Trouble With Getting A Lender While Working Self Employed

[Eric Jackson]

I have been working for a company for six years; they made me a 10% partner last year. I recently got into real estate investing, but I can't get a lender for a mortgage because my tax returns say I had a loss this year, but it is just from buying into the company. I was wondering if there is anything I can do. I feel a little stuck, and some advice would be appreciated. I was told I could wait until my second-year return so there is no longer a loss on my tax returns. Any other advice?

[Doug Smith]

I run into that same issue a lot with conventional lenders. If they aren't accustomed to cash flowing business for self returns, then sometimes they miss things. Your buy in could fall under teh classification of an "extraordinary event" where, if your lender sells it right, you might get the underwriter to add that buy-in back in as a one-time event that is not a regular occurrence. Lenders that know commercial lending can often pull that off, but my biggest concern with that is when you did the buy in. If it's within the last year or two, then that can be a struggle for you. Many have mentioned DSCR and other loan types that don't require cash flowing you personally, so I won't rehash that. Without seeing your returns, I can't give you a perfect answer, but you might want to see if you can find a lender that can sell it to an underwriter as an extraordinary event provided the buy in was yearly in 2021. If it was in 2022, I think you'll have a hard time selling that. Good luck to you.