Advice Appreciated: 6 Unit Deal

[Jerad Casto]

I'm interested in a 6 unit complex in my area.  The lender I am trying to get prequalified through is requesting 3 years of tax returns from the seller.  The seller provided the tax returns but the claimed cash flow has taken a sharp decline the past 3 years to as low as $61 in 2015.  Any advice on how to convince a lender that this is obviously for tax purposes?  I've checked out the building and run the numbers.  They have 4 tenants that have been in place for over 15 years and the rents are way below market but its in great shape.  Has anyone come across this before?  

[Marc C.]

Don't bail yet. Hang in there and learn. Tax records only get you so far. 

First off, DO make an offer with seller financing that works for you. Get 5 years or more, as you don't want the loan to come due during a down cycle in lending. Explain that you will pay his price if he'll take your terms. 

If you can't get seller financing, then make sure he understands you'll need a discount and more time. Get the deal signed, then do "forensic" accounting to show your bank it cash flows. You need more details. You need to see 36 mos. bank statements to verify the rents are actually hitting the account. You need to see a Profit & Loss statement from his bookkeeper's accounting software or you'll have to build it yourself. You need to see 3 years of receipts or account records that show exactly what check went for, and then you can build a report the way YOU (your banker) wants it to look. You may need the help of a bookkeeper or accountant or a relative with some Excel skills. 

Either that, or walk and get a bigger property where it's worth going to all this trouble.