Paying myself W-2 vs other options

[Adam Roll]

Hey BP!

Switching careers and taking over a profitable property management company. Tons of room to improve and expand the business so I am almost certain it will be profitable for the foreseeable future.

My main question is below:

Would lenders rather see me pay myself as a W-2 employee or should I just pay myself out via quarterly shares, etc? Which one do most lenders let me use inside of 2 years of work history in this career change?

I realize for tax purposes there is multiple different ways to go about it, but I am specifically focused on getting loans in the next couple of years to build my rental property portfolio!

Any advice would be much appreciated!!

[Chris Mason]

Originally posted by @Adam Roll:

Hey BP!

Switching careers and taking over a profitable property management company. Tons of room to improve and expand the business so I am almost certain it will be profitable for the foreseeable future.

My main question is below:

Would lenders rather see me pay myself as a W-2 employee or should I just pay myself out via quarterly shares, etc? Which one do most lenders let me use inside of 2 years of work history in this career change?

I realize for tax purposes there is multiple different ways to go about it, but I am specifically focused on getting loans in the next couple of years to build my rental property portfolio!

Any advice would be much appreciated!!

 People with K1s that don't take distributions or a W2 typically have a very hard time.

Other than that, the #1 tip I would give you is to be consistent year-to-year if you don't want to get jammed up when it's time to apply for a mortgage. Whatever structure you decide to use, stick with it. If you're CPA is going to tell you to file on IRS Form 1120S, so be it, have him or her tell you that today and right now, not a year from now, since doing it a year from now could reset your "two years" of self employment to 0, depending on a bunch of factors. 

If you pay yourself via "Vehicle A" in year 1 and then switch to "Vehicle B" in year 2 because a book or your CPA said that "Vehicle B" was more tax-advantaged, there is no guarantee at all that an underwriter will sign off on averaging the two. They might. Or they might not.