Can I Rent To Someone If The Property Is Under Foreclosure?

If you own rental property that is facing foreclosure, you may be wondering what course of action to take. While current laws do not prohibit owners from renting property that is facing or under foreclosure, it's important to understand the process and be as ethically responsible as possible.

Notice Prior To Lease Agreement

Laws regarding foreclosure and rental properties vary by state; however, according to the National Housing Law Project, some states and a few cities are required to disclose a pending foreclosure to tenants prior to the lease being signed. Usually, this notice must be submitted in writing. Neglecting to provide adequate notice to tenants can cost landlords up to twice actual damages or monthly rent, whichever is higher. Additionally, the landlord could be held responsible for any prepaid rent or deposits.

Notice To Tenants Once Foreclosure Has Commenced

In more than a dozen states and in several cities, laws require landlords to notify tenants of a foreclosure once the process has commenced. The process of notification can vary greatly by city or state. Typically, landlords are responsible for notifying their tenants of impending and/or eminent foreclosure. In some place, however, the foreclosing lender or mortgage trustee is responsible.

Handling Deposits and Rent

All U.S. states require landlords to either return security deposits to the tenants or transfer them to the new owner. Some states allow tenants to apply their returned deposit toward rent.

Keep in mind, some mortgages may have a clause in them that allows your lender to collect the rent money generated by the property as soon as you default on the loan.

"Can I?" versus "Should I?"

The short answer to whether or not you can rent foreclosing property to someone is - yes. However, it may not be the ethically wise answer. Even if you live in a state that doesn't require notifying tenants of an impending foreclosure, put yourself in your tenants shoes. Would you want to know if your home was being foreclosed on? Use your best judgment and try to be fair. If you're struggling with the decision, speak with a mortgage professional or an attorney.

This information is intended to help homeowners make informed decisions and should not be used in place of professional, legal advice. Always check with your mortgage professional, real estate agent,  or attorney before making major real estate decisions.

Related Posts and Resources:
Rental Properties and Pets
Best Places to Invest In Real Estate
Reasons Not to Become a Landlord

Guide To Documenting Rental Property Condition – For Property Owners

When it comes to dealing with investment properties, good documentation is key. Anyone who has ever been in a rental situation knows the frustration that can occur when a landlord and tenant have a dispute and many people learn the hard way that documentation could have saved them a lot of time and money.

We all know accidents happen. But any time a property is damaged beyond normal wear and tear, the person who caused the damage should be held responsible. Unfortunately, less honest people may try to avoid financial responsibility by claiming the damage was there from the time they moved in. If you did your duty by documenting the condition of the affected area beforehand, you'll be able to effectively counter their claim. If not, the dispute could go unresolved or lead to costly legal action. The best way to avoid this is by thoroughly documenting the condition of the rental property before the new tenants move in.

Here are a few tips for documenting rental property condition, for owners:

Thoroughly document every area/room in the property, including garage, attic, basement, crawlspace and utility rooms.

Take notes and lots of good photographs.

If photographing evidence of damage, make sure you photograph the subject clearly and that the property is recognizable from the photograph – i.e., if there is a stain on the carpet, take one close-up shot but take another shot that is zoomed out, so you can see the room.

Don't just document the “good” stuff. Own up to anything that is already damaged or deteriorating. Use the documentation as reminders of what needs to be fixed/repaired/cleaned.

If you do not live in the same area as your rental property, hire a professional inspection service or property management company to document the condition of your property for you. Make sure you work with a reliable company with a good reputation.

Be sure to document any damage claim as soon as possible. If a tenant breaks a window, sees water damage, etc – don't wait long to conduct an inspection or contact your insurance company.

Speaking of insurance – don't rely on the inspector your agency sends to document everything thoroughly. If at all possible, conduct your own inspection of the damage and take photos. Just make sure you are not violating the laws regarding tenant privacy in your state.

No matter which side of the rental game you're on – property owner or renter – it's a good idea to practice effective documentation before signing a lease agreement and continuing to do so throughout the lease term.

More Related Posts and Resources
Choosing a Child Friendly Rental Property
What Do Renters Want in a Landlord
Rental Property Financing Information
Understanding a Rent To Own Home Purchase

Forget Location, Location, Location and think Ugly, Ugly, Ugly

Thanks to Mark Wade of CenterCityCondos.com for this guest post on choosing a property to purchase as an investment.

When first considering a purchase of an investment property, all buyers will of course have their own individual set of priorities. How you choose to assemble those priorities will decide which avenue of real estate investing you will follow. If one of your top priorities happens to be value retention as well as growth, then I suggest you forget every axiom you have come across to date in the field of buying investment real estate, and buy the ugliest investment piece you can find. If the condo smells like dog pee- bingo.
   
Under the guise of “You don’t sell the Steak, You sell the Sizzle”, clearly the opposite would have to be the best advice for a buyer of real estate investment parcels. Buy the steak- one with good bones, a good location, in relatively good mechanical condition., and without an sizzle. Almost all novice buyers- whether investors or owner-occupants can not escape the basic need to have an emotional attachment with what they buy, and will often times pass up the parcels that are either smelly,dirty, or just don’t show well. The less demand, perhaps the softer the price, as a property consistently over-looked can fatigue a seller, and soften his stance on his ultimate sale price. Even tony Rittenhouse Square Condos in downtown Philadelphia can have depressed selling prices says John Herniak at Prudential Fox and Roach Realtors. “Investors here in town are visual, and will often pass up pieces based primarily on an emotional level”. Though investing in real estate is often thought of as on an unemotional level, many buyers will let emotions guide their decisions.

Going against the tide, keeping your emotions in check, and buying the  cosmetically ugliest investment piece you can find might just save you a bundle. A little sweat equity can go a long way in quickly raising the value of any somewhat neglected property.

Child Safety Points Before You Rent a Property

Big thanks to Guardian Pool Fence Company and SEO Person for this guest post.

If you are renting, what do you need to take into consideration regarding the safety of your kids?  Here is a list of things you should check out:

• Swimming pools
• Stairs
• Electrical outlets
• Storage areas
• Decks
• Traffic

Swimming Pool - Pool safety is critical for every family.  If there is a community pool, make certain that there is a pool fence to protect your children from wandering into the pool area unsupervised.  Check if there is a guard on duty at the pool.

Stairs - Are there stairs where you child could fall? Is there any way to install a child-proof gate at the top of the stairs? Make certain that you are allowed in the lease to install any gates that may be needed.

Electrical Outlets – Check around the residence to find all electrical outlets and purchase enough outlet covers to put into unused outlets.

Storage Areas – Determine where any dangerous materials are kept, or would be kept, to see if there are child-proof latches installed.  If not, make certain in the lease that you are allowed to install those devices.

Decks – Pay attention to decks or any place where it would be possible to fall from a significant height. If there is a stair to the yard surface, make certain that a child-proof gate can be installed to prevent an accidental fall down the stairway.

Traffic – Last, review all traffic patterns and the speed of cars immediately adjacent to the home. 

If you are the landlord, what do you need to be concerned about to prevent any unusual liabilities?  Review all of the items above and create a child friendly environment for your tenants.  You could even make your safety consciousness a marketing plus and include the safety measure's you've taken in your marketing package as you advertise the rental to families.

Property Spotlight - 4 Unit Dallas Rental Home

Photo from Realtor.com

Looking for a real estate investment in the great city of Dallas, Texas? Take a look at 5200 Victor Street, currently listed for $540,000 (as of 1/31/12.) This 4 unit home is a total of 6084 Sq Ft and according to the listing has had extensive renovations. The home looks updated and attractive, with lots of nice details to appeal to renters.

Make one of the units your primary residence and you may qualify for an owner occupied Dallas mortgage, which generally comes with a lower mortgage rate than a comparable investment property loan.

Wondering whether it's a good investment? Check out today's Texas mortgage rates (with our friend Kelly Decker) and run the numbers to see whether becoming a landlord at 5200 Victor Street would make financial sense.