Lending Qualifications & Tax advice needed 4 BRRRR Self Employed

[Stacy Kiley]

My husband and I bought a house with cash with the intention to finance it once the rehab is complete and a tenant is placed. This will be the first of many BRRRR deals if we do this right.

Currently, all our income is self employed. We'd like to lower our taxable income by pulling out cash on 3-4 BRRRR deals per year thus reducing the amount of taxable income we would need to earn. Ideally, we could keep our earned income at or near 30k if we could pull out enough cash annually from the BRRRR deals.

We have 3 houses free and clear and another one with a small mortgage. No other debts. 

Is this a viable plan? Can we get financed if our income is low or will we hit a road block? What criteria do lenders look for when qualifying an applicant? All advice is truly appreciated so thanks in advance!

[Jaysen Medhurst]

@Stacy Kiley, lenders really like to see a few things: wage income (preferably from a W2 job), assets, low DTI, and other income. Since you don't have a lot of wage income, the other pieces need to play a much bigger role.

I don't know if minimizing your reportable income is the best strategy for the reasons you noted. It will make it more difficult to get financing in the future. I think a better plan would be to use the equity you have in your rentals to scale up to produce a lot more cash flow.

Best thing to do is sit down with a bunch of local banks/credit unions, tell them about your investment plans, and ask about their requirements. Establishing and maintaining that relationship will pay benefits well into the future.