Previously, I highlighted the current situation and mentioned the changes in the map market due to COVID-19.
check it out for more insight (US lasts in crisis) topic.
So in this article, I will talk about the recession strategies and what to do as a tenant. Especially, there is a decrease in the available opportunities whether you are a rental or a buyer.
Some lenders or landlords add more terms in their leases.
It might be challenging, but know your rights and what you can get despite what happens.
Shall we start!
Few elements need to be recognized
- Analyze your portfolio: I mean by that is the landlord will definitely make a screen checking, so do it first. Make sure that you have what it needs to get your next property. All of us want to avoid changing houses and taste the feeling of being at a home again.
- Credit Check: Landlords will check on that point, and if you are a student, new immigrant, or divorced, you might face a hard time these days to have a
landlord that can let you in without any credit history.
- Evaluate your current tenants: see what are their current financial situation, and check what are their current choices, or maybe you can lower their payment for certain months.
I want to highlight something important here regarding the credit score check history, these days a lot of people laid off their jobs, however, they found other jobs with fewer salaries.
So they have cash money, but their credit score might seems low.
As a landlord, you need to put this point into your consideration as it isn’t all related to bad history, but there are irrational changes.
Short sales strategy
This strategy is directed to the property owners, for example, your property price is 100,000 dollars, but the current value for it is actually $80,000. In case you want to sell your house.
There is an option here, which is to contact your lender “bank”, providing him with full details, and most cases they approve to exclude this amount from your loan as after all this $20,000 is considered as bad debts.
Bad debts or uncollected debts you won’t be able to pay are debts will be out of your records with your lender, but for the lender records that will affect his account receivable ledgers and his balance sheet.
Lease – Option strategy
You own a house and face the option of losing it to the bank.
So before your lender forced you to sell your house, you have a free ticket called “Lease Option”. This means that you will rent your house to a tenant who will be qualified to purchase your house later on.
One more point needs to be mentioned before moving to the final strategy, this option contains an ethical side.
The landlord might take advantage of others by charging high fees to tenants who would never qualify anyway, churning through tenants with the full knowledge that they’ll never end up buying.
Subject to the Existing Mortgage
I saved this to the end, as this strategy considers as the best strategy for all parts. Basically, in the same scenario, the owner of the house isn’t able to pay the mortgage payments and interests, and he close to be forced to sell his house.
In this case, someone offered to search for an investor. To take the house and continue paying the bills and mortgage including the missing payments.
There are a lot of pros and cons here for each party
For the owner: (Pros and Cons)
- It is a great way to keep his good credit score, as there is someone else who is paying for the mortgage payment that is under his name.
- For the buyer, he might also be affected by the debt to income ratio…
It might tight up his possibility to get any near future mortgage for a house.
For the investor:
- Between the owner of the house and the lender, there is a condition that “If there is
a change in 25% of the ownership of a property. At the lender’s discretion
“ may” call the mortgage/ loan due completely.”
But this almost never happens since the bank is happy because they are getting paid their principal and interest payments.
This condition is highlighted as ” Due on sale clauses/acceleration clauses ” in the Mortgage document.
These are the best strategies that can be useful in recession periods to save your money and priorities…
Writing by Rewan Emam