How Landlords and Property Investors Can Prevent Foreclosure
April 21, 2016
One of the worst things that can happen to a home owner is having their house foreclosed, and the same is true for landlords and property investors. A foreclosure stays on your credit rating for seven years and can make building a property investment business nearly impossible. Prevention is better than cure and there are several measures you can take to prevent foreclosure from happening to one of your properties.
Hire a Property Management Firm
Many investors and landlords use property management firms such as Austin Fleck Property Management to take care of paperwork and other matters, all of which can prevent a foreclosure down the line. Some of these services include:
- Advertising rental properties.
- Regular collection of rent and security deposits.
- Ensuring all state and federal housing laws are being obeyed.
- Taking care of accounting and taxes.
- Taking charge of legal matters in the case of eviction.
This way, even if you lose a tenant or buyer, you can find a new one as soon as possible and keep your cash flow moving smoothly.
This is another thing that a property management firm can do for you. By attracting higher quality tenants for a rental property, you can cut down on tenant turnover and ensure that rental payments will keep on coming in and the risk of foreclosure is minimal. Checking the potential tenant’s credit history and criminal record can weed out any tenants who could be a problem.
Work With the Bank
If you do risk foreclosure, InvestingAnswers suggests negotiating with the bank to try and settle it. Remember that banks only use foreclosure as a last resort. It costs them money too to fix up and sell on the property. Many people try to cover up financial issues that lead to foreclosure for fear of getting in trouble with the bank. In fact, if they talk to their bank manager they can get a revised loan or suspend payments until their finances are back under control. If you are in this situation, consult with your bank about how you can keep tenants in your properties for as long as possible and how you can prevent a foreclosure.
Have a Financial Backup
Keeping an emergency fund either in cash or in a savings account is a common tip for investors, recommended by Investopedia among others. If a property risks foreclosure, a one-off payment to the bank to cover outstanding debts might prevent it. This is why it is wise to have an emergency fund before investing in any property to cover these costs just in case they should arise.
One of the main reasons people foreclose on their homes is that they don’t take action soon enough when it is imminent. By taking preventative measures and handling any problems when they arise, you can prevent any of the properties in your portfolio from foreclosing and keep your investment business going strong.