Mar

27

KeysJust caught a clip on the nightly news out Oakland, CA way that many people renting homes are finding that the property owners have not paid their mortgages and now they are told they have to move. One example is that the bank offers the renter $2,500 to move out at once and turn in his keys. Other banks send out letters telling the renter that the bank now owns the home and rent is now $10,000 per month! I question the legality of that action, but most renters cannot afford good legal counsel, get scared and move. The banks for the most part will not deal with the renter in any way.

Russ Herrold explains:

An old and well known landlord's trick: In a kinder and gentler day, one could usually strike a deal with a delinquent tenant that if he was out by sundown on a Saturday, you would not adversely report him to the local rental credit reporting agency, and there were a couple cases of beer with his name on them down at the 'beer dock.' Stupid banks in Calif had to drive the prices up for everyone else..

George Parkanyi muses:

This seems counter-productive. If I just inherited a property that had a cash-flow, I'd be grateful for the cash-flow. If I repossessed from the residents, maybe I'd look for a renter to create cash-flow while I figured out what to do with the property. Are there not property management companies that do this sort of thing for a living? Might someone not want to start a rental business by taking distressed properties off panicky banks' hands and finding suitable tenants — and then sell the properties off later at a handsome profit when the real-estate market finally turns?

Alan Millhone replies:

George comments about taking over distressed property and find a renter to stay here till the housing storm subsides. To do this one must have liquidity and then gird one's loins for the downturn in the housing sector. For how long? That is the magic question.

I noted last night along our main drag a new tenant moving into a former Allstate Insurance office that closed due to lack of business. The new occupant has hastily painted notices on the windows that a tattoo parlour is soon to be there! On our Kroger's lot is a new strip mall of five connected buildings. Three have been vacant since they were built over a year ago and the two that are there are 'cash till payday' lenders.

There are many empty rental units around Belpre and one fellow I know dropped his rent in order to fill one unit. He built them new a couple of years ago and the mortgage is killing him as he had one unit vacant for over seven months.

Another fellow I know torn down an older house on one of his properties and built a two story , two bath, two bedroom, double garage, duplex and grossly overbuilt the entire project, sparing no expense. He needs $800 plus utilities per side for rent. Now his construction loan had turned into a monthly payment with nothing coming in and he is hurting. When he was building I asked him what he thought he would have in the new duplex? He replied $100,000. I then replied for what part of the complex? He later told me he had overbuilt and had over $150,000 in the units.

My point? Rental property is good in good times and okay in bad times if you have little going out in a monthly payment, taxes, insurance to the bank. Now is a tremendous time to pick up cheap property, IF you can tough it out till the economy improves.


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