Where to Focus First: the Deal Chicken or Funding Egg?

[Shannon McKenna]

I need a bit of direction. I am a little newbie searching for my first deal, which will also be my first ever real estate purchase... a place I can "house hack" as I build up income for my second deal.  I am looking for buy and hold rental properties for cash flow.

I sat down today and called three different mortgage lenders in my area, to see how much house I could buy on a conventional loan. They all sounded very encouraging until I sent over my tax returns. I have been making a living via 1099 (contract employee) income for the past three years, and... how can I put this? I have gotten very good at claiming my deductions.

The answer to "how much money will THEY give me" seems to be zero, which kind of sucks, because I was hoping to use this number as my parameter when searching for that first deal. Now that I don't have a golden easy number, how would you all recommend I structure my search?

Should I go out hunting and once I find that first deal, scramble to secure funding? 

OR

Should find an entity that will give me my own number, and search for a deal once I know how I'm going to pay for it?

[Kerry Baird]

Keep calling lenders.  My investor friendly lender will add back in items that were 1 time deductions (such as a roof that we replaced on a rental).  Perhaps you can find someone who will "get" what you are doing on your taxes.  That continues to be a problem, in terms of scaling, so perhaps it is a good thing you get through this mental roadblock now.  There are other ways.  

You could look for an owner financed deal, or a lease option.  You could borrow from a relative.  You could use private funds to purchase and then refinance into a conventional mortgage later.  You could partner with someone.   

Lastly, when looking for a house (specifically a rental), I start with an approximate monthly payment and back into the cost in that specific area for property taxes and insurance (often found in Trulia or Zillow or Realtor's calculator function, as you probably are aware).  Older houses need maintenance funds, as well.  

You are very creative in your particular line of work.  Perhaps you will discover a creative niche in the real estate world, as well.  I was afraid to door knock pre-foreclosures, when I started.  But, I got over it.  I have a feeling you will find a way.