I am renting out my condo and it's working out great. Had 2 awesome renters in 2 years. Rent always on time and place is always clean.

Homesharing is such a viable, organic option to help homeowners remain in their home. However, adequate background checking is highly encouraged.

Being an "accidental landlord" is often the result of a grim dilemna for homeowners who have been transferred. Selling converts what was just a "paper loss" into a real loss, often requiring either cash at settlement or the dreaded short sale. Forestalling the pain (by renting) then leads to more pain: first, your taxing jurisdiction removes the residential tax exemption, any phased-in assessment you may have, and bills the full assessment. In the city, this a horror, as the rates are ridiculously high and properties are overassessed. The second problem is the Federal Tax Code, which phases out the tax benefits of deductions associated with renting a property. For many accidental landlords, check with your tax accountant, you may just find that your formerly large tax deduction for mortgage interest and property tax becomes zero while you rent the house out.

Good points, srm. If what you can get in rent is about the same as your mortgage, the loss of your Homestead credit in particular can throw the numbers completely out of whack.

Actually, you can write off the investment property on your taxes as depreciation expense.

Jack (Daniels), actually almost every expense associated with renting out a property is deductible, including capital depreciation, taxes, mortgage interest, maintenance, etc. But watch the income limits. For "accidental landlords" with AGI of $100k to $150k, the value of those deductions is phased down to zero. As explained to me, the income limit was designed to prevent high income filers from paying no federal taxes. Following the real estate meltdown, it has an unintended consequence, it negates the tax deduction value of rental losses on a property that is out for rent, only because the owner can't "afford to sell."

Renting is not so hard. I've enjoyed it and think accidental landlords or ones that only own one house are probably a lot nicer because its "their" home, not just a business.
Yes, the deduction limits phase out, but I think the AGI where it starts to make a difference is closer to 200K.

I certainly have considered it, but I'm not to that point yet. I do currently have a roommate to ease the burden. Technically I believe those who took the $8K from Obama have to keep the house as their 'primary residence' but I doubt the gov. is keeping very close tabs on that.

DoubleB - we got the $8K tax credit, and you are required to live in the house for 3 years minimum. We get letters ALL THE TIME reminding us of that, and I do think the IRS is actively keeping tabs. At least, I'd hope so ....

Long post here... apologies in advance...

For most people, becoming a landlord of any stripe is a monumentally bad decision. I've been a landlord of the non-accidental variety for 3 yrs now. I will say that, at the higher end of the market where someone is paying 2000/month of rent to you, it's probably different. My city rowhome rents for $1450/month (3BR). My rental house is towards the lower range of acceptable housing in the city (safe area, but nothing fancy). Don't get me wrong, it's a nice house and decent area, but it's not going to attract young professionals or upper middle class families. I get mostly lower-middle class working people. They make OK money but are poor at managing it. A common thing after seeing the house is wanting to know if I'll lower the security deposit or take less than first and last month rent to move in. These people generally make OK money but piss it away on their car, their credit cards, their child support, etc. It's hard to tell what you're working with, even if you pull a decent credit report and a clean criminal background. The lower middle class in the country is hurting.

The other thing is the old saying "no one washes a rental car before they return it". Unless you rent to good friends, no one is going to treat your house as good as you would. If you're only getting enough to pay mortgage, taxes, and insurance, you are LOSING your money renting. You need a COMFORTABLE margin--I'd say 20-25%, minimum, to make up for wear and tear. Even if it's not for 5-10 yrs in the future, you need to do roof repair, buy new water heaters, change the locks and deadbolts, have the HVAC serviced, etc.

I'm currently renting to a group of guys I know. They're mostly responsible and clean, but there is still normal wear and tear. I'm at about a 30% margin right now--the best I've had in 3 yrs of renting the place. Before this situation, I rented to random tenants and was lucky to break even.

Most people simply don't know enough about finance or accounting to realize what they need to charge to actually make money as a landlord. If you're renting for $1400 and your mortgage is $1250, you really aren't making money, you're breaking even. You should be saving that $150/month difference towards roof/appliance replacement.

One last thought--all future wannabe landlords should go to small claims or landlord/tenant court some day and look at what you might be facing if you have to evict a tenant. Once someone can't pay rent, things get ugly. I had to evict someone about 2.5 yrs ago when I was a new landlord. I won and I got my full damanges plus court costs covered, but it's a psychological thing--someone is living in YOUR house and not paying you. I'm a lawyer by profession so it was easier for me than most people. I'm also a saver who lives drastically below my means, so I could wait them out til eviction, while paying the mortgage and all bills myself. If you're like most people who can't sell their house and are accidental landlords, ask yourself if you have the mentality to handle someone not paying a few months and then getting evicted.

Great post, chappy... I am a landlord in Belair-Edison, and I had two tenants skip out on rent on me... to be honest, I was afraid to file suit, because they knew where I lived. Who knows what desperate people will do, and I don't want to endanger my family. How weak is that...

I actually just dropped by my rental tonight and was thinking about this a little more.

As someone who looked at ~50 homes last yr when looking to trade up my primary residence, I have to say that houses inhabited by renters were generally worse for the wear. For example, most hand maintenance defered and showed signs of rough use. E.g., roof with just 2-3 yrs left on it instead of newer, old water heater, beat up flooring, beat up appliances, dead/stunted landscaping).

The other, obvious issue is--renters may be home when you want your agent to show the property. Even if they're not home, they may leave a mess. I can't tell you how unprofessional and unappealing that looks as a buyer. I saw houses with trash piled up on the patio, uncleaned plates in the kitchen, and so forth.

Unless you're making a very comfortable margin renting out your house, you're probably costing yourself any chance of selling your house for the value you want if you have renters in it. I've seen very few rentals--EVER--that looked like something I'd want to buy at anything near offering price. You might think you're buying time by renting, but what you're often doing is delaying the sale (who wants to buy a beaten down house?) or costing yourself money (no one's going to give you full price for a current rental in this market).

A lot of the people who think they're making money renting just don't understand the big picture. Unless you're in the high end market where you're renting to grad students/young professionals/upper middle class people who move around a lot for work, you're likely to be underestimating your maintenance and depreciation, not to mention the damage to your future sales price.

One thing I've noticed is that when everyone comments on the expenses, no one mentions taxes. You do know that you have to pay income taxes on the rent charged, right? That's true even if it's a roommate, and even if you do not own the property but you are the renter of record because your roommate is actually the sublessee of the room they rent.