Renting a house I can't sell

Again, rframe is completely off base. Reputable property managers are not "looking for reasons to accept people," because the fact of the matter is, we lose money when a bad tenant is placed. I guaran-damn-tee you, over time, you'll get better tenants using a property manager than you will trying to do it yourself. rframe hasn't been burned yet, but he will be. I see it all the time.
 
I'm somewhat new to the real estate game, <5 years, and the property manager I use has paid off and then some. I live in one of the properties I own and the people who live upstairs don't have the slightest idea that I own it. They think some major investment group does because they write their checks to an LLC. As much as rframe is right about not having to do a lot, it is a peace of mind thing more than anything else. ATN_Pilot is also correct. The thing that you ultimately need to decide is how much and how many problems do you want to deal with and at what hours of the day. Picking a good tenant as well as a good property manager always carries risk, you just want to have the least amount of risk possible.
 
The thing that people don't get is that you can go for years without any problems, but when the problems hit, they can be monumental. It sounds as though rframe hasn't gotten there yet, but given enough time, he will. A tenant comes along who looks great on paper, but ends up being the tenant from hell. No one can quite imagine the hell of evicting a tenant who knows all of the games to play. Once you run into a tenant who decides to stop paying his rent, and he has somebody feeding him all the info on how to play the game just right, he'll take a do-it-yourself landlord to the cleaners. A simple eviction that a property manager would have handled in a month turns into a four month ordeal as the tenant uses every loophole and trick in the book to stay longer and longer without paying.

These are the people I get calling me in a blind panic all the time. They've been managing their own rental for years. Probably telling people the same stuff as rframe. And then they go to court to evict a bad tenant, and find that they didn't quite know the law as well as the bad tenant, and their case gets thrown out. Then they've got to go back to try again. As time ticks away, more mortgage payments come due while someone is living in their house for free. Back to court again, and the tenant takes advantage of another little known portion of the law that the do-it-yourselfer didn't know. And the problems drag on. This is usually the point when I get the phone call from the landlord, completely distraught, begging for help. It happens to all of them, eventually.
 
ATN_Pilot said:
This is usually the point when I get the phone call from the landlord, completely distraught, begging for help. It happens to all of them, eventually.
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What a hero :rolleyes:

One eviction attorney engagement is less than a year's property management fees, since you wanted to bring it up. However the process is normally standardized for each district. It's not rocket science but ATN is absolutely right that you can screw it up by not following the steps correctly, not posting notices correctly, etc and be set back and if that happens then the tenant is going to milk every last day of rent free life from you and probably trash the place before they are gone. This is why screening is so important and the easiest eviction is the one that happens when their application crosses your desk and you throw it in the garbage.

By the way, my tenants also know me as the "property manager" who works for some abstract investment company. All contracts and payments go through my RE business, they dont have my personal contact info or address. That's also very easy to setup.

You can get all the FUD thrown at you that you feel like reading, but I'll continue to tell you that I and many people I know (some who've been playing the game for 25+ years) are doing quite well and stress free. As I've said time and again, if you want zero involvement or you are physically removed and cannot respond reasonably to requests (that does NOT mean 24x7 availability by the way)... by all means go hire a manager, but to suggest the average person with half a brain cannot manage residential rentals effectively is simply dishonest.
 
mojo6911 , one thing not mentioned yet is your loan. If you are still owe a financial institution for the house you might have issues renting it.

I was in a similar situation as you; I was "stuck" with a house I couldn't unload. My loan was originally granted as a primary residence. I was not able to lease/rent the house unless I refinanced as a commercial/primary residence property. I know a LOT of people that don't bother with this but doing so does violate the agreement of your home loan. The bank can start foreclosure proceedings due to the "default" even if you're current on your payments! Chances are they won't do this but if your house has more value to the bank (or the banker's brother) than what you're paying, it's game on!

Different states have different laws with regards to the above so check with your lender.....
 
I've never had problems with this, even though the houses I own are under primary residence loans. I received threatening letters from the banks, but I just wrote them back saying I've been making my payments on time, and that if they called the loan, I would cease making payments and make them foreclose. A couple of weeks later I got a letter saying that they had "reconsidered," and would waive their right to call the loan.

Don't let them bully you. You should never buy a house under false pretenses, claiming that it's going to be a primary residence when it's not intended to be (that's fraud), but if you buy one with that purpose and then end up renting it later, then don't let them walk all over you. Their threats are almost always completely empty. They'd rather have someone making payments, giving them their interest over 30 years, instead of foreclosing and taking a property onto their REO inventory where they'll almost certainly take a big loss on it. When they send those letters, they're just hoping to scare you so you'll refinance with them at a higher interest rate.
 
If you received a letter from the bank about this very subject, that, in itself, IS a problem. You were able to get past it, but you can't state that you've never had a problem. The ONLY reason they "reconsidered" is that they want your money right now. When they want your house, they will recall/foreclose. AND they will use the previous letter and your response as your aknowledgement that you are in violation of the loan agreement. They can also use this information as proof of prior notification of intent to recall/foreclose.

It doesn't matter if you get a primary residence loan know lfull well you'll be using it as commercial property OR get a primary residence loan and decide to rent it after you move out. Either way, it's fraud unless you have papers attached to your loan document that authorize this. [don't bet that this will happen, it CAN but they would prefer to refinance because they make more money] It's not "bullying" if they are enforcing a legal document to which you agreed and signed.

Another issue is homeowner's insurance; make sure you change your insurance to reflect that you're now renting/leasing rather than residing. Also consider your mortgage insurance (if you have it), most policies are written to include something along the lines of "good standing" or "compliance with existing loan". Using a primary residence loan property for renting/leasing (considered commercial use) is NOT in compliance. This is an immediate out for the insuraance underwriter.
 
While what you say is technically true, in practice, it is irrelevant, because the banks don't actually enforce it. We deal in REO properties for banks all the time. Banks hate REO inventory. Absolutely despise it. The less of it they have, the happier they are. So if someone is making payments, they aren't taking on more REO inventory just to enforce a document. Because the reality is, even during the peak of the market in 2007/2008, REO properties always sold for a huge discount. If your house is worth $200k under normal marketing conditions, the bank will be incredibly lucky to get $150k for it as an REO property. Because every agent knows that the bank is absolutely desperate to get that house off of their inventory, so nobody offers them a fair price. And then there is costs involved in paying agent commissions, attorneys' fees, REO department staff, etc. They just don't want to deal with it.

But you're absolutely right on insurance. We put in our management agreements that the owner is required to get an insurance plan for leasing the property, as well as naming our firm on the policy as an additional insured. Most of the time, these policies are of similar pricing to resident policies.
 
dustoff17 said:
It doesn't matter if you get a primary residence loan know lfull well you'll be using it as commercial property OR get a primary residence loan and decide to rent it after you move out. Either way, it's fraud unless you have papers attached to your loan document that authorize this.
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Oh, and this part is absolutely incorrect. Fraud involves intent. If you have every intention of occupying the property when signing the documents, and then two years later you realize that you need to move and are going to rent the property, then no fraud was committed. But if you lie and sign the papers knowing full well that you're going to rent the property out, then that is fraud.
 
You're dead on about REO but let me me understand you, you're cool with holding fraudulent loans as long as you can get away with it? Just asking.....
 
dustoff17 said:
You're dead on about REO but let me me understand you, you're cool with holding fraudulent loans as long as you can get away with it? Just asking.....
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It's not fraud. Dude, I do this for a living. I've been through state courses in two different states on mortgage fraud. There is no fraud if there is no intent.
 
ATN_Pilot said:
Oh, and this part is absolutely incorrect. Fraud involves intent. If you have every intention of occupying the property when signing the documents, and then two years later you realize that you need to move and are going to rent the property, then no fraud was committed. But if you lie and sign the papers knowing full well that you're going to rent the property out, then that is fraud.
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Let's say you move out of a house that has a primary residence loan attached. You don't want to sell it because of market, blah blah blah....whatever reason.
Then you INTEND on renting it. You know that you are no longer going to use it as your primary residence as is stipulated in the loan agreement. Rather than contacting your bank about re-writting the loan, you INTENTIONALLY contact a managment company instead. And then have your renters get their own insurance.....etc....it goes on and on.......

Whether before or after the fact, your INTENT is the same both legally and ethically.
 
No, it's not. Mortgage fraud involves intent at the time you signed the application and mortgage papers. When you apply for the loan and actually take out the loan, if you intend to occupy the property as a primary residence, and then actually do occupy the property as a primary residence, then no fraud has been committed if two years later your circumstances change and you need to rent out the property.

While the mortgage company now has every right to call the loan, jack up the rate, or whatever else the document provides, no fraud has been committed.
 
I think each state has different rules pertaining to this. In NY if I buy a house then two years I decide to leave and rent it out I better let someone know. In the city of Albany they like to have the fire department come out and do a rental assessment. That can become expensive as well as annoying. Then there needs to be a certification from the county clerks office. Sounds painful because it is but if I was renting I would like to know there are rules that are met so there is peace of mind about my safety.
 
ATN_Pilot said:
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While the mortgage company now has every right to call the loan, jack up the rate, or whatever else the document provides, no fraud has been committed.
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This was my point to mojo6911, I think we got off track a little. My advice to the OP on this one: check with your lender BEFORE you start to rent as your house might not be a REO property and they might want it back.

ATN_Pilot, I apologize "Dude", if you state it's not fraud where you live, who am I to discuss or argue? My nationwide bank has a different policy than the one(s) you deal with. Also apparently laws vary from State to State and even Bank to Bank on this subject.
 
dustoff17 said:
This was my point to mojo6911, I think we got off track a little. My advice to the OP on this one: check with your lender BEFORE you start to rent as your house might not be a REO property and they might want it back.
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And my point was, don't let the bank bully you. If you call them, they're going to tell you that you have to refinance. Don't just accept it and move on. You can bargain with them. Tell them that you don't have the money to refinance, that you've been making your payments, and you want to keep making your payments, but if they're going to force you to refinance, you're not going to be able to do so. Everything in life is a negotiation.

ATN_Pilot, I apologize "Dude", if you state it's not fraud where you live, who am I to discuss or argue? My nationwide bank has a different policy than the one(s) you deal with. Also apparently laws vary from State to State and even Bank to Bank on this subject.
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Banks don't decide what fraud is. The law does. Your bank can have whatever "policy" it wants, but fraud has a legal definition, and that definition involves intent. That's what you don't seem to be getting.
 
I haven't read this whole thread, but did want to chime in about bad tenants.

A captain friend of mine is working on a foreclosure right now. The bank foreclosed on this certain individual but won't evict. He is handicapped and they're worried about repercussions, lawyers, lawsuits, etc. So they're letting the property go for $25k vs market value of approximately 80k.

Thing is, the tenant/former owner is smart. He signed HOA papers years ago saying they could evict if he didn't pay the HOA fees. Guess what, he isn't paying the bank but is current on the HOAs. Point being, I'd much rather have a property management firm to deal with these kinds of scummy renters. This particular guy wasn't a renter, but shows what kinds of people are out there. Reduce your risk and get a property manager.
 
ATN_Pilot said:
And my point was, don't let the bank bully you. If you call them, they're going to tell you that you have to refinance. Don't just accept it and move on. You can bargain with them. Tell them that you don't have the money to refinance, that you've been making your payments, and you want to keep making your payments, but if they're going to force you to refinance, you're not going to be able to do so. Everything in life is a negotiation.
Banks don't decide what fraud is. The law does. Your bank can have whatever "policy" it wants, but fraud has a legal definition, and that definition involves intent. That's what you don't seem to be getting.
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No, I get it. And when the bank decides they are going for your house because you violated the terms of the agreement, the law will be on their side because you can't "accidently" rent your house. The intent will have been established.

We aren't going to settle this here. It's obvious that there are a variety of banks, laws, and ethics in this discussion. I've provded my input to mojo6911.
 
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