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Moral dilema as a landlord

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Greebo
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This might belong under ethics...if so, please feel free to move the thread.

I have rental properties, and I keep hearing from other real estate investors in my area how *good* the Section 8 program is in my county.

Part of me balks at the idea of renting to section 8 recipients, for what I hope would be obvious reasons on this forum.

On the other hand, I have no choice in whether I pay into such programs, and we've discussed topics like this before.

The main difference I sort of see with this, unlike something like medicare or social security, is that I would be profiting from this. Significantly. Its not a case of receiving benefits I absolutely need where I paid for them (against my will) in advance - as I continue to add rentals, I could eventually make more than I ever paid into such a program.

Is it immoral to profit from a program you fundamentally oppose?

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Is it immoral to profit from a program you fundamentally oppose?
How do you feel about renting to people who receive welfare in some form? Suppose you knew that a person got welfare (quote a supposition I know) and that it was legal for you to refuse to rent to a welfare recipient (another supposition), would you then also refuse to rent to welfare recipients? Let's also fold in to the mix students receiving educational grants from the state or the feds (which either specifically cover their educational expenses or their generic expenses). If you would oppose renting to people of that type, then you have a consistent principle that you're following.

If you would not oppose renting to then, then I suspect that you've misidentified the principle (or not implied to us clearly what that principle is). My first reaction would be, stay the hell away from the federal bureaucracy. The minute you start to directly receive money from the feds, you become their slave.

What alternatives do you actually face? Do you have a substantial problem with vacancies, or lousy tenants? This is really the standard that you should apply -- what are your actual choices, and how does either relate to your long-term goal, all things considered. The potential problem of recouping way more than your tax losses is a valid consideration (I don't want you to be an indirect leech, living off of my life's blood), but you have not show that this is an inevitable outcome.

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How do you feel about renting to people who receive welfare in some form? Suppose you knew that a person got welfare (quote a supposition I know) and that it was legal for you to refuse to rent to a welfare recipient (another supposition), would you then also refuse to rent to welfare recipients? Let's also fold in to the mix students receiving educational grants from the state or the feds (which either specifically cover their educational expenses or their generic expenses). If you would oppose renting to people of that type, then you have a consistent principle that you're following.

I'm not going to hold welfare recipients at fault (be they students or otherwise) for taking advantage of a system offered to them when they don't necessarily know any better. I make my decisions to rent based on credit and background checks and the ability to pay (ie: quantifiable and legal reasons).

If you would not oppose renting to then, then I suspect that you've misidentified the principle (or not implied to us clearly what that principle is). My first reaction would be, stay the hell away from the federal bureaucracy. The minute you start to directly receive money from the feds, you become their slave.

Valid concern. It's county administered, but still, I see your point.

The difference as I see it is - if someone's getting public money and they choose to rent from me on their own, that seems different from me going to the county and saying, "Here's an apartment for you to put people in", pay me money and put your people there when the County has no business being in the rental business.

What alternatives do you actually face? Do you have a substantial problem with vacancies, or lousy tenants?

No - we're fairly picky, but we're fully rented and nobody's missed a payment yet.

This is really the standard that you should apply -- what are your actual choices, and how does either relate to your long-term goal, all things considered. The potential problem of recouping way more than your tax losses is a valid consideration (I don't want you to be an indirect leech, living off of my life's blood), but you have not show that this is an inevitable outcome.

Well, to give you a comparison - we rent 2 different 1 BR units out for about $675 a month. The same units 2 streets over - same floor plan, etc., collect section 8 rent for $725. A 2br would go for 800, but on Sec 8 it would pull in $906.

The higher rent return is extremely tempting - but deep down it feels like I'd be actively endorsing the program if I chose to make a business profit from it.

Edited by Greebo
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Sounds to me like that extra money could easily be eaten up due to the fact that you would no longer be able to screen your tenants Who are you renting to? Are they going to take as much care as someone who you do approve of first?

You say you are fully rented. So what is the allure? Money? Are you in a rush to make money (any money) or are you willing to take a little longer and be proud of every single self made cent?

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Sounds to me like that extra money could easily be eaten up due to the fact that you would no longer be able to screen your tenants Who are you renting to? Are they going to take as much care as someone who you do approve of first?

You say you are fully rented. So what is the allure? Money? Are you in a rush to make money (any money) or are you willing to take a little longer and be proud of every single self made cent?

Am I in a rush to make money? Um.. Duh? :)

Obviously I want to maximize my profits.

BUT - you do make a very good point to consider about the long term - I think I would feel hypocritical taking section 8 rent when the primary reason I'm in real estate is to establish financial freedom via a capitalistic enterprise. It's hardly capitalism if the check is coming from taxpayers.

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Those state sponsored tenants could easily cause you $50.00 worth of headaches or damage to your property in a month. Isn't maintaining control of who you rent to worth that $50?

Sure - the only reason I was even considering it was that I have heard very good things from other landlords about Baltimore County's section 8 program. Apparently they do a very good job screening tenants, tenants are responsible for part of the rent, and they're quick to remove someone who doesn't pay their share.

If all that is true, then as far as Gov't prog's go, it's far better than most, kwim?

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The difference as I see it is - if someone's getting public money and they choose to rent from me on their own, that seems different from me going to the county and saying, "Here's an apartment for you to put people in", pay me money and put your people there when the County has no business being in the rental business.
I find that to be a bit subtle. Suppose the county has a list of relatively cheap dwellings for generic welfare recipients and they mention your place because you have cheaper places to rent (I assume that's the case). Would you equally object to renting to a student or welfare recipient because they provided information to a potential tenant, when it's not their business to provide such information? Is your objection that the government is obligatorily assigning tenants to particular dewllings where the tenants have no say in where they will go if they get this benefit? It seems to me that you're channeling the tenant's interests, not your own, if that's the case. Do you lose the right to screen tenants? Would you be forced to rent to gang-bangers?
Well, to give you a comparison - we rent 2 different 1 BR units out for about $675 a month. The same units 2 streets over - same floor plan, etc., collect section 8 rent for $725. A 2br would go for 800, but on Sec 8 it would pull in $906.
Okay, that makes it crystal clear. Basically, you would be taking advantage in a perversion of ordinary market forces -- the law of supply and demand. You have the choice to charge everyone $675 for the units, or to charge that only of people who are bound by the law of supply and demand, not the law of government excess.

Presumably this is actually legal, though that is surprising. I mean, you wouldn't be talking about committing fraud so cavalierly, so I assume that it's expected that you will hijack the government for extra money. This is like the $15,000 hammers -- if you bill them, the government will pay. I myself would have moral problems with that.

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Baltimore County has fixed rates for different types of dwellings, apparently regardless of area, so yes, it's legal. Even better - if Anne Arundel County, next door to us on the map, sent overflow to Baltimore County, A.A.C. would pay a B.C. landlord A.A.C. rates. That means A.A.C. would potentially pay me about $900 for a 1BR in an area where $700 is on par with the market average.

Which, when I examine it from that perspective, pretty much settles the matter. I'm not going to deal with Section 8, no matter how much potential rent loss is involved. I would rather rent to someone who earns their income and feel clean about it, even if they can't pay me as much.

Edited by Greebo
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That means A.A.C. would potentially pay me about $900 for a 1BR in an area where $700 is on par with the market average.
My head spins when I contemplate the implication of the strings attached. So that presumably means that if things were different and rents in AAC were a lot lower than in Baltimore county, say by $300, then if they send a renter to you, you'd be stuck with what they give you. In other words, when you sign up for this program, you basically lose ownership of your property, and only retain technical title in exchange for a license fee of sorts.
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My head spins when I contemplate the implication of the strings attached. So that presumably means that if things were different and rents in AAC were a lot lower than in Baltimore county, say by $300, then if they send a renter to you, you'd be stuck with what they give you. In other words, when you sign up for this program, you basically lose ownership of your property, and only retain technical title in exchange for a license fee of sorts.

Couldn't say - don't have full info yet. I'm going to request it, just to understand it better, however.

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I'm not sure what "good" would be concerning Section 8, but I have the misfortune of living across the street from this kind of housing. After I moved, I became aware of the status only after observing the behavior of the tenants. I also soon figured that they were the source of several acts of theft on things in my yard. They are loud, they destroy the property, they invite people over who do the same, and then they leave, furniture strewn in the yard. As far as I can see, they are basically uncivilized.

Who knows if all Section 8 is like that, but when someone else is footing the bill, the normal incentive and motivating factors just don't arise when the person is making decisions about how to treat you and your property. Not to mention that it is depressing, demoralizing, endlessly aggravating, and different than you set out expecting for when dealing with the government like this.

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... I keep hearing from other real estate investors in my area how *good* the Section 8 program is in my county.
If there is some way to find one such investor who used section 8 tenants and later changed his mind, he would be a good source to explain the downside.
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I used to be an evictions specialist in Dallas.

Section 8 tenants never seem to work out. And I have heard my share of horror stories that stem from Section 8 jerking landlords around for various kinds of things.

I would not recommend it. I have never seen anything but classless section 8 tenants, even when I was just an assistant to a real estate investor (he owned 125+ properties in the DFW area.) I can tell you some truly disgusting stories about evicting section 8 tenants as well.

Basically, they are paying you more money because you are taking in the lowest of the low, as a rule. I have yet to meet a landlord who used section 8 and paid attention to the costs associated with it who didn't end up losing money on it, eventually.

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I have rental properties, and I keep hearing from other real estate investors in my area how *good* the Section 8 program is in my county.

I think the points that DavidOdden has made are great. Most importantly those about control and ownership of your properties. As has been said, maybe you lose control of the ability to screen your tenants, etc... If it's your long term goal to make these properties work for you, as you said, then I wouldn't do it; however, you know more about the situation than I do. These tenants can destroy your property, and lower the value of it quickly over time. Who's to say that once you go section 8, more in the neighborhood don't go section 8, and cause a decrease in rental values? Also, how long do you have to stay with this county plan?

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Greebo,

I did a little searching and found that some areas have passed or are considering Section 8 discrimination laws. Have you heard anything about this in your area? Be cautious of making any overt statements, oral or written, to the effect that you don't rent to Section 8 recipients.

Edited by Mixon
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