One option that isn’t often brought up in discussions about what to do with an underwater home is renting it out. Most of the time, Las Vegas homeowners hear the virtues of short-selling or offering their deed-in-lieu of foreclosure, but renting has some benefits (and drawbacks) that are worth knowing.
- “Downgrading” is possible with renting. Instead of short-selling the home and dealing with the deficiency, what renting does is allow the homeowner to move into a smaller property and use the surplus from the rental income to help pay the mortgage.
- Renting the home allows the owner to enter into a rent-to-own agreement on a new property. It’s usually hard to owe mortgages on multiple properties, especially when the first is underwater. However, homeowners who wish to own again can try entering into rent-to-own agreements with a second home, and then they can buy it when their credit situation has improved.
- One drawback to renting is that it gives tenants an advantage in price. Owners can’t spend long periods with the underwater home vacant, or they might be forced into default.
- Speaking of which, if tenants don’t pay you could end up in foreclosure anyway. Renting carries this kind of risk, so owners would be wise to try and save up a cushion of money for times when there are no tenants.
- Tenants are also a chore to take care of. Being a landlord entails some onerous responsibilities, such as maintaining the home for the tenant. It can help if landlords live nearby, but if they intend to move away their only option is to either ask the tenant to shoulder some of the costs himself of herself or hire a property manager, which costs money. It’s probably better to sell in this circumstance.
Renting out an underwater home might be a good option if you don’t plan to move away, but whatever you decide to do, it’s best to consult with an experienced Las Vegas bankruptcy lawyers beforehand to assess your options.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation. Call us at 1-702-880-5554 to set up your free consultation.