Floplords

From the Modesto Bee:

Kenneth Spencer hadn't planned on being a landlord. He and a partner thought they would make a tidy profit buying an older Modesto home, fixing it up, then quickly reselling. "But we bought at the wrong time," lamented Spencer, who lives in Martinez. "We put a lot of money and a lot of time into that house."

After spending $309,000 for the Elm Avenue home in 2005, plus $80,000 more remodeling it in 2006, they haven't been able to sell it for enough to break even. So they're trying to rent it for $1,650 a month. Even if they get that price, they'll still be short $1,000 a month on their mortgage payment. "It's all about trying to survive on the mortgage right now," Spencer said.
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Many people are trying to hold onto houses they purchased as investments by becoming landlords. That has flooded the Northern San Joaquin Valley rental market with houses, pushing down rents and forcing landlords to compete for tenants.

Many rental properties originally were bought by speculators who got caught in the real estate downturn, explained Paula Leffler Zagaris, whose Liberty Property Management company manages 1,500 rental houses.

"They were gambling," Zagaris said of investors who intended to quickly sell — or "flip" — houses to cash in on rising property values. "Anybody who did that before October 2005 was a genius and made a lot of money. … But if they bought after that, they're stuck."
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Many good-quality homes are on the rental market now, said Deborah Naylor, owner of Parkside Management Co., which manages 300 rental houses. "Tenants can really rent very nice houses for really nice prices," Naylor said.
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"Owners are just so desperate because they can't stand to take that mortgage hit every month (without renting to cover part of their cost)," Naylor said. Often, owners ask her to seek higher rents, say $2,000 a month, but Naylor tells them, "We're not miracle workers." Zagaris agreed an owner's costs have no bearing on what they can recoup in rent.
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"My house has been empty for four months," [landlord Darrell] Bye said. "I've been renting out houses since the 1970s, and this is the worst I've seen the market. I've even lowered the rent $200 … but I haven't found tenants I'd rent the house to."