Here in SF tenants are legally allowed to sublease to anyone per the landlord's written approval(no matter what you say in the lease) and the lack of creditworthiness is not an allowed reason to reject a sub-tenant.

The FICO scoring algorithms do not accurately capture creditworthiness in many cases. 

One of my units has a long term tenant who pays below market rent.The below-market tenant is an ok tenant - They are a bit messy but pay their rent on time and to my knowledge, don't really cause any problems.If I did a cash for keys deal with the existing tenant and renovated the unit, I think market rent for a good, creditworthy tenant would conservatively be $550 /month higher than current rent.Including the attorneys fees, paying the tenant, vacancy during renovation and cost of renovation, the project will cost between $28,000-30,000.I do have the cash on hand, it generates maybe 1% at the moment as I have a fair amount of liquid cash sitting in the bank.It would take about 4.54 years to recoup, basically a 2.2% CAP on the $30,000 investment.

Our lenders much prefer to base their decision on our tax returns and credit worthiness.

If we decide to re-rent, fine....but it will be to a fully-qualified, credit-worthy applicant.Thanks for helping me work through this in my head, all. 

Owner finance it to someone creditworthy and then they become responsible for repairs.  

One of these days we'll see that credit worthiness, at least in the eyes of credit bureaus, isn't that accurate for some people.  

If you are creditworthy, get your own loan and take a 10% discount off the sales price.

I should incorporate right away (or when I'm getting close to buying my first building), for a few reasons:- liability protection- establish the business (and its creditworthiness)- looks professional, as it should be if I'm going to own a quadplex, and then maybe more buildings later (presumably all buildings can be under the same corporate name)As for financing, hopefully by the time I need to apply for it, I will have established a good credit reputation and have solid financial statement to qualify for financing or even a business credit card.

Despite what many will say, in my experiences you will need to have a strong balance sheet, be credit worthy, and bring value (IE experience) to find quality partnerships or invest successfully in RE.