Posted by JohnBoy on December 06, 1998 at 20:58:17:
You apply for no-income stated or no-doc loans through a non-conforming lender. If your not going to keep properties for rentals and plan on just flipping them for cash profits as your only source of income, you will need to show money going into your bank account to show some kind of income to qualify for a loan if you ever needed one.
If you can show 6 months of bank statements showing enough funds deposited each month on average to cover your debt ratios, you can also get an easy doc loan.
Another way to help boost your bank statement up showing more cash going in each month is to withdraw money you deposit on one day and redeposit it again the following day.
Example:
Lets say you have $400 each week to deposit into your checking account. After one deposit of $400 each week for 4 weeks your bank statement would show you deposited $1600 that month into your account. Before you use that $400 to pay any bills or whatever, take out $350 the following day and redeposit it the next day. Do that once a week over the 4 week period and your bank statement would show another $1400 being deposited that month even though your using the same money that was in your account. Now your statement would show you deposited $3000 that month. If you need more income, repeat the process 2 - 3 times each week. Your bank statements would show you have a good cash flow coming in each month and that would qualify you income wise for getting a loan.
You would have to do this on a regular basis to maintain an average amount going into your account each month. It can be a little work to keep doing this every week, but it will work if you need to show more income. The bank only cares about the amount going in each month. They don’t question what your taking the money out for or doing with it. Nice! Huh?
To those of you who have succeeded in real estate to the point where you no longer need to work the conventional nine-to-five job, how did you verify your income in the beginning? I ask this because I was speaking to an investor tonight who’s really successful. I told him that I want to quit my job and get into investing full time, but he said I would need at least 10 to 15 income producing properties before I do that. Without these properties, I would not be able to qualify for a loan because I would not be able to verify my income. But I’ve read where people have quit their jobs after just doing a couple of flips. I don’t think I can wait until I’ve got 15 properties before I stop my job. Neither do I believe people like Ron LeGrand or Bill Bronchick waited either. Then again, I could be wrong.
For those of you who did not wait to have an impressive portfolio, how did you qualify for loans when you needed them?
Posted by Russ Sims on December 08, 1998 at 02:41:55:
Contact a mortgage broker and ask for a non-income verifier loan. I’m self employed and just got this type of loan on an investment property that I plan on living in for a few years. They (the mortgage co.) really didn’t ask me how much I made…It seemed strange but the loan went through. The interest rate is probably a full point or so higher than a standard loan but the property enables me to realize a $300 per month positive cash flow (by renting out the home I’m currently living in) so the higher interest is of small concern. RS
Posted by Ray Richardson on December 07, 1998 at 10:35:06:
I’m a complete rookie here, so any advice from me may be a case of the blind leading the blind, but what the heck. I can’t remember where I read it, but I think a nice idea is to incorporate and then start paying yourself a salary as an officer in your corporation. Obviously one would have to do this for a while to show stable income, and one would have to be doing enough deals in one’s corp to support your salary, but after a year of steady paychecks from your corp to you (with maybe a raise or two, if you’re doing well!) you can kiss the higher no-doc no-income verification rates goodbye. Does this approach sound correct to the veterans out there?