I broke The First Law

[Knee Deep in Water Chloe]

It's OK to care, just don't show it. The First Law - you need an arm's length agreement with a stranger, never rent to a coworker, a coworkers kid, an acquaintance, a friend, and never ever to a relative. And never let anyone 'work for rent'. ...PHIL

Is there a way to fix this, or are we just SOL?

DH, well before meeting me, purchased a manufactured home and put it into a park.

He was awarded this house, and it's expenses, in his divorce settlement.

We moved to a new town last summer because DH got a new job.

The contract with the park states the house must be owner-occupied.

He decided to "rent" it to his nephew and his nephew's girlfriend, and their toddler daughter.

He wouldn't have them sign an agreement. We pay the space rent directly to the park each month. The nephew is supposed to deposit money into our bank account each month.

The house costs us:
$460 per month for space rent
$515 per month for the mortgage
$400- 900 per year for taxes
$186.50 per quarter for insurance

We charge them $735 per month for rent.
Included in the space rent is water/sewer, garbage, and basic cable.

They moved in last May and are currently $2350 behind in rent.

In January, DH told them he was sorry it didn't work out with them living there, but that we had to sell the house because they wouldn't pay rent consistently. They got upset and said something to the effect of they thought it just cost us $460 per month, so it wasn't a big deal. DH explained to them about taxes and insurance and mortgages, etc. They then paid in ful both February and March, begging to let them get caught up somehow.

It's clearly not a good time to sell, and DH owes $42,000 ish on the mortgage. The home, according to the realtor we consulted via email only, would sell for about $25,000.

Thoughts...?

[qofcc]

They then paid in ful both February and March, begging to let them get caught up somehow.

Work out a plan to let them get caught up. It sounds like they didn't realize the costs of the place and he probably made the agreement so casual that they took their side of the obligation casually as well. He can't ask them to sign an agreement because it would violate the agreement he has with the park.

It sounds like you're better off working things out with them then taking a huge loss on the property right now. Does the realtor think the property value will ever recover or is it a location that "went downhill"?

Are they paying market rent or below market?

Could they afford to pay enough to cover all of the expenses if you offered an informal "rent to own" agreement where you would sell them the home for the balance of the mortgage when they are able to buy it?

[bobbysgirl]

Over 42000 for a trailer?? wow that was a good sales pitch.

[Gardening Grandma]

I think your best option at this point is what qocc suggested. It appears that if they paid $200 extra/mo, they'd be current within a year. If DH sat down with them and showed them the complete figures, it would be clear that at $735/mo, his costs are not completely covered. From your numbers it looks like your costs are between 1070 to 1112/mo (depending on the taxes). If they can afford the $735/mo rent and the extra $200, that would be the lesser headache.

We sometimes rent to tenants who don't have the full first/last/security deposit and we've allowed them to pay for the last months rent over a 1 yr period. So far, it's worked out OK.

If they can't/won't afford the extra $200 and can't/won't keep current with the rent, they need to find other living quarters and DH needs to find other tenants.

[Knee Deep in Water Chloe]

It is in the technical sense of the word, a trailer.
Even better: total sales cost with set up was $70,000.
He and his XW got such a lovely mortgage, it was only paid down to $53,000 after 13 years.
Then, he had to refinance it to take her name off of it, and the mortgage company made him pay $8,000 of it off.
I've since gotten it down to $42,000.

It is a manufactured home, on a foundation with a nice front, side and back yards, carport and two storage sheds.

I think that's why he ignored my suggestion about having a rental agreement, because he didn't want to completely violate the park's agreement.

The location itself has not gone downhill; it's just the constant depreciation of a manufactured home and then plunging real estate market.

They are paying fair market rent. I wasn't willing to deal with IRS implications of not paying fair market rent. I wanted the full tax right-off.

[Knee Deep in Water Chloe]

I like the rent-to-own plan; I'm just not sure they wold agree to something like that. I'll have to see what that type of deal entails.

[Knee Deep in Water Chloe]

Mar 26, 2011 16:03:29 GMT -5 @tbird said:

I would get rid of this albatross as quick as possible.

In what manner? I'm not being snotty, I swear.
We can't foreclose on it because DH's job is contingent upon having good credit. I cannot refinance it into my name because I have my own mortgage.

Sell it for a loss? I don't have $20k to bring to closing.

Take it out to a field and leave it there? We've really thought about that.

What am missing? How do I legally get rid of it?

[phil5185]

They even had two story trailers, with hot tubs in the bedroom haha.

LOL - I'm getting a visual of a TX tornado, two people in a hot tub.

[DVM gone riding]

CRC's say things like "owner occupied only" all the time but are very difficult to enforce bec of people just like you. DH bought, owned, occupied for several years, job forced move, and can't sell. So they would have to take you to court to enforce this and most judges are siding with the owners as long as the place is reasonable maintained. Which lets face it is all the park is really concerned with.

if $735/mos is true fair market rent (sounds very low to me for what you are describing but RE is so area dependent) then I would try to get them to pay catch up. If it isn't fair and you really should be getting 900-1100 for the place then I would kick them out, writer a letter to the manager explaining how you are going to maintain the property nicely but are forced to rent do to circumstances beyond your control and if that is a problem you will be forced to let the house go into foreclosure (a little white lie but well worth it), and find a good family (even if this means it sits vacant for a month or two) to move in there. Just my 0.02

[TD2K]

He wouldn't have them sign an agreement.

The house costs us:
$460 per month for space rent
$515 per month for the mortgage
$400- 900 per year for taxes
$186.50 per quarter for insurance

We charge them $735 per month for rent.
Included in the space rent is water/sewer, garbage, and basic cable.

They moved in last May and are currently $2350 behind in rent.

They got upset and said something to the effect of they thought it just cost us $460 per month, so it wasn't a big deal.


So they've been paying you something each month? An excellent example why these things should always be in writing so it's clear to both parties what the agreed rent is.

If they are trying to catch up and have been paying the $460 each month, I'd be willing to give them the benefit of the doubt. As Snerd suggested, a rental agreement is a good idea.

[zibazinski]

Well, you can't sell it at a loss and you can't let them "take it back " because of the hit to your credit so it sounds like you are stuck for the next several years until you are no longer upside down. CAN you get more rent by renting to non-family? If you can then you must, if you can't or if it isn't worth it because they are taking care of the place and doing the best they can, then I would "eat it" until the situation changes. There are a lot of places where these manufactured homes can and do go for a lot more money than a trailer in a trailer park. For a lot of people it is affordable housing at the beginning or the end of their lives. Eevn if you are renting at a loss (and you are) it is still better than nothing. My aunt and uncle own a home in Sitka that they bought at the height of the boom (one of many booms) years ago. They are still out of pocket $400 every month but eventually the mortgage will be paid off and then whatever they sell it for, they walk away with. They have had the same tenant for years and they have some years to go before note is gone but that is their plan. Needs to be yours as well.

[Knee Deep in Water Chloe]

Mar 26, 2011 23:07:44 GMT -5 @patstab said:

I have bad news for you, trailers never appreciate, the value will just keep going down. A trailer is a depreciable asset like a car.

Of this, I am fully aware. It's why I never bought one and have only owned "real" houses.

Manufactured homes, which are classified as trailers, aren't the most wretched things ever, but they ALWAYS depreciate. If we were to own the land upon which it sits, that would be a different story.

The other part that threw me for a loop was--it's not actually movable. My parents own five acres, and we considered moving it to their property. However, once the home is put on its foundation, it's not recommended to move it. Settling does take place and uprooting it might damage it.

Sounds like we did think of every possibility, so unless the nephew and girlfriend stop paying again, we'll keep them in there.

If anyone has other ideas, pleae share!!!

Thanks, everyone!

[phil5185]

it's not actually movable. My parents own five acres, and we considered moving it to their property.

Hey, quit that - LOL. Renting to relatives is bad - moving onto a relatives (parents) property is worse. (That messes them up for the next 30 yrs, they can't move, sell, or anything else).

BTW, there are other things that fall under the 'don't rent friends' heading. When you pick a Realtor, don't use your mother's cousin 'who used to sell houses'. When you need a plumber, etc, don't call Uncle Louie who will do it for free except for materials - and so on. All of these wonderful deals end of costing more than hiring a professional at the outset.