Foreclosure to Rental ?

[losgatos200]

Hey I’ve heard many times here that those that lose their homes due to this subprime mess will become renters and put pressure on the rental prices.

In theory that makes sense, but don’t you think if they
have lived in a house without paying the mortgage for 6 or more months that a landlord will allow these deadbeats to stiff them for the same period ?

I takes a few months to move these people out when they stop paying the rent, so I think they are untouchable.

[HLS]

Hundreds of properties have hundreds of different landlords.

There are going to plenty of people who have paid all their other bills except the mortgage, who have solid jobs and documented income.

Many landlords don’t even run credit scores, just credit history and eviction/judgments. Some don’t even do that. (!!) First, last, and it’s yours :-0

If a mortgage payment was twice what the rent was, and people have stable jobs, I would gladly rent to them with a decent DTI. Not a big risk, they gotta live somehwere, and I know they won’t be looking to buy anytime soon!

A family who comes to me and explains that they came to their senses and it isn’t worth owning at $5000 a month when they were upside down over $100K and can rent at $2500 or less is a champ in my book.
Now, if they don’t have 1st and last after 6 months of not paying a mortgage, I would show them the door.

I think that many landlords will come to that conclusion, some later rather than sooner.

I don’t think that it will put pressure on rental prices. The house that they vacate may become a rental at some point, and there are always people leaving the area that are just fed up with what is going on.

[surveyor]

actually i think rental prices will rise in the short term because of all of these people leaving homes and becoming renters. Yes, the empty home will become a rental at some point, but there will be a significant lag. The longer the lag between the homeowner leaving the house and the house becoming a rental, the more pressure on the rental price. It may take time for a bank to find a buyer/investor who will purchase the property and bring it to use. Combine that with the possible difficulty of obtaining financing for the property, and I see at least some pressure on rental prices.

Bottom line, these thousands and thousands of foreclosures are not going to be turned into rentals overnight (which is the scenario where the foreclosures would directly lower the price of renting).

The smart (and more experienced) landlords do run a credit check. In the beginning they may not want to rent to those who have a bankruptcy or some sort of financial problem, but will have to make considerations for it as time goes on. AS long as the tenant can document his income, it shouldn’t be a big problem, though.

[Author]

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