With so many foreclosures happening around the country, homeowners aren’t the only ones affected—home renters find that they are being hit almost as hard when the properties they rent are foreclosed upon and bought up by new owners. The experience these tenants have during the foreclosure process varies, but all of them worry about the uncertainty of a new landlord, and wonder about their rights as tenants when the landlord they’ve known for months (or sometimes years) suddenly disappears.

The first thing renters need to know is that renters do have rights. This article on the Nolo website explains that the Protecting Tenants at Foreclosure Act of 2009 ensures that tenants of foreclosed properties are protected. “This legislation provided that leases would survive a foreclosure — meaning the tenant could stay at least until the end of the lease, and that month-to-month tenants would be entitled to 90 days’ notice before having to move out (this notice period is longer than any state’s non-foreclosure notice period, a real boon to tenants).”

The 2009 law applies to ALL properties—apartments, condos, single family homes.  It even applies to tenants in rent controlled properties. “Tenants who live in cities with rent control “just cause” eviction protections are also protected from terminations at the hands of an acquiring bank or new owner. These tenants can rely on their ordinance’s list of allowable, or “just causes,” for termination.” This is an important point for many New York renters.

The only exception to this rule is if the new owner of the foreclosed property intends to live in the property.  Under these circumstances, the buyer may terminate the lease, but is required to give no less than 90 days notice to the existing tenant. This may still be disappointing to renters, but as the article points out, a 90 day notice period is “longer than any state’s non-foreclosure notice period,” and is “a real boon to tenants.”

Of course, these new protections don’t necessarily ensure that the foreclosure and transfer of ownership will be smooth sailing for tenants.  The most common complaint from renters is that once a property is in (or has gone through) foreclosure it becomes almost impossible to get a response to maintenance requests. “If the bank becomes the owner, it may pay a servicing company to handle the property. But don’t expect close attention — these companies are focused on financial matters, not mundane things like maintenance.”

In more severe cases, tenants won’t even be aware that the property is being foreclosed upon until after the fact—sometimes long after the fact.  It is not unusual to hear stories about tenants who, unaware that the property had changed hands, continue paying rent to the old owner for months before they are notified of the change of ownership.

But perhaps the most drastic stories are stories like that of Pamela Lewis in Jacksonville Florida; stories about foreclosed properties, or properties in-between owners, which are fraudulently rented out without the knowledge of the actual owner. This is an extremely unusual case, but with so many foreclosed properties being bought up by banks which simply don’t have the time or manpower to attend to each one, the idea of a fraudulent lease is not impossible to imagine.

All of this only goes to show that renters in today’s market need to be especially cognizant of their rights—and especially vigilant about the terms of their leases. If you are a renter don’t be afraid to ask for help in navigating these turbulent legal waters; the help of a professional in reading and understanding a lease can be immensely helpful, and when maintenance requests go ignored the attention of a knowledgeable attorney can sometimes get a response more quickly than repeated requests from a tenant.  But most importantly, if you feel you are being wrongly evicted, or worry that your new lease may be fraudulent, don’t hesitate to contact me immediately. Waiting only eats up valuable time, and makes it that much harder to ensure that your rights as a renter are protected.

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I recently came across this article in the New York Times which suggests that the housing boom is over—not only for now, but forever—and that the days of making money with real estate are over as well.  “People shouldn’t look at a home as a way to make money,” quotes the article, “because it won’t.”

Respectfully, I disagree.

It is certainly true that with real estate in such a depressed state, now is not the time to buy property and simply hope the value increases; however, now is the perfect time to purchase “rental” property that will pay for itself in the short-term, and increase in value over the long haul.

A few years ago real estate was skyrocketing and it seemed that everyone’s advice was to invest.  But the time to invest is not when everyone is buying and prices are high.  The best time to invest is when prices are low… so long as you have the time and the resources to hold onto under-valued property until the market recovers—which, as David Streitfeld mentions in his article, may take years. The question you need to ask yourself is not “Is now a good time to invest in real estate?” but “Can I afford to put the time and money that may be required into this investment to see it through?”

According to Andy Louis-Charles of The Motley Fool, the true key to real estate investing is rental value, not appreciation, “this is the only tried-and-true metric that ensures a worthy real estate purchase.” Everything else “is either speculation or indulgence.” The question of whether or not real estate is a good investment now becomes a matter not of luck but of strategy.

The key to success in the investment of rental properties is five-fold:

1. Know Your Timeline (or at least have a good idea). How long you plan keep your rental property will be a large factor in determining how much you’ll need to invest above and beyond the initial cost of purchase. Improvements, maintenance and repairs will have to be considered as part of your overall plan.
2. Have Your Financial Ducks in a Row. Owning a rental property means you’ll be dealing with people… some of whom will miss a month’s rent or leave you with unexpected vacancies.  Have enough money in reserve to comfortably deal with these crises.
3. Find the Right Location. Everybody knows that it’s all about location.  Of course some locations will be more profitable than others, but many non-traditional locations can be profitable if you know who your target rental audience will be.
4. Have Good Advisors. Agent, Mortgage Broker, Attorney, CPA, Management Company… these are just a few of the people who will be invaluable in helping you make the right moves and decisions along the way.
5. Get the Right Price. According to the old adage, “You make your profit when you buy a property, not when you sell it.” And now is definitely the time to get the right price. July of 2010 saw 325,000 foreclosure filings, that’s “the 17th month in a row total filings exceeded 300,000” according to RealtyTrac’s CEO, James Saccacio. Although this is a disheartening statistic for the economy in general, what it means for investors is that the cost of property is low and there is a higher rental demand.

The NY Times article rightfully suggests that investing in property now isn’t likely to make the quick profit it might have a decade ago, but that doesn’t mean we should throw the baby out with the bathwater.  Remember, rental property is often referred to as the “IDEAL” investment:

I: Income/Cash flow
D: Depreciation and tax deduction
E: Equity buildup from mortgage paydown
A: Appreciation in property value over time
L: Leverage; using a small amount of your own money to control a large value asset

Land is still land. People still need a place to live and a place to house their business. You can be a part of that, and my firm can help.

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