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I am renting out my home(I still own) and moving to another state. I have a collection from an old apartment lease that I recently settled for. How will this impact my approval of a new rental? And does my rental income property hurt my chances of qualifying for income purposes? I’m not sure if having a rental property is considered a big debt when you have a tenant paying your mortgage.
For me, having a mortgage on your credit report that was in good standing would be a plus. After all, you had to qualify with a bank to get the loan. I would wonder how you got the bank loan with an outstanding debt to a landlord, though. But, because of the mortgage and ownership of the house, I'd take a 2nd look at your application. I'd want to understand that you're moving for a job, I'd want to see the offer letter and any pay stubs, if you have one yet. I'd want you to have good credit other than the old landlord debt.
But, for me, the current mortgage in good standing would override an old landlord debt that was paid back. It would also show me that you care about your credit, so you wouldn't be likely to bail on rent with me.
I am renting out my home (I still own) and moving to another state.
Don't do that.
Sell the house. Move on unencumbered by the obligation or worry.
Quote:
I have a collection from an old apartment lease that I recently settled.
How will this impact my approval of a new rental?
Mostly that depends on if the new LL sees it or not.
You show up to the new LL as a recent seller (and former owner) most won't look further.
Well, most small timers won't.
To me, the rental is a wash: income in, expenses out. However, the judgement owed to another landlord is a big problem. It might depend upon what the judgement was for, and it helps that you paid it iff.
Judgements to landlords are usually for unpaid rent or for damage not covered by the security deposit. Neither situation is very attractive to me, as a landlord. Plus, to get a judgement, a prior landlord had to take you to court. Not making me happy to see that on your credit report.
Really off topic, but it is difficult to manage a rental from out of state and property management companies need to be monitored, which is difficult to do from afar.
It was not a judgement. I had to break a lease for deployment and ended up settling the balance of the lease. Also, people manage rental properties from all over, as long as you have a good property management company, it’s possible. Not all collections turn in to judgements that go to court. Overall, You would think 5 years of consistent mortgage payments should show a potential landlord you pay your rent/bills on time, especially with more than sufficient income. But LL are hard up these days, being burned by bad tenants, so I understand the hesitation.
I do agree that it's difficult to manage from afar, and the main reason is hiring a management company. Management companies really only make any money when there are problems. Their monthly percentage isn't where their profit lies. It's in charging extra for problems with tenants, maintenance issues, etc. Then, they usually use their own maintenance people. The system is set up for them to find or fabricate problems, and then profit from them. Or to put bad tenants into properties, then get paid to deal with the problems. I've had this problem personally many years ago, my daughter did, as well as many landlords I've spoken to.
That doesn't mean you can't manage it yourself from afar. You just have to have people in place who will deal with problems. Such as, find a plumber, electrician, handyman, gardener, etc., before you move. Tenant calls you, you call the appropriate person.
Don't believe any of the real estate gurus on the internet who say you can make money from out of state properties, or any property where you have to hire a management company. They make money selling their seminars and books, not from their rentals.
Doesn't mean it can't be done. But, unless you have a huge margin for profit from rents, you will lose money with a property management company. If that's in doubt, you should sell it. Or, expect to use it as a tax write-off and expect the loss.
It was not a judgement. I had to break a lease for deployment and ended up settling the balance of the lease. Also, people manage rental properties from all over, as long as you have a good property management company, it’s possible. Not all collections turn in to judgements that go to court. Overall, You would think 5 years of consistent mortgage payments should show a potential landlord you pay your rent/bills on time, especially with more than sufficient income. But LL are hard up these days, being burned by bad tenants, so I understand the hesitation.
How did it go to collections? Or was it just a br Ken lease and you paid it.
It was a broken lease. Nothing in court. It was just a rent debt and shows paid now.
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