6 Tips For Purchasing Real Estate when you’re An Independent Contractor

Purchasing Real Estate as an independent contractor

Are you an independent contractor? You can get a loan if you are qualified, but you must take the necessary steps in advance.

Investing in real estate is usually a good investment. It can be an excellent long-term investment if the value goes up over time, and it can be a source of passive income. You could even use it as part of a bigger plan to start getting rich.

But before you start investing in real estate, you need to make sure you are ready. To start investing in real estate, you will need to put down a lot upfront. It can be expensive to buy a house, an apartment building, or a piece of land. Not to mention the ongoing maintenance costs you’ll have to pay and the chance that you won’t get any income for a while if you have to look for a new tenant.

Is It Possible for Independent Contractors To Purchase Real Estate?

People who work for themselves, like contractors, can get real estate, and they can often get good deals. But the application process is more complex, and the number of people who don’t get in is higher. As a freelancer, it’s harder to find a lender because your income is less stable than that of someone who has a job. It has more ups and downs. Even if your net income is higher than that of a similar employee, lenders will be more careful with you if your income changes or if you work on fixed-term contracts.

Many people think this isn’t fair, and they’re right. The argument is that if the economy is wrong or there is a lot of uncertainty, you might not get any contracts, and your income would go away with them. But the same might be true for employees who are at risk of being laid off. And a contractor may be better able to make income in small amounts even when times are tough, while a full-time worker may find it hard to find another full-time job. Still, whether it’s right or wrong, many real estate lenders have convinced themselves that lending to contractors is riskier.

Your job, then, is to use the strength of your real estate application to make them think otherwise. Use a real estate broker who has worked well with independent contractors in the past. This will help a lot.

What Are The Parameters For Financing Independent Contractors?

Lenders evaluate how much they are ready to lend to independent contractors based on various parameters. They may look at your average annual income over several years or use your lowest yearly income during a particular time frame.

Your day rate might also assist lenders in estimating the amount you are likely to make. They will multiply this value by the number of weeks you earn, anticipating you will take a vacation. Be prepared to demonstrate the number of weeks you’ve worked in the last year and be aware that gaps between contracts will be considered. In general, lenders will look for a stable work schedule.

How Much Money Should I Borrow As An Independent Contractor?

You may do a computation based on your hourly wage to estimate the amount you could borrow. Multiply your day rate by the number of days and the number of weeks in a year to get your annual salary (no more than 48 to include holidays, even if you work longer than this in reality). This will give you your average yearly income, which you can use to figure out whether or not you should invest in real estate.

Remember, though, that lenders will consider the possibility of a decline in your income. Therefore, the amount you can likely borrow will be less than what the internet calculators indicate. Nonetheless, the Unbiased Real Estate Calculator is an excellent starting point.

6 Tips For Purchasing Real Estate When You’re An Independent Contractor

Improving your chances of getting a real estate deal helps to show that you have a steady income and a good track record with money.

Follow these tips to improve your chances when you apply:

Improve Your Credit Rating

Find out what your credit score is and try to improve it by paying your biweekly pay on time, making sure all your information is correct and getting a credit card that you pay off in full every time.

Set Up a Regular Way of Working

Try to keep working steadily and not take too many breaks in the 12 months before you apply.

Try To Get Contracts

Try to make or renew agreements with the businesses you freelance work for to show that you are stable now and in the future.

Look For Proof

You may be sure about how much work you get each month, but a lender won’t believe you unless you can show proof. So, get your pay stubs, bank statements, and other records that show how much it costs you to run your business.

Follow Our General Tips For Getting A Real

Most of them are also valid for contractors. Check out some more tips for getting real estate when you work for yourself.

Last Tip

Don’t forget that you can always start small and work your way up if you need to. Once you own a property, even if it’s a cheap one, your chances of getting your next piece of real estate are much better.

LEAVE A REPLY

Please enter your comment!
Please enter your name here