All Forum Posts by: Nancy H.

I am in the process of purchasing a 5-unit MF, and the smartest money I've spent so far pre-close is on the building inspection, which cost a heckuva lot more than $500 I can tell you. The property is "turnkey" in almost all ways. But the home inspector did turn up two items of major concern.

The roof, which from the ground (it's a massive building) looks to be in good shape, is actually in awful shape. Just got an estimate for replacement of between $31,000 and $41,000 (65 squares; it's big). Plus, as part of the service agreement, he searched the city records for code violations. None, thankfully. But he also pulled all permits of record on the property. One was for a (and no, this is not a typo) 5,000 gallon underground storage tank (oil). The tank has since been removed, but it was so long ago there is no record of it.

I refuse to close on the property until these issues are resolved to my satisfaction. I told the seller's agent today on the UST that the seller needs to do a GPR survey (ground penetrating radar survey) to properly document the tank is no longer buried. This is a legacy issue. If I go to sell in the future, I am legally bound to disclose that there was once a tank there (even if it has been removed; that's the law in my state; not sure if it is the same in all states). If I can't prove it to a buyer's satisfaction, I'm stuck. To say nothing of potential liabilities during my ownership. So yes, I'd say the $500 is money well spent. Never skip the building inspection (this is true for all my personal residences as well).

But also, don't just hire any Tom, Dick, or Harry. Get someone who is known for excellence. Not all are created equal. The inspector I use has a reputation for striking fear in Realtors hearts because he has "killed" so many deals. My brother was going to use him on a residential purchase, and his Realtor literally begged him to use someone else.

I'm not a property virgin who cringes at the slightest defect. This inspector's reports would scare the hell out of someone who didn't know what they were doing. (The report on this 5-unit was 52 pages long.) They don't scare me. He is hypervigilant. I appreciate that. Do I take everything he says to heart? No. He makes a big deal out of things that I know are easy fixes. But he also makes a big deal out of things that are rightly big deals. I rely on him to identify *all* concerns and then rely on my own judgment and that of my contractor team to identify those that trigger me to either walk or renegotiate.

@Mike Hurney: Thanks, Mike. I'm optimistic as well. That said, optimism is not necessarily my first position. I'm more a realist. I know that it may look great on paper but that the vagaries of real life can and do happen. I definitely have a long view and plan, but I'm taking it one step at a time, all the while maintaining as much flexibility as possible. I close in August, and then, game on!

Lawrence B, I am in a similar, though not identical, situation as you. Plenty of cash, mediocre credit due to circumstances beyond my control. There is a very clear "before/after" delineation in my credit history. The circumstances that contributed to my credit blemishes no longer exist, nor will they ever exist again. The bank knows this, has acknowledged this, and has told me that more weight is placed on recent history (and property metrics) than past credit history. (And let me tell you, the past was about as ugly as it gets.) So, if your credit blemishes are recent, you are likely going to need to spend some time building a more recent history of responsible credit use.

I have never owned an income property before, so I knew that between that lack of experience and my credit history, I would need to have a super solid deal to present to the bank. I also knew I would need to leverage the relationships I have in the community where I live and am investing to demonstrate credibility and low risk. This entire deal is uber-local.

I am buying a turnkey 5-unit located in a top neighborhood with near-zero historic vacancy rates that pulls top rents and cash flows like crazy. I am financing through the commercial lending area of the local bank whose wealth management department has managed my investment accounts for the past four years (that delineation point) and the staff of which I enjoy robust, established relationships.

I first ran all the numbers by my money guy when I started looking for properties, who blessed my approach. I also had him advise me on the best approach to lending. I was completely transparent with him about all of my concerns, and he gave me great advice on best strategies with the lending department.

When it came time to apply for financing, I was also transparent with my guy in the commercial lending area. He told me (which I already knew to do instinctively and thanks to reading here at BiggerPockets, but good to be reinforced) to put together a lending package that included: 1) a cover letter explaining the credit history; 2) an "About Me" profile on myself, explaining how my career experience and other factors will translate to success as a a local income property investor and property manager; 3) an "About My Team" profile demonstrating that I have the network and support to succeed.

I am fortunate to have a kick*ss team and, frankly, a similarly strong toolkit of personal attributes that don't necessarily ensure success but make it a helluva lot more likely. A few highlights: My brother is the VP/Treasurer and property manager for a real estate investment company that owns 1,400 of the most desirable rental properties in the greater Boston area. He's mentoring me. I'm buying from a landlord widely reputed in the community to be the best, most responsible, most ethical landlord in the area with the best properties--who has agreed to mentor me (a huge reassurance to the bank). I have the bank's own director of wealth management vouching for my reputation. I have deep roots in the community. I have the time and flexibility to manage my own properties. And, no small benefit, I have the cash in hand for both a sizable down payment and substantial liquidity post-closing.

My advice to you is to find a solid deal, know your numbers inside and out, and be honest with the lender. When you apply, infuse your proposal with *your* personality For instance, the header on my About Me profile was, "So Who Is This Woman Asking You for Nearly $0.5 Million?" I plugged my strengths, both in my About Me and the About My Team profiles, but I also acknowledged my weaknesses (a proven PR/marketing strategy: anticipate their objections and address before they can raise them).

Finally, connect the dots for the lender. Meaning, I have 25+ years of project management experience coordinating successful international publishing projects--all from my couch in both freelance and staff positions. The people and resource management skills, ability to problem-solve on the fly, keep projects on schedule and on or under budget, and relationship and resource management skills required in that position all translate directly to property management, in my opinion. If you have skills that you'e acquired in your lifetime that translate, spell it out explicitly. Don't rely on the lender's imagination to fill in the blanks. And *finally* finally, spell out your investment strategy. I know for a fact (was told by the lender) that my plan to buy and hold and continue the seller's legacy of providing the best rental units in the community reassured the lender and mitigated concerns over credit history and risk.

My lender, after reviewing my proposal, told me that he loved my proposal and that his boss is going to love it as well when he reviews it. I was a little nervous submitting it, but it reflected who I really am as a human and new investor. I had done my homework, figured they need to accept me as I am, and that if the deal was meant to be it *would* be.

Now, all this said, I realize I write with authority here as if I'm an old hand at this. I most assuredly am not (as evidenced by the fact that this is my first post; have been reading and lurking here for a long time, though). I'm just sharing with you what is working for me.

A closing thought on where to invest. I know there are many on the forums who frown on investors limiting themselves--and therefore, their opportunities--to their local market. However, the mantra among writers (of which I am one), is "write what you know." I think there is something to be said for that same strategy in real estate investing--at least as a fledgling investor.

Good luck!

Nancy