This was the example I used to show him why (among other reasons, of course):I'm closing on a deal a week from today: it's a quad, built in 1989, great tenant history, good location, good opportunity to add some value when the long term tenants go.

Lenders will also take into account your income, credit history, DTI ratio, etc. 

No commingling of funds prevents a state audit while they look for "use" tax issues and start charging business tax on your daughters new shoes.

But I am not sure that the history of interest rates in recent years is at all ordinary or indeed sustainable.

Some mentioned it above; I would run a full background check, looking more on rental history and criminal, and less on credit (you are adding them to a less that have been approved per your credit qualifications).

I spoke with the city planner and there was a process to show its history of use as a residential property to legalize it, but it would still be non-conforming. 

-price history shows he's been trying to sell it the past 10 years but can't and last listing price was 84,500 and says listing was removed.

I have rented to people with bankruptcy and foreclosure but only after they have gotten back on their feet and have a good rental history.

Especially when these same folks were not able to recognize the best buying opportunities in the history of REI in their own backyards.

Right now my criteria is I will buy, but only if I can get them for under $55k a door, fully furnished, in good condition and with an established rental history. ...These mom and pop operations are really hard to deal with because they know what these places are bringing in, but they aren't claiming it on taxes, so they want me to go off their word- which I don't want to do.