By Catherine Baab-Muguira
During the heady days of the housing bubble, many Americans bought second homes and investment properties, believing that the value of these properties would increase. Then came the bust, and some owners turned to renting out those recently acquired homes, condos and apartments. Zillow.com has referred to these folks as "accidental landlords."
If you're finding yourself in an accidental-landlord situation, take it from those who have tried it: While renting out properties can help to cover mortgage payments, provide a stream of income, and sometimes even a tax shelter (when properties generate taxable losses or decrease in value), the landlord business also has a pricey dark side.
'What a Huge Mistake!'
Tara Kennedy-Kline, an entrepreneur in Shoemakersville, Pa., says that she and her husband once saw renting property as a way to invest in their sons' futures. But the dream quickly turned sour.
"What a huge mistake! Our first tenants left as a result of an eviction notice after four months of not paying rent, and they trashed the place," says Kennedy-Kline. The next renter they found didn't turn out any better than the first. "The second tenants stopped paying rent in May and we couldn't get them out until November and that was by forced eviction by a constable."
Steven Glassberg is an attorney with offices in New York City and Port Washington, N.Y., whose practice includes all aspects of real estate. He says that being a landlord is harder than most people think it will be.
Kennedy-Kline took both tenants to court and won. But winning in court isn't the same as getting paid. Now Kennedy-Kline and her husband are into the collections process for more than $5,000. "Even the sheriff can't get our money," she says.
Non-payment isn't the only issue people face with their investment properties, Glassberg says. "Add in maintenance, insurance, carrying costs, and it is not a business for most people."
See other tails from the frontline of landlording at Daily Finance.
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By Catherine Baab-Muguira