by Calculated Risk on 7/19/2008 09:47:00 PM

This NY Times article, Landlords, if Only by Accident, is somewhat of an advice column for novice landlords. But what is interesting is the two accidental landlords mentioned in the article.

Mr. Vallance ... bought [a] house about six years ago for $270,000 but has since decided he prefers the city to the suburbs. Selling it now isn’t the best option. “Maybe I could get $340,000, but four years ago I would have gotten $400,000,” he said.

And so he waits, leasing a one-bedroom in Midtown Manhattan while he rents out his house.

Why not sell it now for $340 thousand? He would still make a profit on the property, and if house prices continue to decline - as seems likely - he might get 20% less in a couple more years.

Three years ago, [Dr. Lorena Siqueira] bought as an investment a two-bedroom condominium on Brickell Key, a gated island in downtown Miami. She is concerned that the recently completed condo will not sell quickly for the price she wants — above the $1 million or so she paid at preconstruction prices. Stuck now with two homes that are near each other, she will rent out the new unit.

“I would rather take a loss on the rental and wait for the market to stabilize,” Dr. Siqueira said.

The market will stabilize eventually, probably at prices far below what Dr. Siqueira paid.

Both of these accidental landlords are looking at prices from a few years ago, and deciding to wait to sell. In general this is a mistake. Owners should analyze the rent or sell decision based on current prices - and consider the probability that nominal prices will move lower or at best stay flat for several years.

This is part of the shadow inventory that will eventually be sold and will help keep inventory levels high for years.