Tracy O'Connell, 57, owns a home in Humboldt County, Calif. a region she fell in love with while taking a sabbatical from teaching a few years ago with plans to eventually retire there. When she stumbled upon a cheap property in the area, she snapped it up before heading back east to a teaching job in Wisconsin, where she currently resides in a house she bought using the equity of the California property.
She had been renting out the California place for four years without a hitch-until last year, anyway, when her tenant went "off the rails," as she explains it. He was growing marijuana in the house. It wasn't unusual for Humboldt County, but he also had a lot of unsavory visitors and a trailer parked in the side yard that made the neighbors complain. He ultimately stopped paying his rent altogether and was evicted.
But he trashed the place before leaving and then tried to break back in several times. In the end, O'Connell paid $5,000 to replace all of the carpeting, repaint the entire apartment and clean up the mold, then she boarded up windows and changed the locks so that the tenant couldn't break back in.
"By the time he was evicted and the property repaired, I was out $17,000," O'Connell says. "In the meantime, the economy tanked, there's a glut on the rental market, and I've been told I can only rent out the home for a third less than before-which is significantly less than my mortgage payment." If that weren't enough, her sewer system failed, costing her $1,200 more in repairs.
She had to put her Wisconsin house on the market to get out from under the debt burden caused by the California property, but she hasn't had a nibble.
"I'm laughing," she says. "You just have to. You have to just go with it."
Eisenstein says that some homeowners, desperate to sell or rent, are even offering cars or trucks as part of the deal, just to get someone into the houses. He says he has one client who owns 18 homes, a lot of them vacant. And those that are filled are facing rental reductions of 20% to 40%. People used to buy one- or two-month advertisements with his company, he says. They're now buying six- or 12-month ads.
Mark Kreditor, a property manager for GTF Realty in Dallas, says he's seen so many horror stories that the investment newsletter he's been writing for 20 years can be summed up in just seven words: stay away from real estate in Texas. "The person selling you the real estate doesn't tell you the number of tenants who don't pay rent or will destroy your house," he says.
The problem, he says, is that people think because Donald Trump buys and rents real estate, anyone can do it, and yet they know nothing about the local property codes in a city, the number of rentals there are across the street and what those tenants like, or the likelihood their own tenants will or won't pay.
"It's all about how much does it sell for, and how much does it rent for?" he says. "But that's almost like asking what is a stock's price on the busiest day of the year."