Short Sales: Should You Let the Sellers Rent?
 
Short Sales: Should You Let the Sellers Rent?

If you are interested in buying and profiting from short sale properties, you have many options. The most common is to flip the property. For example, buy a single family home, make needed repairs, and relist the home for sale. An alternative is to rent the property. If this is your first choice, you may consider allowing the borrowers or current home occupants to rent, but is this a good idea? It depends.

How much would you charge for rent? What you must remember is how you were able to buy the property. The borrowers were unable to afford their mortgage payments. What makes you assume they could afford monthly rent and utilities? The goal of profiting from short sales is to make money as quickly as possible. This means charging a fair value for rent. If average rental rates in the area are $900 a month for a single-family home, can they afford? If they were unable to pay similar mortgage payments, you got your answer. Either resell the property or find a tenant who can pay.

Average rental rates in the area. As previously stated, if it is common for a single family home to rent for $900 a month plus utilities, charge that much. Yes, a sob story may tug at your heart and you may want to do your good deed for the year, remember your goal. That is to make money. Truthfully, there are many families in need of a home. You can find a tenant who is willing to pay fair rental rates. Chances are, they have a heart tugging story too.

The current property state. Typically, properties are in better condition with short sales than foreclosures, but there are no guarantees. Commonly, borrowers suggest short sales. They want to avoid the damaging consequences of foreclosure and bankruptcy. These individuals take pride in and care for their home. They just can't afford it any longer. When inspecting the property, how does it look? If you notice holes in the walls, torn furniture, and other small but costly damages, think about the added costs. If they are willing to "destroy," the property when being the legal owners, what would happen if they were just renters?

So, should you let a borrower rent your recently purchased short sale property? It depends. The decision is yours to make. With that said, remember the quickest way to profit is from flipping. Unless you are able to purchase a low-priced property, have experience in the rental industry, or purchase property in an area where rentals are in high demand, reselling is your best option. These are less risks and the profit arrives sooner.

The only exception to the above mentioned factors you should take into consideration is with multi-family homes. Unfortunately, renters are left in a pinch with the high rate of foreclosures. Most pay their rent on time. It is the landlords and property owners that make poor financial choices. Some renters are literally having their money stolen from them, as it should go towards paying the rental unit's mortgage, but it does not. If you have the option to purchase a multi-family or single-family home with paying tenants, keep it that way. In a couple of years, you recoup your expenses and make a profit but without the hassle.

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Articles
Buying Short Sale Properties: The Importance of Preparation

Buying Short Sales: Dos and Do nots

Buyers: How to Convince a Mortgage Lender to Agree to a Foreclosure Short Sale

First Time Buyers: What to Expect with Short Sales

Foreclosure Short Sales: How They Get Started

First Time Homebuyers: 5 Reasons to Examine Short Sales

Homeowners Options to Avoid Foreclosure

How to Avoid Paying Too Much for a Short Sale Property

Buyers: How to Convince Borrowers to Opt for a Short Sale

How to Find and Buy Short Sale Homes

Landlords: 5 Reasons to Examine Foreclosure Sales

Making Money with Foreclosures: Your Options Reviewed

First Time Investors: 5 Reasons to Examine Short Sales

The Pros and Cons of Buying Foreclosure Short Sales

Pros and Cons of Buying Short Sales as First Homes

Short Sale Information: What You Need to Know as a Buyer

Foreclosure Short Sale Information: Frequently Asked Questions

Short Sales and Underwater Properties: What You Need to Know

Short Sales: Should You Let the Sellers Rent?

Short Sales versus Foreclosures: Which Should You Buy?

Foreclosure Short Sales: What They Are and How to Profit

Which Short Sales Are the Best to Profit From?

Who Benefits From Foreclosure Short Sales

Why Foreclosure Short Sales are Good for Homeowners

Why Lenders Agree to Short Sale Foreclosures

 

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