I actually have a general question. A friend of mine is renting a home which is actually heavily negative cashflow and is now thinking of letting it foreclose since he is getting into a hole. However his tennat pays each month and has 14 months left on a 19month lease. Honestly this is his only solution unless he gets it short sales before the foreclosure happens once the mortgage gets behind which is what he plans on attempting.
The main question is. What will happen with the tennants right? If foreclosed the bank will most likely evict the tennants since I do not think they want the financial risk of being a landlord. But in a short sale the buyer may not want the tennants so I am assumming an eviction will have to happen first. Also what about all the rents being collected up to the date of foreclosure or short sale. can the tennant somehow claim an equitable interest, though a renter or sue the orignal owner whom they entered into a rental contract with for damages? And if so, what about liability. Even though the home maybe QCD to his LLC, the mortgage is still in his personal credit and will that effect a legal suit for damages on being evicted by a landlord who let a property foreclose.
I know this happens alot, but do not know the ramification to do and my friend is thinking of going this route to bank roll the rent on some properties to keep the better ones afloat in this tough market,