Many home owners who are unable to sell their home or cannot afford to drop the price any more – and who do not want to hurt their credit by short selling or do not qualify for a short sale - are opting to rent out their homes until the market improves.
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.
While there are many succesful homeowners-turned-landlords, there are some “accidental landlords” who are having regrets.
As many home owners are turning their homes into rentals to generate cash flow, many say the rental income is not enough. They say the cash flow being generated from the property is hardly enough to cover expenses, and in some cases, they are losing money. Accidental landlords also say that being a landlord is time-consuming and can be stressful, as they have to worry about everything from finding tenants to handling any repairs.
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 offers on the home because she thought both offers were too low 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 the previous year.
Homeowners turned landlords need to be realistic about the costs to maintain the rental property, repairs, vacancy costs, and adequate screening of prospective tenants. Property managers can be a tremendous help, but they also are an additional expense which many new landlords, who need to make the monthly mortgage payments, simply cannot afford.
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SOURCE: Minneapolis Star Tribune
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