Dana Nance thought that for the last couple of years she was renting her Houston-area home to a nice woman with a child and two younger brothers.
Then, this week, the home was raided by the Drug Enforcement Agency as part of a takedown of major marijuana grow operations. Nance's home was one of 50 filled with pot plants and rigged with equipment to grow them, Houston's KHOU 11 News reported.
Now, Nance has learned that the woman she thought she was renting to actually lives in Washington state.
"They hired this woman that, specifically, this was her job -- to go and rent properties," Nance told KHOU. "She checked out on every level. She had good credit. She had a job with references. She had a a good rental history."
Nance said she did notice some weird things over the last couple of years. For example, the neighborhood HOA asked that weeds in front of the home be removed. Nance's neighbor told her that the tenants pulled them up in the middle of the night using a car's headlights to see.
After learning of the DEA bust, Nance said: "I immediately thought all the things that had been odd, [they] kind of make sense now."
Investigators believe that Nance's tenants were part of pot ring specializing in growing high-quality marijuana, according to KHOU. Nance hasn't been allowed to enter her home to assess damage because the DEA is still investigating whether she was involved in the scheme.
Are you thinking of renting your home out? Take Nance's advice: "Get references on your references. You have to make sure you're speaking to the employer.
"It's possible her rental reference was a scam," she added, referring to the woman she rented the house to.
Dana Nance of Houston Says She Unwittingly Rented Home to Marijuana Grow Operation
Median home price in 2012: $122,000
Projected home price in 2015: $121,087
Projected annual rent in 2015: $12,829
Home prices in Sin City are still greatly depressed -- down 62% from the 2006 peak, according to the S&P/Case-Shiller home price index -- making for some great bargains for investors. Meanwhile, rents continue to climb, according to a recent report from HomeVestors based on analysis by Local Market Monitor.
Of the 316 markets Local Market Monitor reviewed, Las Vegas ranked number one based on estimated returns on investment for single-family rental properties.
Cities were ranked by estimated future returns investors can expect when they buy single-family homes and rent them out. According to Local Market Monitor's data, for example, investors in Las Vegas will have a 5.6 percentage-point higher return on a rental property than the national average of 5%.
But there are risks with investing in cities like Vegas. The markets with the highest ratings are typically those where home prices have plunged the most, said Ingo Winzer, founder of Local Market Monitor.
And in Vegas, investors are buying up so many properties and turning them into rental properties that there is a glut in supply, said Winzer. In some cases, that could make it hard to find tenants. And letting a property sit vacant could take a big bite out of profits since an empty place can pile up expenses quickly, he said.
Median home price in 2012: $78,000
Projected home price in 2015: $93,982
Projected annual rent in 2015: $9,016
It's hard to imagine that home prices could get any cheaper in Detroit.
Hit hard by the auto industry's financial troubles and the housing bust, median home prices in the area have been cut almost in half to $78,000 from a 2004 high of $157,000, according to the National Association of Home Builders (NAHB).
And with rents on the rise -- up 5% over the past 12 months, according to Rent Jungle -- these beaten down home prices have created a nice opportunity for investors.
Even better, renters' incomes have become more stable. The auto industry has started down the road to recovery, giving a nice boost to the local economy. The metro area unemployment rate has fallen by 2.4 percentage points over the 12 months ended in April to 8.7%.
Winzer figures investors will earn 4.6-percentage-point higher return than the national average over the next three years.
Median home price in 2012: $114,000
Projected home price in 2015: $123,282
Projected annual rent in 2015: $11,048
In a market like Daytona Beach, where the median home price is down to $91,000, most homes are very affordable. But many locals still aren't buying.
"By and large, single-family homes are not priced beyond the reach of renters," said Winzer. But bad credit histories, often due to past mortgage payment problems brought on by Florida's severe housing bust, have made it difficult for many local residents to get mortgages, forcing many to rent.
For real estate investors, that means there's plenty of demand.
And the risks associated with renting in the area, which was hit hard by the housing bust and recession, have also started to subside. Unemployment dropped by 1.9 percentage points to 8.7% over the past 12 months.
Even with the lingering economic issues in the area, there's a lot of potential reward, according to Winzer. The estimated return for landlords in Daytona is about four percentage points higher than the national; average, according to HomeVestors.
Median home price in 2012: $115,000
Projected home price in 2015: $150,491
Projected annual rent in 2015: $13,105
Landlords in Orlando have been seeing a nice return on investment recently. Rents in the metro area rose about 7% over the 12 months ended in March, according to Rent Jungle, as homeowners displaced by foreclosure sought rental properties.
For those looking to buy in this market, properties are pretty affordable: Home prices are down to levels not seen since 2000, according to data from NAHB.
With Orlando's economy on the mend, the risks for investors are fairly low, said Winzer. Orlando's unemployment rate has come into close alignment with the national average, standing at 8.2% in April.
Plus, the metro area population continues to expand, rising 1.5% in the 12 months ended July 1, 2011, sparking more demand for rental housing.
Median home price in 2012: $114,000
Projected home price in 2015: $116,706
Projected annual rent in 2015: $9,308
General Motors put Warren on the map in the 1950s, employing thousands of engineers and technicians and making the town one of the wealthiest in the state.
But when car sales collapsed, so did the local economy. The median home price in Warren has dropped to $114,000 from $175,000 in 2005, according to NAHB.
As in Detroit, the biggest risk for investors in Warren is the economy, according to Winzer. If the auto industry continues to heal, the market for rental houses should remain steady.
Winzer expects to see a slight increase in the metro area's home prices by 2015 and to see rents climb as well as the auto industry continues to rebound.
Median home price in 2012: $115,000
Projected home price in 2015: $135,660
Projected annual rent in 2015: $10,628
When the housing bubble burst in Bakersfield, it really hit hard. Many residents lost their homes to foreclosure, leaving them little choice but to move into rental properties.
That has been a major boon for landlords in the area. In the 24 months ended in March, rents increased by more than 20%, according to Rent Jungle.
For those looking to get into the market, home prices are cheap at a median of $115,000, according to NAHB, That's almost 60% below the high set back in 2006.
Given that Bakersfield has a diverse range of industries -- oil and gas production, agriculture, manufacturing -- it's a lot less risky than a city like Detroit, said Winzer.
That said, Bakersfield is still struggling to recover from the severe hit it took when the housing bubble burst and unemployment -- which stood at 14.5% in April -- is still a major issue.
However, if jobs recover a little more quickly, real estate investors could be rewarded with some modest home price appreciation -- in addition to their rental profits, said Winzer.
Median home price in 2012: $135,000
Projected home price in 2015: $162,053
Projected annual rent in 2015: $12,268
Phoenix has become an investor's market, with many of the city's properties being turned into rentals to house those displaced after the housing bubble collapsed.
Demand for rental properties in the area has helped rents climb by about 7% over the past two years, according to Rent Jungle.
Also on the rise is the local economy. "Phoenix is doing much better than I thought it would," he said Winzer. "The economy has recovered nicely, growing 2.2% over the past 12 months."
But for investors, the best time to act may be sooner rather than later. Housing inventory in Phoenix has shrunk and home prices are on the rise. During the first three months of the year, home prices were more than 5% higher than they were in the year-ago period.
Median home price in 2012: $122,000
Projected home price in 2015: $164,253
Projected annual rent in 2015: $12,255
A knotty foreclosure problem has plagued Atlanta's housing market, with thousands of vacated homes weighing on home prices.
In March, the city recorded a 17.7% drop in home prices, the largest 12-month decline of any of the 20 cities covered by the S&P/Case-Shiller home price index.
Displaced former homeowners have helped push rents 12% higher over the past 12 months, making for some healthier returns for investors.
However, the risks remain in Atlanta, with plenty more foreclosures still being moved through the pipeline.
Median home price in 2012: $137,000
Projected home price in 2015: $152,509
Projected annual rent in 2015: $11,366
Unlike most of the other cities on this list, Reno's market is more popular for investors looking to buy vacation -- rather than residential -- properties.
"Reno is much more of a second home market for people from Northern California," said Winzer.
As such, it tends to reflect the market trends of cities within an easy drive, including Sacramento, San Jose, and, especially San Francisco.
But while Reno's status as a major vacation destination can be attractive to investors, it can also be a risk.
"Vacation home markets tend to be volatile," said Winzer. The prices may track the trends of coastal markets but the swings can be much greater.
One saving grace for investors, however, is that home prices are much lower in Reno than they are in other major cities. At a median of $137,000, Reno homes sell for about a quarter the price of San Francisco real estate. And rents should bring in above average returns, about 2.5% percentage points higher than the nation as a whole.
Median home price in 2012: $100,000
Projected home price in 2015: $150,271
Projected annual rent in 2015: $11,186
For investors, Tampa seems like a perfect place to buy a rental property.
At a median price of $100,000, homes are relatively cheap. And rents are on the rise, having gained about 4% over the 12 months ended in March, according to Rent Jungle. In addition, the economy is on the upswing, with a recent uptick in job growth.
However, there are some risks that real estate investors should be aware of, according to Winzer.
One problem: An abundance of shadow inventory of homes in foreclosure that are already repossessed and vacant but have yet to come on the market. When they do go on sale, they could push home prices even lower but also make it more difficult to find tenants.