The September issue of Money Magazine features an article called Landlords in Waiting. It describes a situation which is becoming more common throughout the country. Homeowners who are unable to sell their properties in a weakening market are becoming reluctant landlords. The inventory of homes for sale is twice as large as it was three years ago, and this could mean a longer time to sell, and possibly to shoulder two mortgages if they buy their next home first.
With home prices flat...or worse...in many markets, there may not be enough equity to pay closing costs. The rental market is still strong. According to NAR (The National Association of Realtors) rents were up 4.1% in 2006.
The article gives a checklist to estimate whether it makes economic and emotional sense to rent, and also tips on finding a good tenant.
My son and his wife in Kalamazoo, Michigan learned these lessons the hard way. Bridget owns a house with a second unit across the state border in Indiana, which they've found impossible to sell. They've just completed the arduous process of evicting a tenant in the smaller unit for nonpayment of rent, and are hoping that the tenant in the larger house will qualify to buy the property. Meanwhile, the monthly payments are still due.
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