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; whenHouse 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. Even if this place had "good
bones"—and it doesn't—they'd be hidden beneath clutter. The living-room
furniture appears scavenged; strangely, the room is equipped with four
televisions. (Bill likes to find and repair old TVs.) By the front door are
several dressers filled with tools, which Bill uses to maintain the place.
Taped to the front of one bureau are four postcard-size pornographic photos. I
point at them and raise an eyebrow. "What, don't you like naked
ladies?" Bill asks. The other unit, where Will and Rose live, is slightly
cleaner, but its state of disrepair is the same.