Financing Rental Properties without a W-2 Income

[Justin Dossey]

Hey everyone! 

I am working towards purchasing my first rental property in the St. Louis market by the end of 2017. I wanted to see what peoples thoughts and experiences are on funding rental properties without having a W-2 income and without paying cash for the entire property. I am working on wholesaling in the area as well to help cover down payment costs and any closing costs that may come up.

I do have steady income but it is from a business I co-own. I know typically its much harder to get traditional financing without the w-2 income. Thanks in advance for any insight and advice!

[Michael Tierney]

hi Justin. I think you will find a lot of folks here that share your dilemma.  Most people go with hard money lenders.  Like you, I could not qualify for Fannie/Freddie type financing due to lack of verifiable income, but I went with local banks.  I spoke with a number of them to find out who was trying to build their portfolio of loans in our local real estate market. Each bank had a different profile based upon what segment they were targeting.  I found one bank who was trying to build their local multi-family portfolio, so went with them.  They asked me to put a larger down payment (nearly 35%), but gave me a preferred interest rate. That was the ante to get established with the local lenders.  Everything was based on the profitability of the asset.  The banks who make the loans keep them in their portfolio. Typically they demand a 5-7 year balloon.  

Once I got financing on the multi family, I thanked the other local banks for working with me.  A number of them stayed in touch and we have done 4 more deals with the original bridesmaid banks.  Once you build a track record the banks will be there for you.  I try to chat with a banker each week.  Their desire to lend changes over time, so good to stay in touch.  They have money to "sell", so if you can establish yourself as a trustworthy "buyer" of money, you should be in good shape.  Good luck!