More homeowners become ‘accidental landlords’

CAMBRIDGE, Mass. – Oct. 11, 2011 – More owners unable to sell their home or cut the asking price any further opt to rent their homes until the market improves. But some of these “accidental landlords” now have regrets.

The number of formerly owned-occupied homes turned into rentals has soared in recent years, according to Harvard’s Joint Center for Housing Studies. In 2009, nearly 25 percent of single-family detached rentals had been owner-occupied two years earlier.

But while homeowners are turning homes into rentals to generate cash flow, many say it’s not enough. Cash flow from the property hardly covers expenses; in some cases, they’re even losing money.

Accidental landlords also say the role is time-consuming and can be stressful, as they worry about everything from finding tenants to handling repairs.

Kathleen Longo, principal with Accredited Investors, advises homeowners considering renting their home to first “take a realistic look at what it really costs to maintain a property. You have to add a cushion for repair and maintenance.”

Joann Velde, housing manager for the City of Minneapolis, told the Minneapolis Star Tribune that landlords may be in such a hurry to generate cash flow that they do an inadequate job screening tenants, which can result in greater problems later on.

Anne Healy in Minneapolis fell into the landlord role after she bought another property and couldn’t sell her current home at the price she wanted. She turned down two offers and decided renting would be a better option. “We were in denial,” she told the Minneapolis Star Tribune. “We’ve learned the hard way.”

She says her tenants created so much wear-and-tear on the house that she had to restore the home room by room. She also said she had to hound the tenants to pay rent. A year later, she decided she had enough and put her home back on the market. She sold it for $50,000 less than an offer she had turned down one year earlier.

Source: “Accidental Landlords on the Rise,” Minneapolis Star Tribune (Sept. 24, 2011)

© Copyright 2011 INFORMATION, INC. Bethesda, MD (301) 215-4688