- Jan 2009 Forced into landlordship

Home Sellers Forced To Become Landlords
By ROBIN STANSBURY | The Hartford Courant
January 4, 2009

Scott Moreland is a reluctant landlord.

Two years ago, when he got married, he and his fiancée both had houses. So they moved into one and listed the other — a

two-bedroom single-family in Portland — for sale. After months of waiting for a buyer, the couple decided to rent out the home instead.

"It was really bad timing. Just as the market started to come down we were trying to sell," said Moreland, who lives in Preston. "I'd

really rather not have to deal with renting it if we didn't have to, but we can't swing two houses."

Moreland's first tenant is now moving out, so he's searching for a second — and still waiting for the real estate market to improve so

that he can again list the home for sale.

"It's a balancing act because we can't list it for sale while we have a tenant," he said. "But we're also losing money every month, so we

can't do this forever."

Accidental landlords like Moreland are popping up all over Connecticut.

The state's tumultuous real estate market — where sales have plunged by double digits in recent months and prices are on a

steepening downward trend — has left many sellers in a lurch, unwilling or unable to sell their homes for a price they find acceptable.

So, increasingly, these home sellers are turning to renters instead.

In the first 10 months of the year, for example, the number of single-family homes listed for rent by a real estate agent increased 47

percent compared with a year earlier, said Amy Bergquist, an agent with William Raveis Real Estate in West Hartford, who examined

16 towns in the Hartford region. In that time, 294 single-family homes were listed for rent, compared with 200 the previous year.

Bergquist said the actual number of home rentals in the region is much higher, because not everyone uses a real estate agent to list a

home for rent.

She said renting is sometimes a good alternative to selling in a down market.

"If you don't need to sell, and you don't need the cash from your home, you can potentially wait out this market if you feel you're not

getting the price you want. That's the main advantage people see to renting," Bergquist said. "And we're seeing more and more of it

in this market."

But there are disadvantages to becoming a landlord. Managing a rental property is not easy, especially if you're moving out of the

area. When things in the home break or need replacement, it's the landlord's responsibility to make those repairs.

"For us, that's a solid 45-minute ride to get to the house every time something goes wrong," Moreland said. He said he considers

himself lucky that his first tenant was handy around the house; at one point, the tenant fixed a broken kitchen sink himself.

Landlords also face another big task — finding a responsible tenant. Management companies and real estate agents can help with

that, but you will pay on average 10 percent of your monthly rent to a management company or a full one-month rental fee to a real

estate agent, which adds to the cost of renting your home.

"Being a landlord probably wasn't your main goal when you purchased your home, and it can be a hassle," Bergquist said.

Another risk to renting is giving up one of the best benefits of home ownership: the capital-gains tax exemption. If you live in your

house for two of the five years before you sell it, you'll pay no taxes on the first $250,000 in profits for a single person and $500,000 for

a married couple. But if you become a landlord for three years or longer, you'll owe capital gains taxes on all profits when you do

eventually sell your home.

Kathy Jones knows all about those disadvantages, but still listed her three-bedroom ranch-style home in Rocky Hill for rent this fall.

She gave herself only one month to sell the home before deciding to rent it instead.

"I priced it aggressively and hoped to get a quick sale, but that just doesn't happen in this market," Jones said. "My thinking is, in two

years the market will turn around and I can sell it then."

In the meantime, she's willing to put up with the hassles of renting.

"Yes, people don't maintain it the same way you would because it's not theirs, but if you can find the right tenant, it can work out well,"

she said. "It could go bad, but there are good people out there."