Clay Spence never intended to become a landlord, but lately, it has started to seem like the most practical choice. Spence, a 27-year-old financial analyst residing in Brevard County, Florida, near Orlando, purchased a three-bedroom townhome for $225,000 in September 2021. The property, surrounded by palm trees and well-maintained lawns, seemed ideal for a remote worker like him. Additionally, the mortgage rate of just over 3% was extremely attractive—less than half the typical rate today.
Spence believes such low rates might not be available again soon. However, when he and his fiancée decided to buy a newly built home in Winter Haven, Florida, about halfway between Tampa and Orlando, they faced a dilemma. This new home offered advantages like proximity to friends, family, and Spence's office, where he has been attending more meetings in person. The builder provided incentives such as a price reduction and a mortgage rate buydown. But what should they do with their existing townhome?
Selling it could yield a modest profit, but keeping it held significant appeal due to its potential for value appreciation and the favorable mortgage rate. Spence opted to list the townhome for rent, reasoning that managing tenants and occasional maintenance issues would be worth the effort. He successfully rented it out for $1,800 per month, allowing him to make around $300 monthly after covering expenses like the mortgage, taxes, and insurance.
Spence is an example of an "accidental landlord," someone who enters the rental business through circumstances rather than ambition. These landlords arise from careful considerations and trade-offs, unlike the enthusiastic real estate entrepreneurs often seen on HGTV or TikTok. While accidental landlords have always existed, the current "Housing Ice Age"—characterized by sluggish home sales due to rising borrowing costs—is creating a new wave of reluctant rental owners.
The ranks of these accidental landlords may grow as more companies enforce return-to-office policies. As employers like Amazon, AT&T, and the federal government bring employees back to physical offices, some may need to abandon homes bought during the peak of remote work. Property managers in cities like Dallas and Atlanta, popular pandemic relocation spots, report increased interest from homeowners seeking to enter the rental market. Online resources for inadvertent investors are also proliferating. With selling houses currently challenging and finding fully remote jobs difficult, becoming a landlord might be an appealing alternative.
When moving, homeowners typically face two options: sell the house or rent it out. In 2021, selling seemed straightforward due to abundant buyers buoyed by record-low mortgage rates. However, this changed in spring 2022 when the Federal Reserve raised interest rates to combat inflation, causing mortgage rates to soar. Today, the average 30-year loan rate is approximately 7%, compared to 2.6% in early 2022. Consequently, recent homebuyers pay significantly higher interest costs.
This shift affects the sell-versus-rent decision: giving up past favorable loan terms could be unwise, especially if tenants can help cover the mortgage. Prospective sellers, particularly in the southern U.S., also encounter weaker demand and more competition. According to Altos Research, about 630,000 single-family homes are currently on the market, compared to 270,000 in 2022. Many sellers are turning to the rental market instead.
Although precise numbers of accidental landlords are unavailable, estimates exist. A 2024 National Association of Realtors survey found that 20% of repeat buyers retained their previous residences as investments, rentals, or vacation properties. Parcl Labs identified popular single-family rental markets like Tampa, Florida; Dallas; Charlotte, North Carolina; and Phoenix. Their analysis revealed that 3% to 8% of sellers who listed homes for sale in September became accidental landlords by November. In Atlanta, roughly one in ten sellers switched to renting within a year, while Houston peaked at nearly 9% in July and Phoenix surpassed 15% in June.
Jason Lewris, a co-founder of Parcl Labs, notes the thin sales market: "Folks want to move, and this is another outlet for them."
Some accidental landlords avoid trying to sell altogether. Ryan, working in healthcare, bought a house in southeast Austin for $615,000 in April 2022—a timing mistake as Austin home prices subsequently dropped by almost 16%. Ryan estimates his house value at $450,000 now. Homebuilders offer substantial buyer incentives, making selling tougher. Disillusioned with Austin, Ryan accepted an in-person job in Phoenix and plans to rent out his Austin home.
Christopher Story, co-owner of Story Real Estate in Dallas, reports that half of his inquiries come from accidental landlords unable to sell. Todd Ortscheid, managing Revolution Rental Management in Atlanta, similarly observes the area being "flooded" with accidental landlords. Of the roughly 15 properties managed monthly, about 12-13 belong to unintentional rental owners.
As remote work diminishes, accidental landlords may increase. Workers who bought homes in rural areas might reconsider if required to return to offices. Selling might not be feasible for some, leading them to retain their homes.
Ortscheid predicts this trend will continue until interest rates drop below 5.5% or 5%.
However, some markets with weak for-sale conditions show softening rental markets too. For instance, Austin saw asking rents decline by over 2% year-over-year in November, with resale listings increasing by more than 60% from 2019 levels. Similar trends appear in Dallas, Houston, Orlando, and Phoenix.
Not everyone is suited to be a landlord. Property managers warn about unexpected costs and challenges. Vacancies and maintenance issues can disrupt cash flow projections. Hiring a property manager is costly, often requiring a month's rent upfront plus ongoing fees.
Despite challenges, small-time rental owners benefit from modern tools. Platforms like Zillow and websites of large investment firms provide comparable rental prices. National firms such as Buildium and Roofstock offer management services and pricing advice. Startups simplify tasks like rent collection and bookkeeping.
Casey Conner’s experience in Nashville illustrates the mixed results of being a landlord. In January 2022, he bought a suburban home with a 3.2% interest rate. After accepting a job in Kentucky, he debated selling or renting. With homes lingering unsold on his street, renting seemed less profitable after hiring a property manager. Despite hesitations, he chose to rent. Charging $2,300 covered his $2,100 mortgage and $200 management fee but left no buffer for additional maintenance costs exceeding $3,000.
After getting laid off, Conner moved back into the Nashville home, finding it easier to secure another job locally. Although financially painful, retaining the home proved beneficial: he kept the low mortgage rate and had a place to return to.
Conner reflects, "Not that I am rich, but I do understand when they say: 'The rich don't earn. They own.'"