In this financial climate, credibility becomes more important than ever.

Lenders who in the past would lend strictly on the equity in a property, are now looking at the character of the borrower more and more. Being clear about what you plan to do, and delivering on what you say are important. Not just for your next deal, but for all your future deals.

Here are some tips:

Provide full disclosure about the property and your situation. In performing due diligence, if a lender finds you have been less than forthright with some particular aspect of the deal, it calls into question everything else you have presented.
Be prepared to take pictures of everything. Even the worst parts. If you leave out a photo of a boiler that is ancient, rusted and asbestos wrapped, and the lender sees it on a site visit, he’ll wonder what else you didn’t disclose. We understand rehabs. That’s why you got it at a huge discount. So show it and what your rehab plan is for fixing it.

There is a fine line between “fake it til you make it” and just faking it. I’ve had many conversations with a borrower that go something like this:

Borrower: “We buy at 40 cents on the dollar, all cash, close quickly and sell at 80% of value to our buyer’s list of first time homeowners.”

Me: “Great, how many of these transactions have you completed this year?”

Borrower: <Silence>……………………”Well, we haven’t actually completed any, yet, but we’ve read alot and taken some courses.”

So save the sales pitch for the motivated seller. The lender knew you were still new at this before the end of the first sentence. Emphasize your strengths, such as a partner who is a licensed contractor, or the fact that you are a real estate broker, or whatever. But don’t lie about it, it will come out anyway.

If you run into a snag that is going to impact your ability to deliver the project on time, be straight about it, and be able to explain your solution to the problem.

Trust is earned over time. And is part of relationship lending. Starting with a few of the basics above will get you on your way to a productive and profitable relationship.