Renting out our home that is in default

[LetItGo]

We are considering renting out our home that is in default. The bank has not yet started the foreclosure process. We are moving out of state due to a divorce and don't want to leave it unoccupied. Does anyone have experience/advice about renting a house out while in default? I would of course let the potential tenant know the situation and it would be month-to-month.

[rjsdsu]

I have done this. I would rent it to someone you personally know at a discount given the encumbrance and have them in-the-know. If you rent to a stranger, I would go through a property management company and not tell the company nor the tenant. Have the tenant knowing you are not paying your end invites problems. And I wouldn't have much guilt, you can rent it to them below FMV and they even might get out with cash for keys later on down the road.

I prefer renting to a friend, because I told him that if the heater goes out, or any other repair over a few hundred dollars, that is on them should they choose to stay. With a stranger, using month to month you could not renew. However, I see more risk with someone you don't know.

As an aside, you will also get a nice tax deduction turning it into a rental property if you are collecting nominal rent along with a nice size depreciation deduction.

[tobee43]

if i knew what i knew now, i most CERTAINLY would have rented our old property. we were foolish not to do it. i would agree with rjsdu and use a property management co., and also not rent to someone that knows my business. we were too worried about liability since we had ponds and a huge pool, but now i know we could have drained them and gotten a good dollar for that 10 room house.

by the way for us it's 5 years now and still chase has not foreclosed, so it would have been a HUGE chunk of change for us. only thing stopping us now is the house fell into disrepair and will cost to much now to fix, after being vacate so long, otherwise we'd be right behind you.

best of luck!

[Logan]

You could always sign a lease with a low rent and the bank may have to honor it even after foreclosure which may protect and benefit the tenant.

[LetItGo]

I did end up renting my property out to an "informed" renter at a below market rent. I converted my homeowners insurance to a landlord policy. So far so good and no word from the bank that they are moving forward on anything. I gives me peace of mind knowing the property isn't vacant and is being maintained. It doesn't hurt having a little extra money in my pocket either;)

[ValleYum]

This may be helpful info:

PROTECTING TENANTS AT FORECLOSURE ACT OF 2009

On May 20, 2009, President Barak Obama signed into law, the Helping Families
Save Their Homes Act of 2009. A portion of the law, the Protecting Tenants AtForeclosure Act of 2009,
establishes protections for tenants living in foreclosed rental properties. Under the law tenants will have
to receive 90-days notice prior to being evicted, when their rental home is foreclosed upon. In addition,
tenants must be allowed to stay in the property through the end of their lease, with two exceptions:

1. The new owner wants to occupy the property as a personal residence, and
2. There is no lease (month to month), or there is a lease but state law allows the
lease to be terminated at any time upon notice.

Despite the above exceptions, the tenants must be given 90-days before they can be
evicted. Notification must be provided by the “immediate successor in interest”. In
some cases, this notification will come from the bank or mortgage company (when
they assume the home), and in other cases it may be the new owner. The protections
of the Protecting Tenants at Foreclosure Act of 2009, apply only to “bona fide” tenants
– who have a written contract, the lease was the result of an arms-length transaction,
and the rent is not substantially less than the fair market rent for the property. Under any
conditions, tenants may still be evicted if they violate the lease terms.

REAL TALK: The tenant is allowed to stay in the home for a minimum of 90 days after
foreclosure. Additionally, tenants with a current lease that extends beyond 90 days
are allowed to remain in the property for the remainder of their lease unless the
new owner plans to occupy the property as a primary residence. The tenant must
continue to pay rent and abide by all existing lease terms.

From: http://www.fairhousingadvocates.com/...ACT2009pdf.pdf