David Cooper! Bank Owned Foreclosure Investor in Bank Owned REOs with Cash Flow. For Freee Daily List
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Hopefullly this is a lesson for others that you should not be putting a lot of money into a property that you do not own or have some rights to. At this point, your only option would be to seek legal advice.
An observation with regard to stopping your rent payments: The fact that your landlord is in financial trouble does not give you the right to break a contract with him. It seems to me you are putting your own good credit at risk with this course of action.
In these times of tight financing is any bank going to give you a mortgage if you haven't been paying your rent?
Maybe you can get the owner to credit future rent to you for some of the capital improvements you have made.
Every situation is unique. Maybe you have a written option to buy, maybe it is part of your lease agreement. It's a little late for you, but a lease agreement that has you making major capital improvements to someone elses property is a hazarous proposition.
My own point of view is that you should be prepared to lose anything you put into a property you don't own. If you have alot into this house and you want to own it I would be looking ahead to how you are going to make that happen.
Maybe this will turn into an opportunity for you. Best of luck.
You may also want to contact a Realtor, as well as the owners, and see if you can negotiate a short sale.