Should Homeowners Continue to Occupy Their Properties After Selling?
Should real estate investors ever allow homeowners to stay in their properties after selling?
It’s a dilemma that has become incredibly common within the industry in the last few years due to the downturn and foreclosure crisis. Real estate investors have turned up plenty of nuggets among REOs, foreclosures, short sales and underwater homes, but often times the owners and current occupants don’t want to leave. So should you let them stay, or is that one of the worst decisions you’ll ever make as a real estate investor?
Many homeowners have found themselves deep in debt and way behind on their mortgages. Many have lost jobs, had medical bills stack up or encountered other hardships while their homes decrease in value. Homeowners have now replaced lost income sources and might be able to afford reasonable payments, yet just can’t get caught up on all the back payments, interest and taxes. Still, they don’t want to leave their homes they thought they would live in forever.
Often real estate investors can find great opportunities in negotiating short sales on these properties. The homeowners might like the idea of getting out from under the burden of debt, but still don’t want to move. So let them stay and rent, or not? What will provide you with the best opportunity for passive income?
This can be an incredibly precarious scenario for an investor. While the heart says to help and take a meager profit in return for a good service and allow the occupants to stay on and rent the home back ,perhaps even with the potential to buy it back, it can get ugly. Remember that these same owners have often defied the banks and have gotten away without paying their housing payments for years. While they might seem appreciative of your help now, once you are the evil landlord their attitude could change quickly. If the giant banks and their million dollar legal teams couldn’t oust them, what makes you think you can?
So perhaps it is better to sweeten the pot and offer them a more enticing relocation package and assistance and start with a fresh occupant. Odds are, most homeowners will have to move anyway, it’s just a matter of time.
At the same time, there are great opportunities for real estate investors to both make a great living and have a significant positive impact on other people’s lives by working out a solution. This is an approach that has definitely worked well for many that have been buying non-performing mortgage notes at big discounts and then offering loan modifications to the owner/occupants. You can create great win-win situations for all, just make sure that your investment is covered.