Renting an Underwater House

If you rent an underwater house, you might not be able to stay there long.
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An underwater house is one that has negative equity, where the owner owes more on the house than the house is worth. Renting a house that's underwater can help you get a low payment, but it also comes with its share of uncertainties about the future and security of your living space.

The Upside

The landlord of an underwater house needs to get it rented quickly so he will have income to help make the mortgage payments. This means he doesn't have time to haggle over how much rent he charges, or wait until someone is willing to pay his price. You can score a great deal on a rental house in this situation. Not only can you negotiate a good rental rate, you might be able to negotiate a lower security deposit or an even lower rent payment if you sign a longer lease, such as for two years instead of one.

Repairs and Maintenance

People who choose to rent out underwater homes might not want the responsibility of being a landlord. This includes the responsibility of repairing faulty equipment and maintaining the lawn. Their main interest is avoiding bankruptcy or ruined credit -- and collecting their rent checks every month. This is especially true if they are renting the house themselves instead of through a rental management company, which typically takes a more active role in maintaining the home. If you are renting directly from the homeowner, make sure the lease clearly states who is responsible for repairs and maintenance. If the responsibility for repairs and maintenance falls to you, you could end up spending a lot of time and money on unexpected problems. The best idea is to ask your landlord to buy a home warranty program, which relieves her from having to deal with repair issues. Under most warranty programs, the homeowner pays an annual fee and you pay a small co-pay whenever a service person must come out. Although not every problem is covered by a home warranty, most major appliances and the HVAC system are covered.


Houses that are underwater often are in danger of foreclosure. Even when you pay the rent, the amount might not be enough to cover your landlord's mortgage payment. If he's not paying the mortgage every month, you won't know about it until the bank shows up at the door telling you that the house is in foreclosure. The bank must honor the lease, so you can at least stay until your lease expires, according to the Nolo legal website. Nolo also says month-to-month tenants are entitled to 90 days' notice before having to move out. Some banks offer a "cash for keys" incentive where they pay you to move out before the lease is up so they can list the house for sale.

How to Protect Yourself

Before signing the lease, ask the landlord to show proof of ownership, such as a recent statement from the mortgage company. Make sure all payments are current and that the house isn't on the brink of foreclosure. Sign a longer lease to help ensure you won't have to move out in a hurry. Also, check the county's property tax records to make sure all taxes on the home are current.

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