how we bought 2 doors in an inflated market as self-employed borrowers

  

Well, we did it!  

We bought a property with a primary residence(door #1) and a rental(door #2) in the very inflated market of Ashland, Oregon.  Ashland is an area that has become like many desirable towns in the west, extremely expensive and competitive.  The average home price here is $500,000.

It was always my dream to own a home here.  The schools are good and it is a great place to raise kids.  It has a great walk-able downtown, with lot of character.  The town is home to all kinds of artistic & healing pursuits:  from the Oregon Shakespeare Festival to the Conscious Living Fair.

But when I came to Ashland as a single mom, that dream was out of reach.  And it is out of reach for many regular working people, who choose instead to live in Medford, where the average home price is closer to $300,000.

I believe that as we prosper, we have a responsibility to lift others up.  So this blog is for all the self-employed friends who want to buy homes in inflated areas.  You can do it, it just takes time.

So how did we get here?

#1.  We tracked our money.
Tracking our spending and self-employed income was a prime factor in our success.  We use household budgeting software(www.everydollar.com) and business budgeting software(Quickbooks & Freshbooks).  Tracking our household ins and outs helped us to "make margin", which is the process of creating cash flow I talk about in my book.  And tracking our business ins and outs helped us make our businesses profitable, as well as set us up well for tax time.

Having good records of self-employed income for at least 2 years is required to get a home loan.  Before 2008, "stated income" loans were allowed, but no longer.  Since that market crash, lenders are much more strict, and they want to see good net income(after business expenses) to be able to lend.  Also, with properties that already have rental income you can count 75% of that rental income toward the loan.

#2.  We worked our butts off!
Both my husband and I have "multiple income streams", another process I talk about in my book.  This works well for us, especially in the semi-rural area of Southern Oregon.  We find money in many places:  our various businesses and investments.  We both have worked very hard over 9 years to grow these businesses, and make them profitable.  

When the economy tanked with COVID, and our regular businesses were challenged, we turned to new income streams and beefed them up.  Shifting to respond to market changes has always worked for us!  At the end of the day, we had about 8 different income streams in 2020, all of which contributed to help us qualify for the loan!

3.  We saved money. 
We made saving a priority.  Every month for years and years we set aside money in our budget:  for the debt elimination, emergency funds and investing I recommend in my book.   Then after that, our down payment grew:  we built equity in the manufactured home we had purchased for cash by renovating it, and invested in other projects that brought a great return.  We made sure to up our home insurance to reflect our home's higher value.

We increased our net worth by hundreds of thousands in 5 years.  On top of that, we received a little extra money from our home insurance payout after the wildfire(see the next section on giving & windfalls).  In addition, our other investments did well, and we added that cash to our nest egg.  We wanted to be sure to have enough for a 20% down payment AND plenty leftover to continue to invest.

4.  We gave money away.  
This may seem counter-intuitive.  When you are saving to buy a home, why give money away?  Well, again this is something I teach about in Give, Save, Spend.  To give 10% of your net income away is a very high practice.  It helps you in your personal growth to give to where you are inspired, and also grows your abundance mindset, and your ability to receive.

We found that giving away 10% of our income, time, and energy to the inspirational places & charitable causes we believe in brought us blessings.  We felt abundant and relaxed, rather than tight and fearful.  And giving brings miracles!  In addition to our regular income, we also sometimes receive windfalls and unexpected income.  And investment opportunities seem to always fall in our lap.

5.  We had professionals help.
We relied on the help of an accountant, bookkeeper, realtor, home insurance agent, and loan officer in this process.  It helps to have a team!  Our bookkeeper and accountant helped us in the years of preparation, to have good business records and complete taxes.  And our accountant helped draw on that background to help us with last-minute requests from the lenders!  It was very valuable to have her in our court!  As we built equity in our manufactured home investments, I made sure always to insure them for full market value, and our insurance agent helped us do that!

Our realtor was aware of our situation, of wanting to live in Ashland, but keep our mortgage low.  So for many months he showed us primary dwellings & rental properties.  While I was the one to find this particular property, our realtor helped us gain an accepted offer, and managed the details of closing.  Our loan officer got us a pre-approval many months before, so that we could confidently shop for homes.  He then helped us with the huge amounts of self-employed income paperwork required for closing.  

So now you know a little bit more about "how the sausage was made".  It was steady work over the course of many years, not an instant miracle.  No trust funds here.  We are just regular working people with a heart for our clients and for doing good in the world.

​But we were able to create continual results over time.  This is possible for anyone!  I hope hearing our story can inspire you.  It is my passion to help heart-centered entrepreneurs get ahead, so you have plenty of resources to fulfill your mission.

Build Wealth, and Change the World.

Blessings,
Kathy Kali