$150k cash, 740+ credit score and can't get a loan for anything...

[John Horner]

So this is a hypothetical...  But I am very motivated and eager to quit my day job.  Last year was my first full year as a Real Estate wholesaler, wholeTAILer and flipper.  I completed 17 deals last year, 15 of which came in the last 6 months of the year.  

I don't have $150k cash yet, but with the 5 flips we are in contract on plus the leads in our pipeline, this is a realistic number to have in 6 months.

I spoke with the residential mortgage specialist at a small bank in town yesterday, and in so many words he told me if I quit my W2 job there is no way to get approved unless I have 2 years of solid tax returns from my business.

My business income from last year was low because 5 flips carried into 2015, as well as us paying for some larger campaigns upfront in December 2015.

I will most definitely make more in RE this year even part-time then I will at my day job.  I have a smaller 3 bed house, 2 small children (2 yrs and 6 mnths) and we are planning on having more.  We have mostly outgrown out house, so if at all possible, I would like to be able to start looking at bigger houses to accommodate our growing family.

Is there any other way to get approved for a conventional loan that I am not seeing or haven't heard yet?

Because I am a wholesaler, the ideal situation would be to find a great property on a seller financed deal, even if it's retail, but we are going to be a little picky since we will be in this house for a while, so the odds of the perfect one just coming along would be slim.

I also just want to say this is a WANT of mine, not a need.  If I can make it work and get approved as a self-employed, great.  If not, we actually really love our house and our neighborhood, we are just outgrowing it.  

[Shaun Weekes]

@John Horner 

First of all you can get a loan with less than two years tax returns. Freddie Mac 90% of the time only asks for 1 year of tax returns. You will however need to prove that you've been in business for two years. So if you don't have a business license or articles of incorporation get them TODAY!!!

I would strongly recommend setting up an LLC and through that LLC w2 yourself. The benefits will be that you're paying into social security and paying fewer taxes. Or you can K-1 your income to yourself with is basically paying yourself 1099. More cash up front but you'll be paying higher taxes.

When you're getting paid cash you really have to think about how to funnel it so that you can qualify for large purchases in the future. I would also put all your rental notes, car notes and primary mortgage note (you work from a home office right) or your lease (if you work from an office outside your home) into the LLC main money bucket. This would be your 1120's or 1065's if it's a partnership.

I'm not a CPA but I know how to read tax returns and when I present a self-employed borrower to one of my in house UW I just say this person self-employed through rental income or is a real estate investor. Your business will look much more legit if it's set up the way I just described because the cash is being funnels into a k-1 or w2 which is much easier to qualify with.

In a nutshell set up an appointment with your CPA and funnel your money through your 1120's or 1065's to w2 income or k-1 income. I would recommend w2 income but that's just me.

I hope this helps Sir