Can you still BRRR if you don't have a W2?

Question

Evening BP,

I'm transitioning out of the military in a year. Curious how difficult it will be (or not) to continue buying properties using the BRRR method when I leave my full time job. I have built up enough cash over the years to buy more property in cash and refi, but will the banks grant me the refi without having a full time job? For clarification, I have a LLC and have a small rental property portfolio. I intend to "work" full time for myself buying rental properties and making my money work for me. Any insight or feedback on this? I know banks will generally accept rental income as a form of income, but this typically doesn't kick in until about 2 years from what I've researched so far. How can I continue buying properties without a W2 or a source of income aside from my cash savings and small rental portfolio? Any and all comments are welcome as I'm trying to plan out my transition. Thank you all in advance!

-Navid

Tyler Weaver · Answer

There are complicated rules on what specific banks consider income.  You are probably going to be best served by a local bank that is making portfolio loans.  I remember a banker telling me for conventional loans they consider rental income if you have 2 years track record, and consider any property you have owned for over 2 years.  They also do a pro forma income on any property you have owned for less than 12 months and currently have leased out. (only if you have other rentals for 2+yrs) which leaves a gap between the 12 months and when you have owned it for 2 years.  That was really strange to me.

A local lender is more likely to consider whatever rental history you have in tax returns, your capital reserves, your business plan, and their confidence in the property.  I would start networking with other local investors to get referrals on banks, and try reaching out yourself.  Get everything together, have all your financials, pictures of your rentals before/after, a one page outline of your business plan, and details on a sample property you are looking to get financed.  Start meeting with bankers and see what you can come up with.

Allan Szlafrok · Answer

@Navid A. It all depends on your bank. In general smaller community banks and credit unions will be more open to listening to your sort of situation. I would start by talking to some loan officers there. I’m a full time investor and those kind of banks are my go to for a refi.

Caleb Heimsoth · Answer

@Navid A. It’s not impossible but it’ll be significantly harder.  You’ll pay higher rates too.

Stephanie P. · Answer

Thanks so much for your service.  It means a lot to us to be able to do what we do because you and people like you do what you do and I really believe we can't thank service members enough.

Try to buy a multi family property while you're still in the military using your VA eligibility.  You can get 100% financing on up to 4 unit properties.  It's the best way to acquire doors.

Once you get out, there are numerous options for you with portfolio lending and hard money for renovations that don't care about your W2 (or lack thereof)

Dan Gamache · Answer

@Navid A. Private Lender doesn't ask for W2 or Tax Returns. Underwriting will base the approval off the Rent vs monthly payment of the property.

John Warren · Answer

@Navid A. you should start establishing relationships with local portfolio lenders and lean on them to allow you to continue purchasing. You will probably have a lot less luck with the conventional lenders.

Salvatore Lentini · Answer

@Navid A. - It will be difficult with traditional banks.  The lenders I use to build my portfolio lend based on the property not the borrower (no W2s or tax returns required).  As long as you have a decent credit score and down money, the underwriting is based on the financials of the property (how well it cashflows) not your financials.

Alexander Knowles · Answer

Local lenders are great for a refi and some abide by their own house rules. We had an instance where the local loan broker brought everything "in-house" to help us out with a refi on our primary residence due to our self-employment (1099) income not being approved by Freddie/Fannie. You are always going to be capped by your DTI so as long as you can meet the local lender rules you should be able to at least find something - might not always be the most optimal and may include loans such as 5-yr balloons etc. Start networking with local lenders and see who you can charm!

There may also be a variety of VA loan options (there was a BP Money episode with a veteran on there that spoke about a variety of VA financing options).

Can you still BRRR if you don't have a W2?

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