The Accidental Slumlord

When you walk into the back apartment of the tan duplex on the west side of Pocatello, Idaho, the first thing that hits you is the smell: an acrid mixture of stale cigarettes, pet odors and filthy carpet infused with God-knows-what. Two strips of flypaper hang from the ceiling, dotted with prey. In the kitchen is an ancient gas-fired heater that, despite frigid Idaho winters, hasn't worked in over a year. The tenants, Will and Rose, seem unbothered by their home's shabby condition. Will, 22, stands in the living room, playing songs on a huge stereo, while Rose, 21, tends to their 1-year-old son. Will does have one complaint, however. The couple, unemployed and living on government disability checks, has fallen behind on their $365 monthly rent. Their landlord, Will says, is being a little hard-nosed about it. As a NEWSWEEK reporter I've heard no shortage of sad housing tales in the past few years; ordinarily I nod sympathetically and take notes. But my role here is more complicated. Though I've just met Will and Rose, and this is my first visit to their apartment, the landlord to whom they owe the back rent is me.

As America copes with a painful hangover from a decade-long real-estate orgy, I'm dealing with a headache of my own. Four years ago, at the height of the boom, I visited Pocatello to write a story for NEWSWEEK about how out-of-state investors had begun buying cheap rental properties there, drawn by ultralow sales prices and a solid rental market. (At the time, the average Pocatello home sold for just $98,000.) A year later, while writing a book about the housing boom, I decided to dive in myself. In late 2006, after seeing only e-mailed photos, an appraisal and an inspection report, I paid $62,750 for a two-unit rental property in Pocatello, which is 2,450 miles from my Massachusetts home. I didn't expect to get rich; my main motivation was to have a good story for the book. By that measure, the deal was a success; when House Lust  came out in 2008, the chapter in which I described my early misadventures as a property magnate (an early tenant went to jail; my first property manager made off with $1,300) helped fuel reviews and interviews. But now, long after the buzz over the book has died down, I'm stuck with a house in Idaho—and friends who call me a long-distance slumlord.

In an economy that's awash with underwater homeowners and families facing foreclosure, my situation is hardly dire. Thanks to an energetic local property manager, my two apartments have never been vacant. Many months the combined rent of $690 covers the $503 mortgage payment and other expenses. Still, I'm frequently hit with repair bills (a broken stove, a leaking underground water line) that send me into the red. And even after the tax write-offs, my costs have exceeded the rental income by more than $2,500 since I purchased it.

While that's a small loss, I worry the red ink could keep growing. Local vacancy rates have been rising, and if one of my apartments falls empty, rerenting it may be difficult. Property values in Pocatello haven't plunged like they have in Nevada or Florida, but the credit crunch has drastically reduced demand for investment properties like mine. As a result, my Idaho duplex has a lot in common with the il-liquid securities languishing on bank balance sheets. Lately, I've come to think of it as my own toxic asset. So I decided to finally see it for myself—and to figure out what to do about it.

Located in southeastern Idaho, Pocatello is a former railroad hub that's today home to 54,000 people and to Idaho State University, which has an enrollment of 14,000. Relative to other places, says Mayor Roger Chase, the city is weathering the recession well. The unemployment rate is only 5.4 percent, and lately alternative-energy companies have begun expanding locally, which should bring an influx of "green jobs." Still, beneath the buoyant statistics lies a large low-income population. "When I grew up in Pocatello, you could not read or write and still get a job at the railroad making $50,000 or $60,000 a year," Chase says. Not anymore: today there's enough poverty in Pocatello that local food banks are often empty due to high demand.

While that's a problem for Mayor Chase, these down-and-out folks are my potential tenants. That's evident as I pull onto a busy one-way street and begin scanning the houses in search of mine. I recognize it by the twin satellite dishes hanging off one corner. On the front porch I meet Bill, who's 66 and has lived with his companion, Sarah, in the front unit of my building for 15 years. Supported by Social Security, they are ideal tenants: never late with a payment, unlikely to move, and when something breaks, Bill often just fixes it himself. Bill wears a T shirt, jeans and an Idaho Fish and Game hat; Sarah, who is in her mid-70s and wears a housecoat, sits on a battered couch on the front porch and repeatedly asks who I am.

The outside of the vinyl-sided house looks the same as in photos, and aside from the peeling paint on the window frames, there are no obvious defects. The roof looks solid. The neighborhood exceeds my expectations; some nearby houses are in good repair. Inside, however, this house is a pit. The floor in Bill and Sarah's apartment feels spongy—the result, Bill says, of previous owners laying new carpets without removing the old ones. In the kitchen, the linoleum is horribly worn. Bugs scurry in the corners. In the bathroom, there's a hole drilled in one corner of the floor. Bill says he put it there so that when the toilet overflows, water can drain into the crawl space below.