Landlords by Necessity

FORT LAUDERDALE, Fla. -- The epic housing collapse has turned thousands of homeowners into reluctant landlords.

They're learning the hard way about how rentals work. They'd much prefer to sell, but they can't get the price they want or need. In many cases, the homeowners are "underwater," owing far more than the properties are worth.

Reluctant landlords at least have a red-hot rental market going for them. Some have taken jobs elsewhere and collect rent from afar. But even those who have stayed in town face the typical headaches: dealing with problem tenants, paying for repairs and losing money each month.

"I never wanted to be a landlord and play the renting game because it's too much of a hassle," said Mike Ablack, 34, of Coconut Creek, Fla. Yet he is doing just that, caught in the cross hairs of the housing bust.

In 2005, at the height of the housing boom, Ablack bought a three-bedroom Coral Springs, Fla., town house for $199,900. He put 20 percent down, but he lost all of that equity later in massive price declines.

Eventually, he wanted to buy a bigger place, but selling the town house was out of the question because he was underwater. He says he owes about $140,000 on the mortgage, while units in his complex are worth only about $75,000.

He didn't have the cash to pay off the loan, and he was reluctant to try a short sale — dumping the property for less than he owes, with the lender's blessing — because that would hurt his credit rating. So Ablack decided to rent the town house instead after he and his wife bought a four-bedroom home in Coconut Creek in January 2010.

Finding good tenants hasn't been an issue. Still, he's $200 in the red each month, and he also has to cover any maintenance costs. In October, he spent $350 to replace the washing machine. "Just little things like that I'd rather not have to deal with," said Ablack, 34, an assistant chief financial officer with the Brow- ard Clerk of Courts.

Still, Ablack feels fortunate his region's rental market has been on a tear for two years. Foreclosures and price declines have left many residents leery of homeownership or unable to qualify for mortgages.

In 2006, the ratio of homeowners to renters nationwide was roughly 70-to-30, but it's now 62-to-38, according to Jack McCabe, a housing analyst in Deerfield Beach, Fla. Within five years, the ratio could be closer to 52-to-48, he said.

"There are a lot of strategic renters, people who can afford to buy but recognize that there's tremendous liability and responsibility with owning a home," he said.

Steve Eckelman owns a condominium in Lighthouse Point, Fla. Although he's not underwater on the mortgage, he insists it wouldn't have made sense to sell following his move to Alaska in 2009 because the market was so soft.

So he's been renting the condo ever since. Even in a robust rental market, it took Eckelman nine months to find his first reliable tenant. Now the unit is vacant again and has been for three months.

"It's been incredibly frustrating," said Eckelman, 51. "There have been too many problems and not enough tenants."

TIPS FOR LANDLORDS

• Make sure the tenant knows this is an arm's-length business transaction. Don't try to be friends.

• Consider hiring a property manager if you've moved out of the area.

• Don't get into a habit of accepting late rent payments.

• Keep good records, because certain landlord expenses may be tax-deductible.

Source: Gary M. Singer, real estate attorney, Sunrise, Fla.