Qualifying for a loan with no (or low) income

[John Rankin]

I am self-employed and show very little income on my tax returns. But my credit is great and I have sufficient savings. To qualify for loans should I look at deducting less expenses to show more income going forward?

Also would flipping be a good way to supplement income specifically for the purpose of showing more income in the hopes of better qualifying for lending? Any thoughts specific to qualifying for lending when income is low, close to nothing, or irregular would be greatly appreciated.

[Wren Martin]

@John Rankin even though you have the cash I think you should use a hard money or private lender for a couple of reasons.

Number 1, real estate is a relationship business. You want to build as many good relationships as you can and lenders can be invaluable for finding additional teammates when you need one. Remember they’ve invested their capital so they have a vested interest in your success.

Number 2, it doesn’t take long to run out of your own capital when your doing deals. Keep your powder dry for snatching up the quick home runs but use OPM for your day to day deals.

Unfortunately, using private money doesn’t help your credit rating; at least most of the time, I’m sure there are exceptions just like everything else.

And for some reason many conventional lenders don’t treat Flip income as real money (don’t ask cause I’ve never been able to figure this out - it’s green, I can buy a Diet Coke with it, its money!). The solution for this is setup your entity and pay yourself a salary, plus commission, plus bonus from your Flip profits and magically now you’ve made some credit worthy income.

All the Best!