Buying Multi-family Property With No.Job and No Income

How to Buy Multifamily Properties with No Job or Income: 2 Proven Strategies

*"Never allow a person to tell you no who doesn't have the power to say yes." - Eleanor Roosevelt*

Introduction

If you've ever thought, "I can't invest in real estate because I don't have a job or steady income," it's time to think again. Many aspiring investors get stopped dead in their tracks by this perceived obstacle, but the truth is: it's entirely possible to buy multifamily properties without traditional employment or income.

Whether you're starting from scratch, can't scale fast enough with your single-family investments, have been laid off, or have simply decided you're done with the 9-to-5 grind, there are viable paths forward in commercial real estate investing.

In this guide, I'll share two powerful strategies that can help you overcome these obstacles and acquire multifamily properties regardless of your employment situation.

 Who This Guide Is For

Do any of these scenarios sound familiar?

1. **The Stuck Single-Family Investor**: You own single-family rentals but feel stuck because they don't produce enough cash flow to achieve financial freedom or allow you to quit your day job.

2. **The Between-Jobs Investor**: You've been laid off or are between jobs with no W-2 income but still want to buy commercial or multifamily property.

3. **The High-DTI Investor**: Your personal debt-to-income ratio is too high to qualify for conventional bank loans, preventing you from expanding your portfolio.

4. **The Career Changer**: You've quit your 9-to-5 job (or plan to) and want to pursue multifamily investing full-time but need financing solutions.

5. **The Action Taker**: You're simply done making excuses and ready to improve your financial life through multifamily investing.

If you identified with any of these scenarios, the following strategies are designed specifically for you.

 Strategy #1: Non-QM Multifamily Loans (DSCR Loans)

A non-QM (non-qualified mortgage) multifamily loan, specifically a DSCR loan, is designed for creditworthy borrowers who don't fit into conventional lending requirements.

What is a DSCR Loan?

DSCR stands for "Debt Service Coverage Ratio." Unlike traditional loans that focus on your personal income, these loans are primarily approved based on the property's income potential.

> **Note**: You won't find these loans at major banks like JP Morgan Chase, Bank of America, or Wells Fargo. They're offered by specialized lenders who understand the unique needs of real estate investors.

 Key Features of DSCR Multifamily Loans

- **No W-2 Required**: No proof of personal income or tax returns needed

- **Credit Score Requirement**: Minimum 660 (higher scores receive better terms)

- **Property Requirements**: 4-50 units, relatively stabilized with no major immediate repairs

- **Maximum Loan**: Up to $5 million

- **Down Payment**: 20-25% (plan for 25% to be safe)

- **Interest Rate**: Typically 0.5-1.25% higher than conventional loans

- **Loan Terms**: 5, 7, or 10-year balloons (sometimes 30-year fixed available)

- **Interest-Only Option**: Up to 10 years of interest-only payments available

- **Foreign Nationals**: Eligible

- **Gift Money**: Accepted (borrower must provide at least 10% of the down payment)

 The Most Important Factor: DSCR Calculation

The most critical requirement is that the property must generate sufficient cash flow. The gross rental income (GRI) must be at least 1.1-1.2 times greater than your PITI (Principal, Interest, Taxes, and Insurance).

The DSCR formula is:

> DSCR = Gross Rental Income ÷ PITI

For example, if your property generates $10,000 monthly income and your PITI is $8,250, your DSCR is 1.21 ($10,000 ÷ $8,250 = 1.21).

- DSCR less than 1.0: Difficult to finance, may require additional assets

- DSCR between 1.0-1.2: Acceptable to some lenders

- DSCR above 1.2: Ideal, will attract many lenders

 Example: DSCR Loan for an 8-Unit Property

Let's walk through a practical example of how to calculate whether your deal would qualify for a DSCR loan:

- **Property**: 8-unit multifamily

- **Purchase Price**: $1,000,000

- **Gross Rental Income**: $116,000 per year

- **Down Payment**: $250,000 (25%)

- **Loan Amount**: $750,000

- **Interest Rate**: 8.5%

- **Term**: 30-year amortization

- **Monthly Payment**: $5,766 ($69,192 annually)

- **Property Taxes**: $12,000 annually

- **Insurance**: $6,400 annually

**DSCR Calculation**:

> DSCR = $116,000 ÷ ($69,192 + $12,000 + $6,400) = $116,000 ÷ $87,592 = 1.32

With a DSCR of 1.32, this property would be attractive to many DSCR lenders.

> **Pro Tip**: If you opted for interest-only payments, you could increase your cash flow by approximately $5,400 per year.

 Strategy #2: Creative Financing (Master Lease Agreements)

The second strategy involves no banks at all and focuses on creating win-win arrangements directly with property sellers.

 What is a Master Lease Agreement?

A master lease agreement is a robust commercial real estate strategy (not to be confused with a simple lease option) where you gain control of a property through a lease structure with the current owner.

 Key Features:

- **No Banks Involved**: Direct arrangement with the seller

- **No Credit Check**: Your credit score doesn't matter

- **Low Down Payment Potential**: Typically 10% versus 25-30% with traditional loans

- **Control Without Ownership**: You get equitable title (not legal title) and full operational control

- **Cash Flow Benefits**: You receive all income, pay all expenses, and keep all profits

- **Future Equity**: You benefit from any property value increases

- **Seller Benefits**: Seller receives down payment, monthly payments, and operational relief

 When to Use a Master Lease Agreement

1. **Tired or Burnt-Out Seller**: The seller wants to sell but needs to maintain some monthly income

2. **Tax Concerns**: Seller doesn't want to pay capital gains taxes all at once

3. **Non-Bankable Property**: Property has high vacancy, deferred maintenance, or lacks financial documentation

4. **Personal Circumstances**: Seller has health issues, financial problems, poor property management, or is relocating

> **The Key**: Understanding the seller's motivation is crucial. Once you know why they want to sell, you can structure the deal around their specific needs.

 The "10-5-5" Master Lease Formula

Our default approach for master lease agreements follows a simple formula:

- 10% down payment

- 5% interest-only payments

- 5-year term

 Example: Master Lease for an 8-Unit Property

Using the same 8-unit property from our previous example:

- **Purchase Price**: $1,000,000

- **Down Payment**: $100,000 (10%)

- **Remaining Balance**: $900,000

- **Monthly Payment**: $3,750 ($45,000 annually) at 5% interest-only

- **Gross Rental Income**: $116,000 per year

- **Estimated Expenses**: $46,400 (40% of GRI)

- **NOI (Net Operating Income)**: $69,600

- **Annual Cash Flow**: $24,600 ($69,600 - $45,000)

- **Cash-on-Cash Return**: 24.6% ($24,600 ÷ $100,000)

> **Important Benchmark**: We target a minimum 10% cash-on-cash return for master lease agreements. If a deal can't produce at least 10% using these terms, we pass.

Conclusion

Whether you choose a DSCR loan or a master lease agreement, the path to multifamily investment doesn't have to be blocked by lack of traditional employment or income. These two strategies provide viable alternatives that focus on the property's performance rather than your personal financial statement.

Remember, the best time to have bought real estate was five years ago—the next best time is today. No more excuses—it's time to take action toward your financial freedom through multifamily real estate investing.