Buying a Home with Non-Traditional Income

The real estate adventure has been a crazy one. I start with a dream of retiring my wife, building my dream house in Texas, moving in, and raising my kids there. I want to provide a place for my kids, carve out the time to spend with them, spend time with my spouse. All goals that I have hit except for one. Kid is being born in a few months, house is built. However, we have some delays there. I'm going to share that drama, and what this episode is about is how you actually close on a house when you are an entrepreneur. If you have unconventional income, how do you get conventional loans? If you're wondering this, we're covering that on today's episode. So welcome back to the channel. My name is Christian Osgood. In the pursuit of financial freedom, I bought hundreds of rental properties starting with $0 because $0 was in fact the budget. If you're trying to build the same thing, you may run into a point where you are very difficult to finance. I ran into an issue, and you may have noticed I'm still filming in this empty office. I've done a few episodes without anything in the office. That is because underwriting has taken an extra week to clear me from close. We don't know why, but it's just stuck in underwriting forever. The little black box won't spit out my final approval. So technically, I have not completed the goal of owning Texas. But what have we had to go through? This has been quite a journey. 9 months ago, I made the decision after 2 years of running my companies, I'm ready to build a dream house. We pulled the trigger. We got pre-approved, which was quite easy to do. We started the build. I went through the build, went through the build. Lender came back and said, hey, as long as you made about what you made the prior year, as long as you're in the ballpark, your pre-approval is good. We're gonna have no trouble qualifying you. So then we get to the actual approval time, and here's what happens. They come back to us, hey, there's a problem with your income. Well, I made a little over 3 times what I made the prior year. We ask, what's the problem? Well, one of your LLCs posted a $400,000 loss. Conveniently, I did $395,000 of renovations to said building that I had invoices for. Said, ah, yes, I'm aware of these losses. They are one-time improvements. They show that on my tax returns. It also shows up in our depreciation of the asset. Please look at my K-1 and my Schedule E. Which are both, by the way, if you're new, those are both things that you're going to need to file when you are a business owner. They look at the LLC. On the property, and they came back with this: well, we're not comfortable taking off your depreciation or your renovations, any of your one-time things. It was new siding, new windows, and for a unit that had no flooring, plumbing, or electric, we redid that entire unit plus a bunch of other upgrades, like painted the entire building on a 38-unit campus. We did a lot of one-time renovation projects, and they said, hey, you know what, We're going to go ahead and reduce your income by $400,000. So if you're trying to get approved and you have unconventional finance, things can come up. Your write-offs matter. The way you file your taxes matter. And at the end of the day, a lender may have difficulty underwriting. I went to a second lender. I ran into a very similar problem, different business, same exact thing. Well, we're not comfortable with how we want to take the write-offs for the projects you did. I called a third lender and said, look, am I just unbankable because I renovate buildings? They said, no, but it's hard right now because lending is really tight and lenders are really worried and Fannie Freddie doesn't like buying the notes. So we have to buy, we basically just want to lend to people who have a W-2. So we're looking at what's called a bank statement loan. Now the bank statement loan looks at your bank statements and says, how much income do you actually have to service the debt? It takes an expense ratio. It doesn't care about your actual expenses. It doesn't really care about much other than what money do you make? Now, if you happen to be like me and you have 6 companies and you have about 20-some of those are LLCs that hold properties, you have a lot of real estate holdings, a lot of entities, there's a lot of income. Bank statement loans are awesome. The approval of those are a little ambiguous though. Here's how they work. Essentially, they're selling these on the secondary market. So private investors and individuals and organizations are buying these bank statement loans. They're based on income, they're packaged and sold. They're typically 1 to 1.5% more than a traditional loan. So it is a little bit more expensive on interest rate, but as an entrepreneur, you can qualify based on bank statements in lieu of going through the conventional approvals that one would need. I am almost there. There are delays. So I'm still stuck in this house. This is not a flawless process, but it is in progress. I am told that we are 100% done with everything that needs to be submitted. Unless I have amazing news on this channel later that somehow we failed to buy a house for $850,000 after making over $1 million last year, which would be surprising if you make enough to pay for the house in cash every year. One would think you should be able to get a loan. But as we're going through this process, we found that it is really stressful and it is really difficult. And if you are an investor and you are looking at getting a house, if you can keep the 9 to 5 and qualify and then go off on your adventure, that would be my number one advice to any entrepreneur. If you have a 9-to-5, the goal is to leave the 9-to-5. Keep it. Now, for me, I've been out of the 9-to-5 for 4 years. I have not had a job that would qualify me for a house for a long time. I chose to build the companies first. If you go that route, expect a lot of hardship. Expect it to take a long time to qualify. Work with lenders way in advance, uh, like I did, and know that even when that happens, just like any real estate deal, things change along the way and you may have to adjust. That being said, persevere through it. I did build my businesses. I built the revenue to where it needed to be. I built the house. We're going to be closing on it hopefully by the end of this week. We'll move there. We'll have the kiddo, God willing, healthy kid, and we'll have hit every single goal. For those who are setting their goals, seriously, super attainable. It is not get rich quick, but I did it in 3 years. That's pretty fast. And I mean, we went from like worth a few hundred thousand after years and years of saving and buying a few properties. To millions of dollars in real estate. Anyone can replicate this. I have friends who've done it with $300, friends who did it with $3,000. Did I have a little higher income when I started? Yes. Left that job almost immediately though. Any starting point, you can make it happen. If your goal is to buy the house, keep the job if you can. If you just can't stand it or it's not in the cards or it doesn't make sense for your business plan, there's still a way to close your house. I did it with a bank statement loan. Tons of other options for you out there as well.