I recently had a transaction, in fact I shouldn’t put it in the past tense because it is still moving through the pipe. The buyer in this transaction is my client. He owns about 30 units and he has had some of them for some time, he is a full time owner/property manager. We made a move on a building and after some extended negotiations we put the property under contract.

The buyer nets a little less than $200,000 per year pre-tax; he has a little less than $2Million in equity and he has about $350,000 in cash kicking around in a money market account. So this should be a no-brainer. The property we’re buying is under agreement (with us) at better than a 9% cap so we’ll pull the 25% out of his existing property for the down-payment and that should be that.

WARNING! WARNING! WARNING!

This is what I should have seen going off like a light in front of my face because nothing is easy in real estate these days. As it turns out the buyer’s credit score was, well, low.. In fact the score was so low that I went to several different lenders each of which said basically - NFW - or “No way” I had one guy tell me “This guy isn’t bankable for 2 years” that’s a quote. I’m not talking about a 3-family here that we’re buying I’m talking about doubling his portfolio so this is a significant transaction (for the mortgage broker) and still each mortgage broker I talked to basically said “go away”.

Well, we’re closing in 2 weeks. I’m going to make a long story short and tell you that we raised the buyer’s credit score by more than 100 points. We needed 75 more points to qualify for the loan program I put him into and to assume the existing notes and we got 100. Yay me. I saved the day and saved the transaction (knock on wood we’re still 2 weeks out). We were lucky because this can’t always be done. And by the way I am not holding myself out there as a credit repair professional. There was a good chance that this would have been irreparable, lucky for both of us it wasn’t. There were some simple things we could do and there were some errors in his reports that we eliminated.

If you are going to be or if you already are a real estate investor you have to have good credit. There’s no two ways about it. This lending environment is tough and unforgiving. If you spend a bunch of time and a lot of money investigating a property only to find out that your credit stinks you are going to feel and look like a bit of a fool.