Renting homes in Bankruptcy or preforeclosure until bank takes it

[Brian Degener]

Has anyone heard of this strategy where you find a owner in bankruptcy or pre foreclosure and you get a quit claim deed and rent out the property until the bank forecloses? What are your thoughts?

Brian

[Jay Hinrichs]

@Brian Degener   this is simply known as ripping rents.

@Rich Baer Rich not sure about east coast mortgage documents.. however in the Trust Deed states we play in... there is clearly an assignment of rents clause.

I know some folks that do this.. mainly with BK trustee's deeding the property to them.. then they go at it with the lender usually bringing a MERS type complaint against them.. and trying for a cram down.. in the meantime the home is rented and they are receiving the rents.

I think if you do this with private folks this could defiantly get you in hot water.

And of course your tenants would be squirrely... I see it as ( and of course I am a lender by trade) as a sleazy thing to do to lenders who put up money in good faith and either want to get paid as agreed or get the asset back.. having some third party come in who gets on title for next to nothing then rips rents just leads to more and more regulation that hurts the industry in my personal opinion.

So if I was the lender and this happened to me ( and its happened to me many times)  I file for assignment of rents... Either a very pointed letter to the PM  and usually can bluff them as I tell them I will own this eventually.  OR I knock on the door show the docs to the tenant.. and they will start paying me.. and if the owner try's to evict we have a cause of action against them.  they are not going to get any love trying to defend that position.

The courts though have been gracious with those that can prove lender issues..