Advice Appreciated: Portfolio/In-House Loans, Cash Out Refinances when Self-Employed / Low W-2 Seattle, WA

[Thomas Coburn]

Hi there...

ANYONE who can share advice or tips I'd GREATLY appreciate.

My questions up front:

I HEAR EXAMPLES ON BP how investors are doing cash-out refinances after the loan is seasoned, and many right after purchasing using hard money or private lenders.

1. HOW ARE PEOPLE DOING THIS when I can't even refinance my long-term investment property?

2. How do I set up a relationship moving forward with a lender that will actually loan?

3. What am I missing or doing wrong? Obviously... SOMETHING because I'm not getting loans, even a refinance.

I want to:
1. Refinance investment property to 30 year fixed; possibly cash-out refinance
2. Set up home equity lines of credit on primary residence and potentially investment property
3. Establish portfolio lending relationship
4. Use flips to secure buy and hold single family

My wife and I have:
* high credit scores
* a good amount of cash in the bank
* no consumer debt other than mortgages
* high monthly verifiable deposits yet low W-2 and adjusted gross income

Challenges:
1. I've met with many local banks and credit unions:
* many don't offer in-house/portfolio loans.
* And the few that do limit number of loans to four, and my income needs to guarantee the loan.

2. We've owned a small business for 10 years. We have VERY low W-2 income and very low adjusted gross income due to tax planning. Yet, "high" yet high monthly deposits (all verifiable). ("High" meaning our deposits are 5-6 times more than W-2 income; but this may not be "high" compared to high earners!) Our income comes from owner draws from the LLC, rent the LLC pays us, and rent paid by commercial and residential tenants.

Our investment property:
* We owe $87,000. It's worth $185,000-$200,000
* Receive $1,325 monthly rent.
* Have rented for 9 years.

Our primary residence:
* we were FINALLY able to refinance last August at a local credit union. They approved a conventional 30 year fixed through two levels of underwriting. But... the third underwriter disallowed some of our rental income from our business for home office space. They weren't going to give a loan... but after a lot of complaining up the ladder... they gave us an 'in house'/portfolio loan based on our assets and credit. A 7/1 ARM. But they told us they would refinance our investment property.

Moving into investing full time
* I want to move into investing full time. In fact, I did 5 months ago.
* I just completed my first flip. Grossed about $48,000 (with hundreds of my own hours into the deal. So this profit amount is VERY skewed/inflated versus if I'd hired full contractors. I know this.). And I also paid about $17,000 in hard money lender. So I did okay
* But I'm VERY concerned about my ignorance on how to scale this business using leverage in the equity of the properties to accelerate growth.

I mean... if I can't even refinance right now - with six figures worth of equity in each property, solid cash deposits, and high credit score - how will I get loans/make this work in the future?

Thank you very much in advance for reading and commenting. I know a lot is here. And please know I really have tried to figure this out. But I'm kind of at a loss. And I'm hoping someone who has knowledge, experience and expertise far greater than mine can help.

And... for what it's worth...I donate a large chunk of the net profit to a charity that supports people in Haiti. So know that you're helping a MUCH BIGGER cause than just me! :-)

Thank you,
Tommy Coburn
Seattle, WA

@Andrew Syrios

@Brandon Turner
Andrew and Brandon: Great podcast!!! REALLY great information. Thank you.

@Mark Ferguson
Hi Mark - Tommy in Seattle. Your blueprint has helped me a lot! This financing/lending stuff has slowed me, however.