Is short sale a better option compared to renting out am a property?

I am trying to figure out if the short sale is better option than renting the house. I live in different state and renting. I do not have any intention to come back to the old house. What are the benefits of renting the property versus putting it short sale?

Asked on September 15, 2011 under Real Estate Law, Michigan

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

Whether you try and "short sale" your rental, you would end up trying to sell it less that for what is owed upon all recorded mortgages and trust deeds upon it. In order to actually close sale on a proeprty subject to a "short sale" you will need to have "short sale approval" from the lenders who have recorded mortgages or trust deeds upon the property.

The key issue is whether or not there is equity in the property and if you can service the property's debt load by renting it out to a third person where the tenant's rent pays most if not all of the rental's expenses.

If you "short sale" the property, your credit rating will take a negative hit because the property if a short sale goes through will be sold for less than what is currently owing to secured lenders upon it. Renting the property out to a third person does not harm your credit rating so long as you keep current on the property's mortgage.

Good luck.


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