More home owners who are unable to sell their home or afford to drop the price any more are opting to rent out their homes until the market improves. But some “accidental landlords” are now having 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 home owners are turning their homes into rentals to generate cash flow, many say it’s not enough. They say the cash flow being generated from the property is hardly enough to cover expenses, and in some cases, they’re even losing money. Accidental landlords also say the role is time-consuming and can be stressful, as they have to worry about everything from finding tenants to handling any repairs.
Kathleen Longo, principal with Accredited Investors, advises any home owners 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."
Also, 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 of 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 was unable to sell her current home at the price she wanted. She had turned down two previous offers on the home 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 the 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 last year.
Source: “Accidental Landlords on the Rise,” Minneapolis Star Tribune (Sept. 24, 2011)