Your property does not have to be owner-occupied.
Formerly, most short sale programs required the home to be owner-occupied. However, recent changes to several of the major programs now allow owners to do short sales on homes that are rentals, second homes or investment properties.
What if there are tenants in it?
As long as the rental agreement or lease that you have signed with your tenants does not contain any provision that requires you to give your tenants notice of your intent to sell, you can short sale your rental property without providing notice to the tenants.
Cash incentive payments.
Cash incentive payments may work differently for the short sale of rental homes than for principal residences. For example, the HAFA incentive is for “relocation costs,” so it is paid to the occupant. For rentals, it is paid to the tenant, not the owner.