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When a homeowner becomes a renter

The transition can be difficult, but it also can be a chance to change some things for the better.

March 01, 2009|Associated Press

Michael B. Bennett used to own his home in Chesapeake, Va. Now he rents it, which is taking some getting used to.

There are advantages. "If something goes bad -- the hot water heater or the air conditioner -- the people that own the house pay for it," said Bennett, who lost the home to foreclosure.

On the other hand, "I don't like saying I'm renting."

Bennett and his wife, Candace, are among millions of Americans who have become renters again after foreclosure. Although the transition from owner to renter can be difficult, real estate experts and financial consultants say it also can be an opportunity to change some things for the better.

Some of their suggestions on how to make the most of renting after owning:

* Decide whether you want to rent an apartment, condominium or house. But consider this: People who have gone through a foreclosure may have an easier time renting directly from property owners than from apartment complexes, which tend to place more emphasis on credit history, said LaToya Irby, who offers financial advice on the website About.com.

* Use this time to save money and repair your credit, because rent is often lower than a mortgage payment for a comparable dwelling, said Ralph Roberts, who wrote "Foreclosure Self-Defense for Dummies" (John Wiley & Sons, 2008). Renters should stay current with bills and reduce credit card debt, he suggested, to improve their credit scores.

"That's the plan," said Bennett, 56, who hopes to be a homeowner again someday. He and his wife bought their home in August 2007 but then racked up medical expenses. They fell behind on mortgage payments. The Bennetts, who rent the home they lost in foreclosure from the investment company that bought it, hope to relocate to a more affordable area.

* Some families may use renting as an opportunity to move to a better school district or to get closer to work or cultural attractions. Neighborhoods that were too pricey when you were buying a home or paying property taxes may be affordable when you're renting, said Larry Cotter, general manager of the website Apartmenthomeliving.com.

"Living in a cultural center becomes a reality when you get rid of the notion that living in a home is the American dream," Cotter said.

* The foreclosure crisis and the accompanying real estate slump have created more rental homes. But there are also more reasons than ever for potential renters to be careful.

Before renting a property, verify with the local tax collection agency that property taxes have been paid and see whether any paperwork related to the mortgage has been filed in civil court. Unpaid taxes or court filings could indicate that the property owner is headed toward foreclosure.

"A lot of landlords are in trouble," said Roberts, who is a real estate agent in Sterling Heights, Mich., as well as an author. "Make sure the landlord you're dealing with is current."

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