A Beginner's Guide
To Landlord Hassles

Phil Heagney, a 56-year-old circuit-court judge in St. Louis, has been a landlord for 30 years. When he married Barbara Prosser, in 1991, they began investing in two- and four-family houses on their block in the city's Forest Park Southeast neighborhood. Today, they own nearly half of them.

Their wanted to make a long-term investment that would help to preserve their neighborhood -- an area of St. Louis that has quickly become a hotbed of home-buying and -selling activity. While some buyers have shown a commitment to the Forest Park Southeast area, Ms. Prosser says the neighborhood has become popular among speculators -- investors who buy properties with the intention of selling them quickly for a substantial profit.

"Property here is going fast," Ms. Prosser says, adding that buyers in her neighborhood have ranged in age from their late twenties to late fifties. "We wanted to make sure there was an investment in [the neighborhood] and it was well tended to."

The couple now earns enough from their four properties to cover their mortgage payments and renovate the buildings. But they've also learned that being a landlord entails more than just collecting rent checks. In fact, Ms. Prosser has taken a leave of absence from her job as a nursing-home administrator in part to better manage her landlord responsibilities.

Likewise, Chad Decker, an account manager for a lab-products company, knows that owning multiple properties can be time-consuming. He and his girlfriend, Trina Carter, an estate planner for a local attorney, own seven one- and two-unit homes in the Allentown, Pa., area (he owns three, she owns four).

"Many people are getting into real estate," Mr. Decker says. "They think: 'As long as I break even and the mortgage is being paid, I am building equity.' But it's more difficult than ever to be a landlord and make money."

Still, the right investment can yield solid cash flows. For Mr. Decker, a minimum profit of $500 per month, per property, makes it a worthwhile venture -- despite the headaches involved.

Considering buying an investment property? Below are 10 of the biggest hassles that send residential landlords reaching for the aspirin.

Hassle No. 1: Finding good tenants. For many property owners, this is easier said than done. Alvaro Rodriguez of New York City rents out a single-family home in Miami. He has turned down numerous applicants due to bad credit, disorderly pets and requests to house extended family.

Mary Grieve, of Bethpage, N.Y., has had "13 years of aggravation" renting out her townhouse in Fort Myers, Fla. "I've had two good tenants out of 15," she says. "Eight have broken the lease and thought nothing of it."

Success as a landlord boils down to: "Can you pick good people?" says Mark Stender, an actor and landlord in San Francisco. He says he is fortunate to have kept good tenants in the six-unit apartment building he has owned since 1997.

Hassle No. 2: Collecting the rent. Some tenants simply don't pay up. In this respect, George Grant, a former landlord from Mineola, N.Y., has been burned twice. Most recently, he had a family with a good credit history evicted from his Long Island property for not paying the rent.

"Make sure whomever you rent to can afford it," says Mr. Grant. "Check with the previous landlord, and if you have a bad gut feeling, don't rent to them."

Mr. Decker, too, has had problems collecting. Most of his tenants receive monthly rent assistance from the U.S. Department of Housing and Urban Development (HUD). Each month they're given a voucher to pay for their rent, but it may not cover the entire amount.

"If the tenant can't make up the difference, I'm in the hole," says Mr. Decker.

Hassle No. 3: Vacancies. Every landlord would love to hang a "no vacancy" sign. Unfortunately, empty rental units equal financial loss for property owners.

"One winter I had two empty apartments and a four-family home and couldn't get them rented," says Mr. Grant.

Mr. Rodriguez is facing this problem with his Miami house. After listing it with a rental broker, he has received only a few inquiries, he says. He believes this may be partly due to this year's active hurricane season.

Hassle No. 4: Maintenance. Whether a tenant has a clogged sink or a more serious issue, like black mold, it's the landlord's job to take care of it.

"When a washing machine is broken, you have to get someone down there to look at it," says Mr. Grant. Unfortunately, every repair call will cut into your profits.

The alternative is to do the repairs yourself. No problem -- if you're handy. As self-described unskilled laborers, Ms. Prosser and her husband say they can handle grunt work like mowing lawns but can't take on bigger projects. This means more time spent tracking down workers.

Hassle No. 5: Finding good help. Finding repair professionals -- especially good ones -- can be a project in itself. Ms. Prosser says it's difficult to find dependable people who respond to calls in a timely fashion.

"We are pretty patient, but our 'do not call' list is getting longer and longer," she says.

Even when you do find help, projects don't always turn out how you'd hoped. Florencia Jimenez-Marcos has often found this to be the case. She and her husband own nine residential properties in Houston and one in Miami. Recently, she had to redo all of the electrical wiring and sewer and water lines in the Miami house due to poor maintenance work.

"It's one of the joys of property ownership," she says. "You think you pay for a top-notch job, but you never know for sure until something bad happens."

Hassle No. 6: Negligent tenants. "It's a big mistake to make a rental property as nice as you might like to," says Mr. Decker, "because your tenants are never going to take care of it as well as you would."

The same is true, he says, when it comes to basic maintenance like shoveling sidewalks. Mr. Decker used to deduct $25 from the rent if tenants did the shoveling themselves, but he found he couldn't trust them to do so -- and he was liable for any related injuries.

Ms. Prosser has had her share of disasters as well, like the tenant who neglected to inform her of squirrels living inside her walls.

"We had put thousands of dollars worth of new wood in there that the squirrels were eating through," says Ms. Prosser. She has had similar issues with tenants ignoring mold and other rodent infestations.

"Those are manageable things, but when people casually put up with them, they become your problem," she says.

Hassle No. 7: Natural disasters. Anyone who owns property in Southern Florida is all too familiar with this threat. Mr. Rodriguez managed to get through Hurricanes Ivan, Frances and Jeanne with only a few fallen plantain trees. Because he lives in New York, his friends in Miami secure his home's storm shutters when there is a hurricane threat and clean his yard after a storm. But his friends would not be able to prepare for and manage the aftermath of a direct hit by a strong hurricane, he says.

On many parts of the West Coast, earthquakes and floods are a concern for property owners. Mr. Stender's wood-frame building in San Francisco is bolted to its foundation, which can help protect against collapse in an earthquake.

Of course, owners should always carry property insurance, but review your policy with your insurance broker so you understand what's covered -- or not. "The homeowner's insurance I carry covers hurricane damage as well as anything structural, but since the house is not considered my primary residence, I am not covered for any damage or loss of personal effects inside the home like furniture," says Mr. Rodriguez. "And I don't live in a flood zone, so I don't have that type of extended coverage."

Hassle No. 8: Managing from a distance. Managing a property in another state can be challenging. Ms. Prosser says she finds it difficult to manage a building across town. With her four investment properties located in her neighborhood, she says she's lucky.

"If a tenant needs something, I can just walk it over," she says.

Mr. Rodriguez isn't as fortunate. During hurricane season, he realized that not being local is a huge disadvantage. "It is hard enough for me to reach Miami, let alone assess how much damage has been done," he says.

One option is to find a reliable local property manager to deal with maintenance and other issues as they arise. Owners can expect to pay a manager 5% to 10% of gross income from the property.

Hassle No. 9: Rising property taxes and insurance costs. If you are considering buying property, conditions in some markets could make it difficult to turn a profit. Ms. Jimenez-Marcos describes Miami property returns as dismal, due largely to escalating property taxes and insurance costs.

"I don't even want to think about how much insurance will increase after Florida's four recent hurricanes," she says.

Mr. Stender finds it very difficult to make money on his property in San Francisco's Richmond district based on traditional cash-flow expectations.

"The PITI [principal, interest, taxes and insurance] are so high for a newly acquired building that new landlords are going to run in the red for years to come," he says.

Hassle No. 10: Late-night phone calls. Unless you can afford to hire a property manager, being a landlord means always being on call. Mr. Decker learned this the hard way when one of his tenant's children had health problems and relied on an electrically-powered breathing apparatus. If the power went out in the middle of the night, he needed to respond and find an electrician as soon as possible.

Some tenants won't hesitate to call at any hour over less pressing concerns, like minor plumbing issues. This headache relates to the first, and biggest, landlord hassle: finding good tenants.

"I've yet to get a phone call in the middle of the night about a toilet," says Mr. Stender. "My tenants have been chosen based partly on their reasoning skills. They wouldn't call up Banana Republic or Whole Foods at 3 a.m. to demand service and they don't do it with me. Experience has taught me that anything short of a flood or fire can wait until the morning."

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