Get Creative..How Can I Obtain Financing With Income Capped Out?

Question

Hello, I have multiple assets and am a small business owner, so my taxable income and real income are very divergent bc there is alot of cash in my business. Anyways I wanted to get a mortgage for a rental property but my bank is JP Morgan Chase, and even though Im in their private client group, they are one of the least risk averse banks on the planet. I really should switch but I've been there so long. Anyways here is my balance sheet and Im trying to see if someone can give me pointers on how/where to obtain financing for what I want.

Main Home: $1.35M                      Debt:$240k

Rental Home: $750k                      Debt:$235k

Rental Home: $75k

Rental Home: $50k

Land: $150k

Land: $175k

Also have an auto loan of $75k but overall $2.65M of assets and $475k of mortgage and $75k car loan. I also have about $350k in cash in the bank, and own a couple franchised businesses, I own the business but not the land so those really dont count on my balance sheet.

Anyways my taxable income combined with the wife is around $17.5k/mo and Im interested in buying a $850k rental condo. The rental home I have now is currently rented at $3500/mo and is cash flowing $1000/mo after mortgage,maintenance,taxes. I know not much by this sites standards, but im happy with it bc its up about 40% in 2 years since I bought it based on comps, thats how miami is.

Anyways Chase would not finance me and Im trying to see what I need to do to get this rental condo I want, its a great deal but should I do a home equity loan on my main home? What are the terms on those loans usually? Can I borrow on the equity in my expensive rental home? Im just looking for creative options to buy this place.

Thanks

Jeff Dulla · Answer

@Danny N. - I cannot share contact info with you on here so just PM me and I can get you details.

Danny N. · Answer

to be honest even my $75k car loan isn't on a depreciating asset it's in a 16m I paid $265k for in 2015 and it's probably worth $400k today,but no bank on earth is going to look at a Ferrari as an asset but being one of 399 made it actually is. I understand what you're saying but as a business owner I am in the gas business that isn't s business that has hiccups really it's pretty consistent cash flows and as I stated I'm valuing my businesses at $0 on my balance sheet which  is really silly bc I'd say those are worth $3-4m in a sale that's why I'm trying to see how to creatively finance this place bc it's a very good deal and just need a little remodel and will be worth 30-50% more easily,I can handle it financially even if it is not rented but it seems convincing my own bank of that isn't tough even though they handle my deposits

Steve Vaughan · Answer

May be a blessing in disguise if it keeps one from obtaining (another) $850k condo rental IMO.

Banks will read your balance sheet differently that you do.  A $1.35M personal residence is not an asset.  It takes from your income statement rather than earning for you.  A big ol' liability really.  Same with the cars, obviously.  They are dropping in value to boot- 'like a rock'.

You've done great @Danny N. although you don't need me or anyone else to tell you that.  Personally, I have the large 'assets' swapped around from you.  My $1M+ assets are in apt bldgs, personal res and cars, an afterthought.  A rounding error, LOL.

Read the Millionaire Next Door if you care to and please keep us posted!

Danny N. · Answer

Wow Jeff what banks offer those types of loans bc in that case I get weekly deposits from the jobber I buy fuel from in excess of $20,000/week and do cash deposits of $1000-1500/day. The cash flow is certainly there, its just the taxable income that isnt. That is the perfect product for a guy like me, but of course chase is so tough. They have the 2nd home I have currently mortgage and I had to put 50% down on it to get it down, they really take no risk at all.

Jeff Dulla · Answer

@Danny N. There could be quite a few options but hard to say without looking at the specifics. I would say it doesn't sound promising to go with a conforming loan (which it sounds like you are thinking of for the second home) but I know Chase well and I have zero confidence anyone there reviewed your returns in enough depth to qualify that statement. So you may be able to go conforming.

If not, there are lenders rolling out programs that would probably work best for you. One in particular is called a bank statement loan. It would take your business and qualify you based on cash flow into the company's business account (essentially showing income that you are not necessarily claiming on your return because they are paired off by expenses). Like many of these non-prime/portfolio loans, they will carry higher rates/costs.

Jassem A. · Answer

Apply with some other local banks and credit unions. They are sometimes a bit more flexible than the big banks.

Get Creative..How Can I Obtain Financing With Income Capped Out?

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