Is there a risk with the loan?

Question

Hey guys!I wondered yesterday, while reading "The Book on Rental Property Investing", if there is a risk with the loan I take. As there is the rental property as a security for the bank, can't they just take the house in case I can't pay off the loan any more, leaving me with no risk at all, only losing the money I put down?

Please tell me if I think wrongly here!

Thanks!

Frank Greg · Answer

Of course there is a risk with any loan you take out, especially on a rental property where you are relying primarily on the tenant to perform.

It is not unusual for most investors to service the loan on the rental property from collected rent. So if you have tenants who have to  break a lease due to any array of life complications, you may find yourself having to go a few months before repairing and re-renting the unit.

This can be a problem for some investors if the property barely cash flowed, did not have a positive cash flow or worse...

While the lender can foreclose on and take the property, this is a serious distraction and expensive course of action. Loosing whatever you actually paid for a down is not particularly riskless.

Olivia Radziszewski · Answer

@Simon Huber- Hypothetically yes, however, you will also significantly damage your credit and ability to get another loan in the 7 years following that event.

Chris Seveney · Answer

@Simon Huber

Umm no. You are responsible for the debt so they could get a judgment against you and garnish wages or put the judgment on your other assets.

Will they do this? It depends. Your only way to make sure they don’t is file ch 7 BK but then good luck getting credit after that

Eliott Elias · Answer

The bank will take the house no matter what kind of loan it is if you don't pay. They use it as collateral

Simon Huber · Answer

Got it, so all in all....forget this thought of mine! Thanks for the answer, appreciate it!

Simon Huber · Answer

Ok, got it. Thanks for the info!

Is there a risk with the loan?

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