Can't get mortgages due to new self-employment status.

[Teresa Hunt]

I'm ready to get into real estate investing full time, however, I've recently gone from being an employee to being self-employed. Now I find that I can't get mortgages on properties until I have two years of tax returns to prove that I'm not broke.  I have money sitting in an account at Edward Jones, but that doesn't seem to matter. I currently have to use owner financing which leaves me with high down payments and high monthly payments. This ties up my working capital and limits the number of deals I can do.  I live in a small town where there is much money to be made on rental income.  I'm ready to do this.....but I need som help ASAP because I'm missing out on opportunity after opportunity. I have drive and passion. I'm not afraid of hard work.  I have a general contractor in place. I'm ready to put on my overalls and get some forward momentum! Thank you!

[P.J. Bremner]

@Teresa Hunt

I feel your pain!!  I have a successful real estate rental portfolio and eCommerce business that does well over $1M in sales each year and they chopped my income in 1/4 when I tried to get an owner-occupied mortgage.  Don't count on self employed income for getting a personal mortgage, even if you've had it going for 2 years.  Often times they will take a weighted average of the last couple of years ($50k first year and $150k the second year, they DO NOT give you $150k in income, it will be closer to $75k since they are conservative - not exact numbers but ballpark).

As far as being self employed, there are a couple of other options at your disposal... What kind of business do you own? I ask because while my eCommerce business has nothing to do with real estate, I was able to leverage the cash flow from that business to obtain a business line of credit (BLOC) from wells fargo at $90k with 3.99% interest for 12 months then 6% after that. I can use that line of credit for whatever I want, does not have to be related to eCommerce. I've also been able to open a $110k HELOC at 4.75% on one of my properties, so if you own property you can tap into the equity. The combo of BLOC, HELOC, liquid cash on hand is enough for me to buy homes cash, renovate and do whatever else is necessary, but it certainly didn't come from me using traditional financing methods.

Another option to you would be hard money.  It's much more expensive and should be used as a last resort, but if the deal is good enough then it might make sense to leverage that.

Lastly, if you have great opportunities and cannot get funding for them, then perhaps they aren't that great after all. Or you have not presented them to enough people with the ability to fund the deal. Believe me when I say, if someone came to me with a deal in my area that made perfect sense, I would RUN (not walk) to the bank and pull every penny needed to get it done. Deals are not that easy to come by in this crazy market. They are definitely out there, but if I had one presented to me without me having to do all the marketing necessary to get it in the first place, it's a win win. Get to a local REIA meeting, get a pro account on BP and post on the market place, do whatever you have to do to get in front of the right people at the right time. Best wishes!