RENTAL PROPERTY PROBLEMS

Back when the economy was doing great many people refinanced their home and wanted to get another property that they could rent out. They wanted to use that rent to pay off their mortgage on that rental property, and to also supplement their own monthly income.

Unfortunately, Wall Street crashed the economy, the real estate bubble burst, and the nightmares began for millions of people across the country. This left many people who bought rental properties looking for a way to get rid of those properties if they can.

Q: My renters stopped paying me, now what do I do?

A: First and foremost, you need to consult with an attorney. You are now on the verge of having to begin legal action against your tenants. There are certain steps you need to take in order to get those tenants to either begin paying you, or begin leaving your property.

Q: As a result of my renters not paying me, I missed my mortgage payments to my bank, now what do I do?

A: You are at a very serious risk of going in to foreclosure. You most definitely have to consult with an experienced attorney to see what your options are. You might be able to save your property, but you should act sooner rather than later. If you do not want to keep your rental property, then there are certain options available to you.

Q: If I just let my property go vacant and walk away from it, will the bank just take it?

A: Well, the bank will take it, but probably not in the manner that you envision. If you just walk away, then you could be looking at bigger headaches that you can imagine.

Q: What headaches are you referring to?

A: If you walk away, you are still considered the owner of the property for some time. Therefore, you are still responsible for the taxes, utilities and maintenance of that property. If you do not pay the utilities, then the utility companies can sue you for those bills. Second, the city in which the property is located will most likely sue you for certain building code violations. If your rental property goes vacant you will probably have to pay a fine to the city. These fines can add up to thousands of dollars each month.

Q: What is the safest way to rid myself of this rental property?

A: Consult with an attorney to run through your options. One option would be to return the property to the bank and have the bank forgive the balance of the loan. You most definitely do not want to return the property to the bank and have bank come after you later for the balance of the loan.

Q: Is a short sale an option for the property?

A: Maybe, but it is not likely. This is because of the serious tax ramifications you will have as a result of that short sale.

Q: What tax ramifications?

A: If you sell the property for less than what you owe on it, then that is called a short sale. Then, you have to pay tax on the amount of the difference between what you owed on the loan, and the sale price. That could be tens of thousands of dollars. If you cannot pay the IRS that large tax bill, then a short sale of your rental property will not work for you. The bottom line is, if you need to get rid of your rental property, you should first consult with an experienced attorney and see how it is done properly with as little financial damage to you as possible.

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