With the high numbers of foreclosures and short sales, a lot of people have been forced out of their homes and into rental properties. This means that this is the best time for investors to pick up properties. If you decide to go this route, then the following are just a few tips to help you along the way.
1 – Have a home inspection completed prior to making the property available. This way you can have all repairs made prior to placing a tenant. And you will avoid the pressure of a tenant calling several times a day with an issue.
2 – Consider getting a home warranty and put in the lease that the tenant is responsible for calling in service calls.
3 – Use a real estate broker to receive the rent. This way your identity is concealed. And most people will pay a company before they pay an individual anyway.
4 – Be sure to go by the property or have someone to go by the property periodically. Oh and before approving a tenant, go by and visit where they currently reside. A lot can be learned by a short 10 minute visit.
5 – Don’t be greedy. So many landlords price themselves out of the market. Or worse many landlords set the rent high oping to attract a certain type of person. Then down the road, that person can no longer afford the high rent. Just be reasonable from the start in order to have a pleasant landlord experience.
I hope that these quick tips help you in your quest to create an income producing investment.
What is a deed in lieu of foreclosure?
Deed in lieu of foreclosure is an alternative to foreclosure. A borrower who cannot pay his mortgage may attempt a deed in lieu of foreclosure transaction where the borrower gives the property to the lender voluntarily in exchange for the lender canceling the loan. When this transaction is completed, the deed to the property is transferred to the lender along with ownership.
In this scenario, the lender promises not to initiate foreclosure proceedings and stop any that may have been in progress. Many people prefer the deed in lieu of foreclosure option because they can get free from their mortgage quickly and it may be less damaging to the their credit.
Why would a lender accept a deed in lieu of foreclosure? This process is easier and faster than going through the foreclosure process. In addition, they take control of the home immediately — instead of allowing the borrower to live there without paying during the foreclosure process. And it’s cheaper for the lender. However, the lender still may suffer losses, and they have to sell the house themselves. Because of this, the lender may or may not agree to forgive any deficiency balance remaining after the sale of the property.
Let’s pause here and be clear that most lenders will not accept a deed in lieu of foreclosure. But it’s vitally important that you arm yourself with the knowledge of them. Many time when a lender says that they are not going to grant a short sale, mentioning a deed in lieu will cause the lender to change it’s tune.
With either option, short sale or deed in lieu, you must communicate early with your lender. Waiting until two weeks prior to
the foreclosure sale is too late. As soon as financial difficulties start, that’s when you should pick up the phone and call your lender.
Are there potential tax liabilities? Yes. Since federal law requires a creditor to file a 1099C whenever it forgives a loan balance greater than $600, this may create a tax liability for the former property owner because it is considered “income.” There was a law that was passed that provides tax relief for some loans forgiven in 2007 and 2012. This law is the Mortgage Forgiveness Debt Relief Act of 2007. I suggest that you become familiar with this law so you will know your rights and options.
Well that’s a deed in lieu of foreclosure. I truly hope that this has helped you in exploring all of your options.
the last few weeks I took a small vacation. Not that I didn’t want to share with you, I just needed some time to get my focus back. And I have been working on some great things. So today’s post will be short and sweet. And I am asking you to participate as well.
There have been so many predictions made about where the economy is headed, when the real estate market will recover and so on that my head is spinning. So where do we go from here? Honestly, I’m not sure.
As I have said before, now is not the time to sell unless you absolutely have to do so. Short sale is a much better option over foreclosure. And I have found that banks are considering deeds is lieu of foreclosure more now. I will give more information about that next week. So my point is this, before you make any decisions concerning your real estate affairs, call a REALTOR. I didn’t say call a real estate agent. No, I said call a REALTOR. Why? Because REALTORS are more informed and ascribe to a code of ethics.
Now for your participation. What are areas of real estate that you want answers to; what are your concerns that you want addressed; simply what are your questions? Reply here and I will respond to each concern.
Thanks in advance.
Welcome to Joiful Thoughts
As a professional full-time Associate Broker of real estate, vegan, and woman who does her best to look for the positive in life, my blog features real estate information, recipes, tips on living a healthier lifestyle, motivational stories, and quirky tidbits. Joiful Thoughts comes to you weekly up to three days a week. I would appreciate feedback and comments--I enjoy ongoing dialogue, and I'm happy to answer your questions.