Freelancing + Buying a House

SEASON 5, EPISODE 2:

Is it possible to buy property while working for yourself? Recently, Jenni and Wudan both bought houses -- so the answer is yes, but with a lot of caveats! In this episode, we'll talk about what kinds of things to do if you're thinking about buying property, how to make sure your team is working for you and supportive of your business, and barriers you may face as a self-employed person looking to take on a loan. The TL;DR: The house-buying process is a mess, the market is crazy, but buying a house is possible if you have support and get your business paperwork together.

Full Transcript Below:

Jenni Gritters- Hey everyone, and welcome to The Writers' Co-op

Wudan Yan- We are a business podcast for freelance creatives everywhere.

Jenni Gritters- Where are your co hosts? I'm Jenni.

Wudan Yan- And I'm Wudan.

Jenni Gritters- We are popping in today with what I would call a mini episode for the month of April. Technically, we're kind of on a break, kind of not on a break, but we decided we would address some much asked about topics in a few season five-ish episodes. They're going to drop all spring, one per month.

Wudan Yan- Yes, we're planning to release new episodes every month throughout the spring, then we'll rerun some of our older hits this summer, while Jenni is on maternity leave

Jenni Gritters- So Wudan, you're taking time off to this summer, right? What are you doing?

Wudan Yan- Yeah, so a little crazy, I guess. I'll be spending a month that summer throughhiking in the Washington State portion of the Pacific Crest Trail. It's something I thought about doing and considered more seriously, after I've grown more accustomed to taking longer trips by myself. And not to mention, I've hiked all random parts of the Washington PCT. And I think it's just finally time to put it all together. So the scary part is that it's less than three months away from my start date. And let's just say I've been slacking a little bit on the training.

Jenni Gritters- Yeah, sounds awesome. And a little bit scary. Maybe in a good way.

Wudan Yan- Yeah, it is excitement and nerves, in a good way. For sure. So Jenni, how is it going planning for maternity leave?

Jenni Gritters- It's going. As you know, I'm starting to front load work for The Writers' Co-Op and with some of my regular clients. So my next few months are actually a little bit over busy. But that's okay. I am going to be on leave starting mid-June, padding my time a little bit. Baby's due the first week of July. So yeah, it's like coming. It's eight weeks, or so left of serious work. And I'm really over being pregnant. So I'm excited about it.

Wudan Yan- Yeah, I cannot speak from personal experience, probably ever, but pregnancy sounds like a marathon.

Jenni Gritters- Yeah, it really is. Especially when you're sick like I am. So when people ask me if I'm excited about being pregnant. I'm like, I'm excited to be done, for the baby to get here. So it is coming. So Wudan, tell me: what are we going to talk about today on this mini episode,

Wudan Yan- We're gonna dig into something that might sound a little tangential, but feels top of mind for both of us, which is buying a house?

Jenni Gritters- Yeah, so we both bought houses recently, ironically, at the same time, because these things just seem to happen to both of us at the same time. We are both first time buyers. And I think it brought up a lot of questions about running your own business and making really big purchases like this, like sort of being taken seriously getting a bank loan. And so we wanted to dig into tha- Wudan Yan

Yeah, it's been a process. And for people listening, Jenni and I literally do not plan to buy a house at the same time. But we are going to get into some of those practical logistics and share our house buying stories and what the process was like. And if you're a freelancer, what that might also look like for you.

Jenni Gritters- Yep, sounds like a plan. So Wudan storytime, as per usual. Why don't you go first? Tell us what it was like to buy a house.

Wudan Yan- I mean, the short answer is, is that it was short and painful. So before we dive the whole way in, I think we need to caveat this entire episode by saying that where you live, and where you want to set down roots for a second plays a big part in whether or not buying a house is feasible, right? Or what the market is in that very specific location. So I live in Seattle, which is also one of the hottest and most explosive housing markets right now. A single family home will probably get listed around $800,000 to $900,000. And buyers will probably bid on it closer to over a million for sure at this point. And there's no way I would be able to afford property here if I weren't partnered with someone else, even as a freelancer making six figures. But also because Seattle is such a crazy market. Things moved really fast for us once we started viewing properties and putting offers in. So we had to cobble together paperwork for a pre-approval at the same week that we put in our first offer. That was a journey. There were tons of unpaid hours that just went into viewings. And if you've never bought a house before, winning a bid is basically only the beginning. It felt like everything else that came after, especially with appraisals and closing fees, it really just tests how much you want a house for lack of a better term. And I think in competitive markets, too, you have to just wave like all the things which can really screw you over. I mean, it screwed us over.

Jenni Gritters- Yeah, your experience was so fast and definitely sounded stressful. I think I started looking in December, and we didn't close until March. But by the time we were closing, you had already closed because you did everything in 30 days. So definitely like a crazy quick turnaround.

Wudan Yan- Yeah. It took us three weeks to close. Less than 30 days, so it was too much. Anyway. So Jenni, tell us your story.

Jenni Gritters- Yeah. So I guess I should start by saying that I've always like been very skeptical of this game that is required to buy a house. I remember going to a financial planner a couple years ago, they suggested that we should have an account that was building up savings to buy a house. And I asked them why it made sense to buy a house like I'm like, can you please explain to me rationally why I should be doing this. Because I just really wanted to make sure that it was a good idea. I think this is very me as well, I'm kind of skeptical that the established way of doing things is the only way of doing things. And I also really have an addiction to moving and changing my location. So that complicates things, and I wasn't sure if I would ever want to buy a house. But over the last year, as we've been traveling around, and then settling in Bend, it actually made sense for us to buy because my husband was making a lot of extra money as a traveling nurse, we suddenly had some liquid cash for a down payment, which had literally never been the case before. And our rent was just looking the same as basically what a mortgage would be here in Bend, Oregon. So with a toddler, and then another kid on the way, stability actually started to seem like it made more sense to my brain. But I was adamant that if I bought something it needed to be like an ideal place. I didn't want to play the game for something that felt subpar to me. I like I guess I didn't want to settle that was really important.

Wudan Yan- And I think that kind of happened. Right? You finding a place that seemed ideal for you?

Jenni Gritters- Yeah, for sure. So a lot of this, as we said in the beginning is because I'm not in a big city now. But we bought a house on unincorporated land right outside of Bend proper. It's on an acre of land. It's an older house built in the 90s. So it definitely needs some work, like weird pink bathroom and garage doors that don't work. You know, like, there's definitely some parts of it that we're gonna have to change. We ended up offering about $680,000 for it, which was under asking price and putting about 15% down. We put in our offer over the week of Christmas. And we actually got the sellers to install a new roof for us too. So again, like, surprisingly, not as terrible as I thought it was gonna be.

Wudan Yan- Yeah, it wouldn't happen in Seattle.

Jenni Gritters- No, for sure. I mean, Bend real estate is booming. Don't get me wrong, like for this area that is considered expensive. But we had Seattle prices in our brains because that's where we used to live. So this felt more doable to me. Although I would just say that like signing those mortgage documents. It's like, Oh, my God, it's just a lot of money.

Wudan Yan- Yeah, and our texts, we started calling it Monopoly money because you play Monopoly as a kid and you just have like, so much freakin cash and you don't know the meaning of it. So why not just like, throw it on Broadway or something?

Jenni Gritters- Totally, totally. It just becomes like an unreal sum of money, right? Like once you're dealing in hundreds of 1000s of dollars. What's another 1k 2k 10k? It's a crazy process. So like I said, we also did a 90-day close, which was unique, I would say. There were tenants living in the house. Tenters. And when we first saw it, it was a mess. Like this house was not staged. I think this is also part of why we got it. It was the second house we saw. Someone was at a hospice care. So the tenants were there when we went on our first tour. It was really awkward. We were like wandering around their stuff. It was really messy. There were boxes everywhere and furniture everywhere. But I went into the backyard and I could just actually see us living there. I could see the potential there are these huge picture windows looking out into the Ponderosa Pines. There's a woodfire stove. Four bedrooms. It's really quiet. So we saw a couple other places but like it was the backyard I think that sold me on this one.

Wudan Yan- Yeah, it sounds really charming.

Jenni Gritters- Yeah, I can't wait for you to visit. I will say like I did before though that like we bought this house for the potential. So there's just a lot to be done. Like blinds, the hardware is all terrible bathroom remodels, kitchen remodel. I sort of just like bought a 10 year project, which feels maybe fitting for me and slightly overwhelming too, to be honest. There's just a lot to do. So Wudan, can you tell us about your house and where you guys ended up?

Wudan Yan- Yeah, so my husband and I probably viewed over 20 properties around town. And it became like quickly apparent what we needed—I needed a place that felt open. So did he. I mean he's six-two, so cramped spaces are no go for the two of us. I love good light. And we found a place just out of Seattle City Limits not too far from the house that we were renting during the pandemic, it has a really open living space, it has a huge backyard for the dog to romp around in. And the biggest win is a covered patio. We'll probably throw in some space heaters for winter. So we'll still be able to have folks over during this seemingly nonstop pandemic. And Jenni, I agree about all the projects, too, I still don't see a home as an investment, I still see it as a purchase. And it's also a constant money sink. So as of this recording, I've been in my new place for about a month and 10 days in, we threw down like $1,200 in a day, because the plumbing in our house wasn't working properly. It turns out, there was a massive clog, like 100 feet out of our house. And it wasn't disclosed by anyone. It wasn't picked up during our inspection. And while we needed it fixed, because we weren't able to use the kitchen and our basement bathroom was kind of flooding for a few days. So the idea that the money that you put in and invest in your house, is all that you're putting in is like a scam. To me, your house is like a life partner that can't speak and there's a good chunk of money you're putting into just like maintaining it and not even increasing its value. That's all to say, overall, ours does not require that much work or upgrades. But that was also our intent. We don't want a project.

Jenni Gritters- Yeah, my husband always jokes that like we have to spend another house unit which is $1,000. Like every house unit is $1,000. $1,000 for blinds. $1,000 for a space heater. The way you're talking about this makes sense. I feel the same. Despite buying different places. What we're learning about being a part of this system is self employed people definitely tracks. So what we wanted to do to make this episode useful for everybody listening is to offer some information about what we've learned when it comes to buying property as a small business owner, because it's definitely a particular brand of weird.

Wudan Yan- And it's definitely harder, although not impossible to buy a house when it's just you and you work for yourself.

Jenni Gritters- Yeah, so we did ask around and found a fair number of people who bought houses by themselves as freelancers, although I will say most of them were in rural areas, right? So the first thing I want to call out, just practically is that it was very important, helpful, necessary for me to have business records. So when it comes to getting pre-approved and then approved for a mortgage, they want to see everything, like everything, everything. So I submitted tax returns for the past three years, plus profit and loss statements that were generated by my QuickBooks account, business license documents, they asked like 17 times for copies of recent invoices to make sure that my business was still running. It definitely helped that I was an LLC, they wanted to see that I had been a business for at least three years, I guess that's like the number that helps them feel like my business could be trusted and was reliable,

Wudan Yan- They're looking for a trend, right? And I think that three year line is the standard for most lenders. So it's important to remember that as you plan your buying timeline, they want proof that your business has been running in a stable way or growing even for a number of years. And I think because of the pandemic, I will say in my experience, they were extremely skeptical that I would make money as a small business owner, because small business owners were so hard hit by the pandemic and the government had loans that helped assist us and all that. So that's a really fun way to just get discriminated against right off the bat.

Jenni Gritters- Yeah, agreed. I had that same conversation with our lenders, we talked to a few different people. And they were really skeptical about the stability of my business during the pandemic, right? So what else did you have to submit, Wudan, paperwork wise, if anything.

Wudan Yan- Bank statements. And because I did not have my tax filings done for 2021 in February, I drafted a profit and loss statement, which sounds really fancy, but if you've never done one before, it's really straightforward. If you've already calculated your expenses, it's basically just a version of your schedule C.

Jenni Gritters- Yeah, so thankfully, I had all of my records, same things, with all of that in a Dropbox and in QuickBooks, because I was already preparing it for taxes. So I kind of like pulled that info over for the mortgage people and then for my accountant, but in whatever way shape or form it takes for you, you do want to be tracking how much money you're making, how much money is coming into your business, how much is leaving, with expenses, you're gonna have to show proof of that.

Wudan Yan- Yes, and the other thing that's worth mentioning is that maybe there is a case for talking to your accountant or whoever helps with your taxes to maximize your tax reporting. I mean, oftentimes, we might not count tons of expenses, or we do count lots of expenses because it's good to write off but you might not want that in that case, because the more you make every year and the better your credit score, the better your mortgage offer will be

Jenni Gritters- Yeah, exactly. So I had a year of making less within the past three years. In 2018, I was on maternity leave. So I made about 75% of what I usually make because I was gone for a quarter of the year. And for the lenders that I worked with, that was seen as a sort of ding on my record. It made things look uneven, and there was nothing I could really do about that. But all of that is to say that like there is maybe a case if you've had really discrepant years for not filing all your deductions. So your top line earnings are stable or higher overall, this is like sort of pre-planning. If you think you might want to buy a house, think about this stuff strategize on it.

Wudan Yan- Yup. Just one thing to maybe consider.

Jenni Gritters- Yep. So Wudan, I know you had trouble with lenders being sort of discriminatory, and even your realtor taking you seriously about being self employed compared to your partner who has a quote, unquote, traditional full time job. So tell me about that.

Wudan Yan- Yeah, I flicked at the issue of discrimination earlier on with pre-approval. And it did come up with our realtor who took visibly a lot more interest in my husband's work and life because he is a man or because he's conventionally employed. I think there are a lot of unconscious biases at play.

Jenni Gritters- Yeah, for sure. I had the same thing happened. So like I said, we got pre approved for mortgages at a few different places, because we wanted to compare them. And at one place, the guy just wanted to do all the paperwork under my husband's name. He was like, Yeah, you got a PPP loan during the pandemic. And that looks sketchy. So you know, the underwriters may not trust your business. And so we should just buy the house with only your husband's income and not yours.

Wudan Yan- Yeah, not cool. Not cool. And also like, not necessarily true.

Jenni Gritters- Yeah, not at all. The other lending company really respected me as an entrepreneur, which was really great. So I want to say that because if you're looking for a place to work with on a mortgage basis, look for someone who respects you and who prioritizes your earnings, who understands that you're working hard to run your own business, right? They allowed both my husband and I to apply for a cosign mortgage, which to me was very key. So even a realtor is running her own business. And so she respected what I built, we talked about it a lot. And she treated me with I think, like, equal attention to my husband. So just some things to keep in mind that building, the team that helps you buy your house to support you and prioritize your business is something that you have control over.

Wudan Yan- Yeah, having people who are like-minded on your team, for the house buying process is big, like it's such a short term thing in some markets. But in the grand scheme of things, it can be really helpful, I would liken it to the analogy of even if you work with a client for a short period of time, you're still building something together. And the better that you jive and work together, the better the thing is.

Jenni Gritters- Yeah, absolutely. So we also want both want to acknowledge and we've sort of mentioned this throughout that we have partners in the mix. And without them, we may not have been able to afford the top line number that we ended up offering on both of these houses, because the market is nuts.

Wudan Yan- Yeah, this is a huge privilege. And we know that many of you may be considering buying property on your own, which is, again, definitely doable in some markets, but requires more burden of proof, as we said around the officialness of your business.

Jenni Gritters- Yeah, and this feels like another case for thinking of yourself as a business when you're freelancing. Because you are a business, whether you are a single member LLC, or you're filing taxes as a sole proprietor, you're still a business and thinking of yourself that way trickles down to how you're treated in the world and how you carry yourself, especially in situations like these where you're trying to grow your assets.

Wudan Yan- Yeah, and along with feeling official as a business, the more seriously you will take your paperwork and your records, and the better deals you'll get out in the world. So I think alone, I could have probably afforded a house that cost like a quarter million. That's doable. Again, not in a big city. I don't even think that buys you a plot of land in Seattle city limits. I'm thinking about a house that was two bedrooms, one bath across the street from my old rental. So definitely a starter home, it listed at around $540,000 and it sold for 640. And I'm like, could not do that on my own. Not even close. Yeah, not ever

Jenni Gritters- Totally. Totally. I think on my own, I would have been around the same maybe 300,000 max that I would have been able to afford by myself. I'm imagining my life without my husband's student loans and like dreaming for a second about the possibilities there. But truly, even though like I'm still the one who makes the most money in our relationship, my husband is back to not being a travel nurse anymore. But the quote-unquote stability of my husband's job definitely made for an easier experience for us. And I think it was easier for underwriters to accept that they were going to back us in buying this house. So finally, I think it's worth saying that location matters, I just want to underline that like, you can really see how different out experiences were given urban center versus small town like Bend. And if you're beating yourself up about not being able to afford a home, the context of the market right now is completely nuts. Putting down $100,000 for a deposit won't be doable for a lot of people for many years. And I guess like I would just say, ask yourself how worth it it is to you, right? Money is a tool. So if that's what you want to be saving for it is possible. But this market makes it tough. So just to read you into some stats to back that up. There's a very limited housing supply at the moment. Hence, the like many offers offers over asking trend. In fact, there is lower inventory right now in houses than there has been for over 20 years. And the prices are super high. Wudan, I saw that there's a 25% price increase year over year in Seattle, it was like at the top of the list. And even like nationally, the rates are rising by 5% every year. So this is just it's a tough market. Doable to work your way through. But tough.

Wudan Yan- That's gross. That's all yeah, that's my response.

Jenni Gritters- Basically, it's very competitive to buy a house right now, at the time of this writing, it is harder than it has been to buy a house.

Wudan Yan- Yeah. And the gap between what we earn and how much houses are going for is growing wider and wider, which explains why it feels so out of reach. And this is something I've been saying to tons of people who are just like, I'm a freelancer, and my partner and I are thinking buying house. And that point is prices, interest rates and market competition are probably never going to be all track in the buyers favor at the same time. So in Seattle, which I will speak to because I don't have expertise in other markets, prices are still rising, mortgage interest rates bumped up immediately after I closed our house because Ukraine. And you know, there's more supply to come this year. But there also may be less competition per property because people can afford the rising prices and the higher interest rates. So I mean, the first house we put an offer on had like 20 offers, which is nuts. And you know, Jenni, I think we both feel pretty net neutral now that we've bought houses. Like if you can afford to put that money down and you have the privilege of a partner, great. But if you choose to use your money for something else, because money is a tool, and you want to go invest it and buy stocks, that's also a really good decision.

Jenni Gritters- Yeah, house buying is a game. It's almost a con I think. The whole time, I just kept thinking like, wow, what is happening, this is a wild ride. For me, given my values at the present moment, it feels good to be investing in building something that we could eventually sell because Bend is a vacation town. And there's a lot of reasons why for our family, it makes sense. I feel good about buying a house that was aligned with my values too. Like I'm spending money on something that is aligned with how I want to live my life. But buying a house is not a decision that is right or necessary for anyone, especially at certain times in your life. So yeah, I guess to sum it up, we're gonna say proceed with caution.

Wudan Yan- Correct. If Buying a house is on your list of personal goals, know that it's possible as a freelancer, but you'll need to plan ahead. You and whoever you're buying a house with will want to obviously save up, make sure you keep really tight records and maximize your tax returns to show your full income.

Jenni Gritters- Yep, you'll want at least three years of business ownership. I'm thinking of my massage therapist who decided she wanted to buy a house. So she is moving all of her payments out of Venmo. And things like that to make things official because she does need three years of reliable stable income shown on her tax return. So plan for that. And I think you should be prepared to educate mortgage lenders on your business and why you are a reliable investment. And know that if this feels out of reach, it is not like a personal failing. The system is rigged. So consider also looking outside of major urban centers as remote work becomes more possible. I think this is a cool thing about freelancing. We have location independence. How could that work for you? Look at people who respect you and your style of work when you're looking for realtors, mortgage lenders, you want to work with people who consider you to be a business. And I also want to say what someone told me, which is you're paying interest on your loan, but the money you put down on your house still belongs to you if you sell that house, so it's not just being thrown away like you would with rent. It gets a little murky with how much you're spending to maintain that house. But if you sell the house, you will get a portion of that money back. So remember, this is an asset building thing that feels important to my brain for whatever reason, just that it does work a little bit differently than how you might be used to working if you're paying rent every month.

Wudan Yan- The two of us have also been posting a lot about this new journey as homeowners, mostly on the gram, so you can follow us there right now. Yesterday, Jenni, I learned that there isn't a return on our furnace which is why our furnace is so fucking inefficient. Fun thing to learn. I made our inspector come back this morning. Anyway so we'll have our handles in the show notes.

Jenni Gritters- Yeah, you can get behind the scenes looks at my pink bathroom. So with that we are going to head out. Thank you for joining us on this practical adulting journey. I need to set some mousetraps and hang some blinds. I will be busy.

Wudan Yan- All that time just goes into the house. Well, I will talk to you later Jenni.

Jenni Gritters- Okay, bye Wudan.

Season five of The Writers' Co-Op is made possible by you, our listeners. Thank you. The season's co-hosts are me, Jenni Gritters and Wudan Yan. Our producer is Jen Monnier and our editor is Susan Valot.