Need To cash out refi ASAP but can’t prove income

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Need To cash out refi ASAP but can’t prove income

Zachary Bellin
Atlanta · Member since 2018 · 3 posts · 1 vote

Hey Bigger Pockets,

I’ve been flipping for about 2 years and have been doing some retail real estate sales as an an agent part time to pay the bills. February last year I bought my first home as a flip and have since finished the rehab. I’m 20 so this years taxes will be the first I show any real income. I’ve talked to 5 different banks and 3 different mortgage brokers and none of them can help me (even after my brother who makes 80k agreed to co-sign). I’ve got 2 other projects going and I desperately need to cash out on my principal to finish them up. I owe about 200k In Hard money on the principal and it’s worth about 350k. My credit is 700+ if that helps.

Thanks!

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Chris MasonPro Member
Moderator
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
6y
Originally posted by @Zachary Bellin:

Hey Bigger Pockets,

I’ve been flipping for about 2 years and have been doing some retail real estate sales as an an agent part time to pay the bills. February last year I bought my first home as a flip and have since finished the rehab. I’m 20 so this years taxes will be the first I show any real income. I’ve talked to 5 different banks and 3 different mortgage brokers and none of them can help me (even after my brother who makes 80k agreed to co-sign). I’ve got 2 other projects going and I desperately need to cash out on my principal to finish them up. I owe about 200k In Hard money on the principal and it’s worth about 350k. My credit is 700+ if that helps.

Thanks!

 Not disagreeing with anyone else here, but I have a BIG picture solution that you may want to consider, if you're determined not to have a W2 day job yourself (hey, power to you for that btw).

Anything the mortgage industry is going to consider a "liability," such as an in-process flip with a HML going out but no rental income coming in, or a car loan, or anything like that, shove it into Spouse A's name.

Anything the mortgage industry is going to consider "income" or an "asset," like a stabilized rental with a normal FNMA loan or a W2 day job, shove it into Spouse B's name (usually that W2 day-job kind of gives you a big "hint hint" about who to use as Spouse B).

And, yes, a spouse can buy a property from a spouse when something starts as one thing, and becomes the other. :)

Instead of joint A+B mortgage applications being "meh" or "close but your DTI is just a little too high...", you end up with Spouse A being dead on arrival, and Spouse B looking like a shining golden ticket that anyone would lend a million dollars to.

Prior to feminism women had a really hard time getting mortgages alone, they would always require either the husband or dad to cosign. You go back far enough, women didn't even have solo credit scores, only joint. So Sally+Husband might have one credit score, and Sally+Dad might have another, but Sally alone basically didn't have, and couldn't get, any credit, of any form, at all. The above paragraphs are an unintended side consequence of moving away from that.

Note also I used "Spouses" b/c that is the convention. It could also be "Significant Other" A and B, or "Fiance" A and B, or "Brosefs" A and B, or whatever.

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  • Charles Carillo
    Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes
    6y

    @Zachary Bellin

    It sounds like this property will be a profitable flip. Have you ever thought of just selling the property? It makes it even less expensive if you are an agent.

    0Reply
  • Zachary Bellin
    OP
    Atlanta · Member since 2018 · 3 posts · 1 vote
    6y

    @Charles Carillo

    Thanks for the reply! Couldn’t edit once posted. All in is 280k and I owe 200k. I have moved in and have 3 roommates paying $2200 a month (I built a basement apt and rent out the other 2 rooms) so selling isn’t an option...

    0Reply
  • Tamara Deering
    Real Estate Agent · Austin, TX · Member since 2019 · 235 posts · 194 votes
    6y

    @Zachary Bellin

    If your property truly appraises at $350,000 as it sits you may be able to get another hard money loan for approximately $227,500 but you will have to pay points for the origination fee probably $6,825.  Your options are most like to refi the existing hard money loan with your lender which will not generate cash flow, sell the property, I'd list it at slightly below market value to generate interest, or sell one of your properties to your brother - he can get a hard money loan and you can use the cash to finish them up and service the existing loans.  It sounds like you are over-leveraged though so your first priority should be getting your first flip on the market and sold.

    0Reply
  • Account Closed
    Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes
    6y

    @Zachary Bellin in the future, add in some contingency funds and make a financial plan to ensure that you don't end up in a position where you can't afford to sell your deals. Also, all in 280 and 350 sale sounds a little thin, especially considering 350 is just an estimate on your end.

    Get out of one of the properties... preferably the one that will me most profitable and require the least work/time.. ASAP. Get some funds back. You're in damage control mode and it's prob too late to fix it because this problem was created on the front end when the deals were purchased. Just get some money back... maybe even dump 2 of 3 and actually complete the 3rd if its a project that makes sense. Don't try to salvage the remaining deals out of pride/failure. Lick your wounds and do it differently next time.

    0Reply
  • John Barrows
    Real Estate Broker · Auburn, WA · Member since 2015 · 151 posts · 106 votes
    6y

    No income loans are available today. BUT, the catch here is that the interest rate may or will be higher and you'll need to have very good credit for that to happen. If you can prove that you are collecting rent (through a tax return) then that might be enough to make the deal go. If you live on site and rent out rooms that's cool but, if you live off site and rent out rooms then that becomes a rental.

    There are plenty of companies that will do to a NO INCOME/NO CREDIT SCORE on about any loan you want as long as they get an Automatic Payment Agreement and a few other tid bits about the equity in the property or other collateral that you may have. Most will want to make sure they tie you up for the long run because they know you'll be bouncing out of this loan once you can prove income and stability.

    Look around BUT, DOWN'T GET CAUGHT with a PRE-PAYMENT PENALTY type loan. Be smart and READ THE SMALL PRINT!

    0Reply
  • Charles Carillo
    Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes
    6y

    @Zachary Bellin

    All of the hard money lenders I have worked with previously have a strict policy on moving into the property or financing a personal property which is what you did. You can still sell a property with people living in it or you can find a private lender with a 5+ year term and no prepayment penalty. 

    0Reply
  • Guifre Mora
    Lender · San Diego, CA · Member since 2019 · 874 posts · 355 votes
    6y

    @Zachary Bellin Non-Prime O/O Consumer Purpose loan is what you need. @ 75% LTV its doable.

    0Reply
  • Alex BekezaBusiness Member
    Lender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    6y

    @Zachary Bellin 

    There are commercial programs for investors who don't qualify for conventional. It happens to a lot of self employed borrowers or people with less than 2 years work history or a variety of other reasons. These commercial programs are based strictly on FICO and subject property cash flow and don't even calculate your DTI.

    Of course, rates are a bit higher but you can still find a 30 year fixed mortgage in the 5%-6% range. Another perk is that you can vest title in your personal name, LLC, or Corporation, whichever you prefer.

    As others have alluded to in this post.  If the property is not stabilized and tenant occupied then a hard money refi is another option. 

    [email protected]818-606-8823
    Investor Property Loan5308 Reviews
    WebsiteView Page
    0Reply
  • Alex BekezaBusiness Member
    Lender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    6y

    @Zachary Bellin I read your other reply saying that you live there.  This kind of thing I'm describing is only available on non owner occupied properties.

    [email protected]818-606-8823
    Investor Property Loan5308 Reviews
    WebsiteView Page
    0Reply
  • Calvin OzanickBusiness Member
    Property Manager · Janesville, WI · Member since 2017 · 708 posts · 297 votes
    6y

    You may have to just wait the year out and then go on to perform the refinance all around. If multiple different places are not willing to work out a loan with you, it may not be the right time. There is a reason banks do not do this as easily any more. The mortgage crisis allowed too many people with unknown incomes to over-leverage. It really is for your protection. 

    Wisconsin Property Managers4.7416 Reviews
    WebsiteView Page
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  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    6y
    Originally posted by @Zachary Bellin:

    Hey Bigger Pockets,

    I’ve been flipping for about 2 years and have been doing some retail real estate sales as an an agent part time to pay the bills. February last year I bought my first home as a flip and have since finished the rehab. I’m 20 so this years taxes will be the first I show any real income. I’ve talked to 5 different banks and 3 different mortgage brokers and none of them can help me (even after my brother who makes 80k agreed to co-sign). I’ve got 2 other projects going and I desperately need to cash out on my principal to finish them up. I owe about 200k In Hard money on the principal and it’s worth about 350k. My credit is 700+ if that helps.

    Thanks!

     Not disagreeing with anyone else here, but I have a BIG picture solution that you may want to consider, if you're determined not to have a W2 day job yourself (hey, power to you for that btw).

    Anything the mortgage industry is going to consider a "liability," such as an in-process flip with a HML going out but no rental income coming in, or a car loan, or anything like that, shove it into Spouse A's name.

    Anything the mortgage industry is going to consider "income" or an "asset," like a stabilized rental with a normal FNMA loan or a W2 day job, shove it into Spouse B's name (usually that W2 day-job kind of gives you a big "hint hint" about who to use as Spouse B).

    And, yes, a spouse can buy a property from a spouse when something starts as one thing, and becomes the other. :)

    Instead of joint A+B mortgage applications being "meh" or "close but your DTI is just a little too high...", you end up with Spouse A being dead on arrival, and Spouse B looking like a shining golden ticket that anyone would lend a million dollars to.

    Prior to feminism women had a really hard time getting mortgages alone, they would always require either the husband or dad to cosign. You go back far enough, women didn't even have solo credit scores, only joint. So Sally+Husband might have one credit score, and Sally+Dad might have another, but Sally alone basically didn't have, and couldn't get, any credit, of any form, at all. The above paragraphs are an unintended side consequence of moving away from that.

    Note also I used "Spouses" b/c that is the convention. It could also be "Significant Other" A and B, or "Fiance" A and B, or "Brosefs" A and B, or whatever.

    1Reply
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