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Q. I've been an independent marketing consultant for five years and I want to buy an apartment. Income-wise, I had one bad year three years ago but other than it's been pretty steady at around $225,000 a year. Still, I've heard co-op boards have a bias against self-employed buyers. Should I even bother looking at co-ops? If so, do you have any suggestions for how to present my income and self-employed status in the best light?
A. Co-ops have historically been cautious about approving freelancers and entrepreneurs, but the times they are a-changin', according to some of our experts.
"The arena of self-employed individuals has gotten much larger and co-op boards are seeing more and more self-employed applications," says property manager Dan Wurtzel. So long as your qualifications match a prospective co-op's on face value, "there is no need to stay away from co-ops."
Real estate broker Deanna Kory agrees: "Your profile is a good one for most co-op boards. Remember that if you have had that kind of consistency and had a bad year when everyone else had a bad year, you are actually ahead of the game. Most reasonable and even some tougher boards will be fine with this scenario provided that you keep your monthly payments --mortgage, maintenance and any other longterm debt--within 25-33% of your gross income. They will also want to see a really good credit score."
You also need to show that after your down payment, you have two years of mortgage and maintenance leftover in liquid assets, says real estate broker Jacky Teplitzky.
"Not having any pre-existing debt and having a high credit rating would be a big plus in your situation," says real estate broker Gordon Roberts. Board requirements vary from building to building, he notes, and some may ask for a hedge against the risk your situation presents.
"Would you have a fallback position if your business dried up or your income fluctuated?" asks Roberts. "If the building allowed it, could you produce a guarantor?"
Indeed, there are more ways to stack the cards in your favor.
"Have your accountant write a letter that confirms you've been in business since 2006 and have built an impressive roster of high profile clients," says real estate broker Shirley Hackel. In addition to offering a guarantor and escrowing a year's worth of mortgage payments, "write your own cover letter to provide additional assurance about the longterm future of your business."
In your application, be sure to show that your current year-to-date income is the same or better as last, says Kory.
"If there are any longterm contracts or retainers, make sure to include those in the package," she advises. "Include business letters of reference from top clients saying wonderful things about you....and have your social or personal reference letters also state how responsible you are. Make sure each person says it in a different way."
But before going too far down the co-op (or condo) road, make sure you can get a mortgage.
"Entrepreneurs are having a hard time obtaining a mortgage let alone passing a co-op baord because of the tightening of credit," notes Roberts.
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