DETROIT — A growing number of homeowners are finding out what it means to be a landlord after failing to sell their homes in one of the worst housing slumps in history.
With home prices down nationwide, many don’t want to take a huge loss when they decide to move. They want to wait to see whether they can rebuild their equity. So they rent.
“People just really don’t want to be landlords, and they really have no choice,” said Dennis Dickstein, a real estate salesman in Farmington Hills, Mich., who estimates that 20 percent of his deals are leases.
Mark and Rhonda LaVelle decided to buy a bigger home while the market was down. The couple had a 1,100-square-foot house in Royal Oak, Mich., to sell but decided to move when they found a 2,300-square-foot home about 2 miles away. They started renting their house in January after it had been on the market nine months.
“After paying two mortgages and the house wasn’t moving, we were at a point where we would have to sell it at a substantial loss or get someone else in who could pay the mortgage,” said Mark LaVelle, 38, a freelance cameraman.
He and Rhonda LaVelle, 37, a television-news producer, turned the leasing over to his real estate agent.
“It’s been a great experience. We’re getting the full mortgage payment from the tenants,” Mark LaVelle said. “My wife just wanted to wash her hands of the whole thing. She looks at it like a liability. I look at it as an investment.”
But it’s not always moving up that sparks a home rental.
Sometimes it’s a life change, such as marriage, college graduation, divorce or death in the family.
Many homeowners who decide to lease their homes use their real estate agents to handle the transaction, including background and credit checks.
The service generally will cost a landlord one month’s rent, while property management could cost 10 to 20 percent of the monthly rent. But with rent often set just high enough to cover the mortgage payment, some landlords do it themselves.
Dan Elsea, a real estate broker in Southfield, Mich., advises landlords not to be too turned off by potential tenants with bad credit.
“The people coming to them have gotten rid of their biggest expense, their mortgage, when they arrive at the door. They arrive with a reasonably clean income statement if they have a job,” he said. “You should look at the credit report, but don’t scrutinize it too closely. References are just as important.”
Other real estate agents agree.
James Silver, a real estate sales agent in Troy, Mich., said there are many good tenants to choose from.
“As long as you get everything … a credit report, the last few pay stubs, references. As long as you have everything in front of you, you’re fine,” Silver said.
And the beauty of the rental market is that prices there have not fallen by 40 percent, as many parts of the sales market have. The reason is there are a lot of renters to feed demand.
“So many people have lost their homes … they are looking for a place to live,” said Linda Hiller Novak, a real estate saleswoman in Birmingham, Mich.
There are horror stories, of course, for untested landlords. Some learn quickly that the old saying, “Possession is nine-tenths of the law,” is true.
Steve Cole, an agent in Birmingham, said he knows a homeowner in Birmingham who rented his house to tenants who not only didn’t pay rent, they trashed the home before the landlord could evict them.
“When times are tough, people look to scam,” Cole said.
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