Would you accept a bankrupt L/O tenant? - Posted by Russ Sims

Posted by Tim Pannabecker on January 05, 1999 at 09:27:39:


You are once again right. Some of my best l/o tenants have BKs, usually due to problems associated with divorce. Another great feature of this type of tenant is that they cannot file again for 7 years. And they are very compliant due to the difficulty they perceive (or have experienced) in applying for a rental.


Would you accept a bankrupt L/O tenant? - Posted by Russ Sims

Posted by Russ Sims on January 04, 1999 at 01:27:10:

I’m moving and have decided to L/O my house. Got a couple that loves it. One problem. They filed bankruptcy 2 years ago. Good income though and a credit counselor has told them that if they jump through certain hoops with regards to getting their credit back on line, they should be able to qualify for a loan in a year. Does this sound realistic? It seems lending standards have been relaxed, at least in my area. But I find it hard to believe that a lender will loan to a bankrupt tenant after just 3 years. Anyone with experience with this?

Thanks in advance!
Russ Sims

Re: Would you accept a bankrupt L/O tenant? - Posted by JPiper

Posted by JPiper on January 04, 1999 at 02:23:38:


Prospective borrowers can get FHA financing in 2 years. Conventional financing may be 3 years. Nonconforming financing maybe in 1 year. I?ve heard of loans quicker than that. By the way, this has been the case for quite a few years now?..it isn?t something new.

As it pertains to lease/optioning your property, I?ll give you a personal opinion. I like people with bankruptcies. Here?s what I look at. I look at the reason for the bankruptcy. I look to see if something has changed. Keep in mind that one of the positives of bankruptcy is that it wipes your debt out. What this means is that the only payment they have is yours. I require cash upfront for option consideration. Cash talks. If they have enough cash, I?m not particularly worried about it as to whether they default?.but chances are they won?t.

You don?t mention much about this guy, so there?s not much that can be said. Pull the credit report. Verify the income. Take a look at the stability of the jobs. Find out what?s been going on since the bankruptcy. Banks will accept a bankruptcy. What they won?t accept is negative credit subsequent to a bankruptcy. That?s a big no-no. Find out how much cash he has.