the talk" or otherwise accelerate the learning curve where I can so I am best prepared to work with these lenders.Owner-financing has been mentioned - is it common for them to operate as a private lender would or do they generally approach it like a bank would i.e. want my financials?

J Scott · Answer

Just to clarify, YellowLetters.com is owned by Michael Quarles, not Jerry Puckett.But, both Michael and Jerry are awesome and tremendously knowledgeable about direct mail marketing...

Matt V. · Answer

@Steve Frost , along the private lending side of things, why don't you seek out properties where the owners will do owner financing? Do some direct mail in your target area and see if you can pull some deals together that way. Look for owners with high equity % or own their properties outright and just ask if they are willing to sell via owner financing or with a lease option. If you have the cash to put down, they won't be worried about W-2 income or anything, maybe just a simple credit report. To me, this seems like the best strategy for you to get started without having to redo a bunch of past stuff or change your way of life.Check out site sponsor yellowletters.com, Jerry Puckett, if you need some guidance on direct mail as a lot of BP members use him for just that.Regarding private lenders, start hitting up your local REIAs or BP meet-ups and build that network. It will take some time to build some relationships but then you'll be golden.Don't get discouraged, you can definitely get into this without having to bring yourself back on the grid. Good luck!

Lucas P. · Answer

Steve, can you afford to save some $ for a small down payment? If you can get 25% for a downpayment on an income property from some of the markets in the US that have turn-key property at or below $50k, returning as much as $1000net, you can get lending at a reasonable rate without personal income proof. Speak to Lisa at B2R, one of the sponsors/advertisers on this site.

Steve Frost · Answer

@ J Scott - thanks for the suggestion. To be honest, I'd rather not get into what revising tax returns would entail. I suspect, and it seems from some of the responses, it is possible to navigate into real estate investing without conventional personal financial statements. For a variety of reason, I'd much rather focus on heading in that direction, rather than worrying about the past.@ John Santero - thanks for the positive vibes! Could you - or anyone for that matter - also recommend any resources to get me pointed in the right direction? Are there any books, forums, etc I should familiarize myself with?

John Santero · Answer

I have not used a bank in 12 years. I have not put together a P&L, tax returns nor did I "interview" with joint ventures.You can make money, buy and sell, off the grid as you say. I do. Just find Great Deals!Not to say I do anything fraudulently. I dont. I just don't own anything in my name, even my vehicles. Even my debit cards are in the names of my LLC's.Everything is held in trusts with the beneficiary as either a LLC or another trust (maybe an offshore one??) Don't get rapped into cross collateralization, PG's and such. YOU CAN DO IT without them.