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A House That Won’t Rent

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Posted On: 03/11/2015

QUESTION:

I recently moved from a house that I own to a new house with my boyfriend. I thought I would easily rent my house. The house is now empty, and I do not know what to do. I can’t continue to pay the mortgage without rental income. What happens if I want to sign the deed back over to the bank?

ANSWER:

If you give the keys back to the bank you will lose title to the home. This will surely result in a massive credit ding that will make it very difficult to get financing for a home or car for the next few years. Moreover, depending on your jurisdiction and the specifics of your situation, the bank may be able to come after you for any unpaid mortgage balance once the property is sold off.

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Giving up ownership is likely the worst option. The better choice if possible is to hold on to the property and look at your long-term goal – more equity and income.

You intended to rent the property, so let’s assume the unit is safe, habitable and suitable for a tenant. It has not quickly rented and that brings us to the first problem: You can’t be in the rental business without cash reserves to support you when there are vacancies and repairs.

Next, there’s the matter of why the property did not rent. If the issue is condition, the property must be brought up to the local standard. If the issue is price, that can be resolved by lowering the rental rate.

However, rental demand is strong throughout the country. Less supply means higher rentals – and that’s good news for real estate owners.

If we assume you have a rentable property in a market with limited options for tenants, then the real questions are price and exposure. The preferred best step is to speak with local real estate brokers and get the property rented at the best-available market rate. Yes, there will be a fee, but a fee is cheap compared to a vacancy.

A broker will be able to help you properly price the rent, acquire a tenant and, perhaps, even manage the property. In speaking with brokers look for individuals active in the area where the property is located and who now handle single-family rentals.

Meanwhile, there’s the issue of your short-term finances. If keeping the house makes any sense – and most likely it does – then find new sources of income to get you past this period, say a part-time job for a few months.

If for some reason giving up title to the property still seems attractive then speak with an attorney to better understand the implications of such a choice. Also, speak with local housing groups – they may be able to help and might even know potential tenants.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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