For rentDuring 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 (Z) 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.

Courtesy Tara Kennedy-Kline"What a Huge Mistake!"

Tara Kennedy-Kline, an entrepreneur in Shoemakersville, Pa., says that she and her husband once saw renting property as 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 the 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."

Here are some other tales from the front line of landlording.

The Tenant Who Tried to Burn the House Down

Problem tenants aren't just an issue for inexperienced landlords. "I got a real estate license in 1992 and bought my own first property that same year," says John Braun, a landlord in Minneapolis and St. Louis. "I now have a little portfolio of eight units, which I view as my retirement account. I take great pride in having helped to gentrify my neighborhood, which is a much more attractive place now than it was 20 years ago."

John Braun meeting with a model tenant

Improving the neighborhood has had its costs, however. "I have had an angry tenant move out leaving diapers smeared to the wall by their contents and feminine products stuck to the bathroom fixtures in the same way. That was someone I evicted because I surprised her one afternoon while she was smoking a bong in her living room with her 2-year-old on her knee and an electronic home-monitoring bracelet on her ankle."

What could be worse? Plenty, Braun has found: "I had one tenant who tried to burn my house down on New Year's Eve."

Ruined Appliances, Outsize Water Bills, and Legal Expenses

Josh Scharf, a landlord with several properties in Brooklyn, N.Y., tells a similarly horrifying -- and expensive -- story.

In 2010, new tenants moved into one of his apartments. "Soon after [they moved] in, the water usage in the building skyrocketed from $60-$70 per month to over $300 and even approaching $400," he says.

Scharf discovered that the tenants were selling showers and even taking on other renters. "Effectively, they monetized every part of the apartment at my expense -- showers, toilet usage, cooking rental, etcetera."

Evicting the tenants proved difficult. "Eviction for non-payment in NYC can sometimes take six months or more, and landlords rarely recoup that money," Scharf says. "I was able to get these tenants out of the apartment in three months after they started to not pay rent."

Scharf settled for two months payment -- but he was still left with the water bill, legal expenses, and the costs of cleanup, which were substantial.

When Rental Property Becomes a Crime Scene

Landlords expect some amount of wear and tear on their property. But few expect their rental units to become toxic. That's what happens when someone uses a property to cook meth.

Dawn Turner runs the website MethLabHomes.com and sometimes hears from landlords whose properties have become highly contaminated crime scenes after being used to manufacture methamphetamine.



"From the meth lab cook's perspective, if the property gets contaminated by meth and meth lab chemicals, it's the landlord's problem, not theirs," Turner says. And, she adds, they're right: "Like private homeowners, landlords are responsible for the cost of decontaminating the property they own, when it's financially feasible to salvage it."

While there are no statistics available about how many landlords have had their properties turned into meth labs, Turner says that those thinking of getting into the landlord business should be aware of the danger: "Meth lab testing and decontamination costs can add up very quickly, which is one reason that some investors may think twice about buying or owning rental property."

Steven GlassbergBall's in Your Court

Real estate lawyer Glassberg notes that the courts are "notoriously slow to enforce a landlord's rights." Depending upon the lease, the landlord may be able to hold the tenant personally responsible for the damage, but "this is extremely difficult and exceedingly rare," he says. "The landlord is usually stuck with the bill to fix his property."

Glassberg has seen one reliable way landlords can protect themselves, however. Landlords can insist upon "a personal guarantee from a third party for any damage in excess of the deposit." However, "I have only seen this in context of a student in college renting an apartment that their parent is paying [for]. The parent is the guarantor."

What's your take, DailyFinance reader? Have you lost money as a landlord -- or as a tenant? Share your story in the comments section below.

Catherine Baab-Muguira writes Fool.com. The Motley Fool owns shares of Zillow. Motley Fool newsletter services have recommended buying shares of Zillow."


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18 Comments

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gildersleeve9

these bad apples ruin it for us that pay our bills and mind our P's and Q's. hell my upstairs neighbors, who pay rent late every month, do laundry for 7 hrs a day, 5 days a week. unfortunately our property manager can care less since our ceiling, below thier washer, now has water stains and mold growing threw the sheetrock. he says its nothing. we have kids. be nice if you good landlords could get paired more often with good tenants.

October 10 2012 at 10:32 PM Report abuse +1 rate up rate down Reply
yigal

If you must rent your house make sure you get the the right tenant even if you lower the rent, having the wrong tenants is going to cost you more than the income you are going to receive, and even getting the rent could become a problem. But worse than that if you are going to be faced with repairs the cost is prohibitive. The only time it makes sense to rent is when you own an apartment complex and you have your own crew to repair and not depending on an outside contractors that going to rub you blind. take it from me I owned over 7,000 apartments in the last 35 years.

October 10 2012 at 7:38 PM Report abuse +1 rate up rate down Reply
busloans

don't be a slumlord.don't rent a residence you would not live in yourself and do your checks, credit check , arrest records, call the bosses, call ALL the references and the relatives, listen carefully. I have had units left dirty but NEVER trashed , stolen or intentionally damaged

October 10 2012 at 5:48 PM Report abuse +1 rate up rate down Reply
rarondini

Having owned rental properties for over 40 years, I would tell any prospective landlord to expect the worst and hope for the best. I have had a house burn down which resulted in 6 lawsuits, a property where the plumbing was stolen and the tenant left in the middle of the night, multiple evictions, some where even when the judge ordered them out, had to pay the sherrif to put their property on the street. Thats just a few.

October 10 2012 at 5:04 PM Report abuse rate up rate down Reply
avcaman

are there no laws that landlords can achieve "prosecute"

October 10 2012 at 4:40 PM Report abuse rate up rate down Reply
theycallmeroy3

There's a difference between a landlord and a slumlord. I don't get the one who decided to surprise his tenant. Unless that was written in his lease. " The I can come by anytime I want to lease." Sounds slumlord to me. Also, there are mortgage rules from lenders on when and how one can rent anything, if they hold a conventional, FHA, or VA loan. Have to get permission from the lender, and the mortgage insurance changes from homeowner to rental insurance.
Say the house or unit burns down, and the underwriting isn't right? Major problems.

October 10 2012 at 2:33 PM Report abuse rate up rate down Reply
ilm9p

Tried it once through a property management firm and had the place trashed by a piece of human filth on welfare. Never again.

October 10 2012 at 2:22 PM Report abuse +1 rate up rate down Reply
gmsexton

property managers... and it doesn't take 60 or 90 days to evict... the second they are 2 weeks late with rent you start the eviction process... it takes 20 days.. if you got a decent deposit... that will cover most of the costs.. if they do damage... insurance can cover sometimes... i pay a property management company and they have established backround checks and credits checks.... in addition i definately file court papers to go after them.. and effect their credit rating .... it's not perfect but it's effective....

October 10 2012 at 12:56 PM Report abuse rate up rate down Reply
gmsexton

cc

October 10 2012 at 12:53 PM Report abuse rate up rate down Reply
niceguy71653

Frankly I have no sympathy for most of these people. They watched the flip shows and believed they could get rich quick. Now they are paying the price.

October 10 2012 at 11:44 AM Report abuse rate up rate down Reply