If he has to keep paying two mortgages for too long, he might have to start dipping into his 401K. I suggested the idea of renting it out, while waiting for the market to improve. Even if he can’t rent the house for the entire cost of his mortgage, he’d be losing less money than he would if the house were to sit empty for a year. The house would actually be a perfect setup for a group of college or post-college roommates — four bedrooms and three baths, a four car garage, nice fenced in yard, and a home theater room in the basement.
He’s uneasy with renting, though. “What if the tenants damage it?” “What if they don’t pay, and then I have to evict them?” “It’s too nice of a house to use as a rental.” It seems to me that all of these questions can be easily solved by 1) Homeowner’s insurance, 2) Careful tenant selection and screening, including credit checks and previous landlord references, and 3) A security deposit.
With the foreclosure situation, I would expect that a lot of families who would otherwise own might be looking to rent.
Landlording isn’t for everyone, though. I’d hate to try to talk him into it, in the case that he would get a case of bad luck with tenants and property management… But I do think that he’s overlooking a good opportunity.