When Ed Amaya put his Oak Park bungalow up for sale in mid-2007, homes in his neighborhood sold in a matter of days, weeks at the most.
"We had some showings; got close to a deal," recalled Amaya. But as the housing market soured, a sale proved elusive. So Amaya agreed to rent it to a family that was not in a position to buy.
"We stayed in that pattern for a couple of years," said Amaya, who expected real estate to rebound. "But guess what? The market got worse."
Like many homeowners in the housing downturn, Amaya became an unintentional landlord by renting out a property he once hoped to sell.
How many homeowners are in this category is difficult to know. Anecdotally, realty agents say it is more common, and more competitive, than ever. As home sales have stalled in recent years and foreclosures have risen, homeowners who need to move on and those who have inherited property are turning to renting to help cover costs.
So many residences are now for lease that there is "a saturated rental market," with more available units than potential tenants, said Jeanine McShea, president of brokerage services for @Properties.
"Many people are renting out property, but most are not making money," said Sara Benson, a principal in Chicago-based Benson Stanley Realty.
Chicago-area home sales have had an uptick in recent months, but prices have continued to slide. With few forecasts of a quick real estate turnaround, many sales agents suggest slashing selling prices rather than renting in hopes of a higher price later.
Most owners "need to fish or cut bait," said Benson. It is really a question of "you lose money now or you pay over a long, slow process," she said.
In making that decision, Jim Rossi, broker/owner of Re/Max 2000 in Crete, urges owners to "be realistic about your own costs in trying to hold and rent the property. Don't fool yourself that you can charge more than the current market conditions will bear."
Those costs go beyond the monthly mortgage payment. Benson advises clients to talk with an accountant to learn how renting will affect taxes and to call the insurance agent to ask how renting will impact homeowner premiums, which may rise with renting. To avoid costly landlord/tenant misunderstandings, she urges clients to check with a lawyer to become acquainted with landlord and tenant rights and pertinent condo or community association rules.
Lawn care and snow removal is "negotiable with the tenant," Amaya said, but "you might want to consider your own or neighborhood standards" rather than leaving it to the renter. Be prepared to pay for repair or replacement of household equipment if it breaks down.
"If you can't do minor repairs, a handyman is worth his weight in gold," he said.
Owners should assume 1 to 1.5 percent of the sales cost will be necessary to put a home in selling shape when a tenant leaves, said Mario Greco, senior broker and vice president of sales at Prudential Rubloff Properties. Factor in two months of vacancy because "tenants lose their jobs," he said.
The most important costs for some are also the hardest to quantify: the time and patience necessary to deal with renters.
"Be ready for annoyances you never dreamed of," said Greco.
After evaluating your expenses, research the going rental rate by calling local realty agents and rental specialists.
"First-time landlords should be aware of their market situation," said Rossi. What had been standard practice may be changing. Landlords traditionally have asked for a security deposit equal to the first and, sometimes, the last month's rent, but that is now negotiable in some neighborhoods, he said. Ditto the fee added for pets, especially large dogs.
Finding qualified renters can be tough in some areas, Rossi noted.
"We are advising that owners who want to rent should look past the overall (credit) record and make sure the prospective renter is paying the gas and electric bill on time and has no overdue water bills. If they are paying their utilities on time and do not have other outstanding debts" other than a foreclosure, they may be a good prospect, he said.
"If it's a buyer's market out there, and it is, it is a renter's market as well," added Rossi. So many properties on the market means some people, even those with damaged credit, will try to negotiate for cheaper rent, he said.
In addition, "Renters don't keep the property as well as they used to, and they are more willing to jump from property to property as more foreclosures come on the market," he said.
Finding a good tenant is key for steady income and peace of mind, agree real estate agents and owner-landlords.
Terry Mutchler left Illinois and a job with Attorney General Lisa Madigan to open a new state office for Pennsylvania Gov. Ed Rendell in June 2008. She thought she had sold her two-story Springfield home, but the deal fell through. In January 2009, Mutchler told her realty agent to rent the property.
When she didn't receive the rent in September and couldn't make contact with her renters, Mutchler asked a friend to check on the property. To her horror, she learned they had trashed the house and abandoned it with the utilities unpaid.
"Do you know what a house looks like when the water has been turned off? The toilets, the sinks — it's disgusting," said Mutchler, executive director of the Pennsylvania Office of Open Records.
She invested several thousand dollars to repair the damage and cover lost rent, then found her own tenant through friends. The rent doesn't quite cover the monthly mortgage, but she rests easy because the tenant "is responsible."
"I am more engaged as a landlord. We talk by e-mail or phone. I want him to know that he can talk to me or tell me if he needs something," Mutchler said. "Be hands-on. Stay on top of what is going on. Try to rent to someone you know."
Both Amaya and Benson agree it is important to go beyond the standard credit check for applicants. Get three references and call them, said Benson. "I want to know their character," she said.
Amaya finds tenants through a realty agent, most of whom can run credit checks, rather than putting up signs or ads on Craigslist.
It "costs you a month's rent," but the responses are from a better customer, he said.