Quick question about section 8, can I change rent?

Rehabbing, Fix and Flip, Rental Properties
1

I realize it’s illegal to raise the rent for someone on section 8 but can I tell the tenant ‘Rent is (higher amount) and it covers the utilities.’ ??

The reason I ask is because I hadn’t even considered section 8 until I had a lady call me tonight from my online add and ask if I accepted section 8. I told her that I hadn’t considered it up to this point but I didn’t want to tell her yes or no until I had a chance to research it. I’ve found that one of the issues is the tenants inability to pay bills which can create issues if the utilities fall into this category. She actually told me that she gets a voucher for $1,250 (not sure if she was supposed to disclose that or not) and my rent is listed at $1,000. Would I be able to raise the rent total to include the utilities and remain within the rules? I just want things to go smooth and set the tenant as well as myself up for smooth sailing down the road.

Any help would be greatly appreciated. Thanks!

2

Most tenants have absolutely no idea what rent they are authorized for. When the tenant said that she gets a voucher for $1,250, she’s probably saying that $1,250 is the “payment standard” for the number of bedrooms she is authorized. The payment standard is NOT her authorized rent. Other factors are calculated by your local housing office to determine the maximum rent that is authorized. These factors include the tenant’s income and the calculated utility allowance for the specific rental. The utility allowance depends on what type appliances and HVAC the property has.

I would NEVER include the utilities (except water in large apartment buildings) in the rent. Doing so only encourages the tenants to keep the heat set at 80 degrees during the winter with the windows open. Also, if a tenant gets mad at you, the utility bills will skyrocket. The utility bills can easily be greater than your entire gross rent. Even without an evil motive, utility bills can rapidly rise (like last winter) and your profit could disappear due to higher fuel costs. I personally know landlords that experienced this last year.

If you’re considering Section 8, go to your local housing office and pick up a landlord packet. Many of these offices also have a training program for new landlords or will sit down with you one-on-one to explain the program.

Mike

3

Hi Jeremy,

I agree with Mike. Also, some of the Housing Authority offices here in WA have really good websites that give you much detail. While most of the HA offices have a lot of the same practices (as they are governed by HUD), do make sure you check with the HA office that governs your units because they all have their own pecularities.

Good luck!

Cate

4

Thanks for the heads up people.

I checked my local housing authority online I think, it was pretty uninformative as far as landlord type info and I came up empty assuming that’s the only site. It’s for Loveland Colorado in Larimer County if anyone can find anything better than I was able to.

I guess one of my primary concerns is the 60 day notice for the previous landlord. If it starts on the first of the month that means should I take an application and approve it in the next couple of days it will be almost three full months before I get a rent check. I don’t want to be out $3k for accepting a section 8 and at the same time I’m worried of getting in trouble for rejecting them for this very reason. I want to be able to accept it since housing authority helped out my mom and I when I was a kid and I would like to be able to supply a nice home to help someone else out and make my rental available to all possible tenants to get it rented. This being said I’m also afraid I will make a wrong move and get myself into trouble should I decide not to rent to someone for whatever reason.

Keep the posts coming people, I’m learning with every reply. Thanks!

5

Jeremy,

I’m seeing a lot of red flags in your post. If you’re going to be a landlord, it is absolutely essential that you become an expert with the tenant-landlord laws for your state as well as the fair housing laws. You can bet that many “professional” tenants know these laws and YOUR tax dollars are providing bad tenants with a free legal aid lawyer.

You will not get in trouble for not accepting Section 8. If you don’t want to take Section 8 - then don’t do it. It is completely legal to discriminate against potential tenants for a variety of things. I “discriminate” against criminals, the lazy, drug addicts, drunks, anyone with tatoos on their neck and hands, people with such baggy pants that you can see their underwear, people who can’t come up with the entire security deposit, and many more. None of these are in protected classes and you are free to “discriminate” at will.

I’m having a hard time believing that it takes 3 months to receive a check from your HUD office. I’m sending in a “Request for Tenancy” form this morning and I expect to have the tenants in the house in about a week and a check in my hand not later than the 1st of next month (probably sooner).

Finally, you talk about supplying a nice home to help someone out. That’s just naive. You are NOT in business to help someone. If you want to do charity work, volunteer at church. After you’ve been ripped off by the first hundred tenants, you’ll understand what I mean. Remember the old saying “No Good Deed Goes Unpunished!” Unfortunately, when it comes to tenants, this saying is sad but true.

Good Luck,

Mike

6

Thanks for the post and I understand what you’re saying. I took the real estate classes required for getting your broker’s license so I understand what the protected classes are. I read though that section 8 participants are required to give 60 days notice (good for me if I currently have a section 8 tenant) which begins the 1st day of the following month. Being as how today is now the 5th that would be almost a full three months assuming they haven’t already given their notice. Should I accept their application and deposit and then find out it will be almost three months before they move in and decide I don’t want to wait that long I don’t want section 8 breathing down my throat because I turned down the tenant pretty much because they’re on section 8. I realize they’re not a protected class but I also don’t want to put myself in a situation where I can’t rent to section 8 because I get black listed or something as a result.

I’m sure there are plenty of red flags because I’ve never rented to section 8 or even considered it prior to this phone call the other day. That’s why I’m using my resources to find out what my options are.

As far as being naive… I’m far from. I just realize that sometimes money making can help more than just yourself out. Clearly you didn’t grow up as a section 8 child and don’t realize what things like that mean to your family. I’m not providing charity but at the same time if I’m able to get the same check every month and help out someone less fortunate yeah I’m gonna get a slight warm feeling from that.

7

Mike,

You offered a fantastic explanation of “discriminating” acts ;D. The 7 protected classes are straight foward I think. You can discriminate against practicing drug addicts and drunks; however, I don’t think the same applies to recovering alchoholics and addicts?

Is this right?

You will not get in trouble for not accepting Section 8. If you don’t want to take Section 8 - then don’t do it. It is completely legal to discriminate against potential tenants for a variety of things. I “discriminate” against criminals, the lazy, drug addicts, drunks, anyone with tatoos on their neck and hands, people with such baggy pants that you can see their underwear, people who can’t come up with the entire security deposit, and many more. None of these are in protected classes and you are free to “discriminate” at will.

8

I “discriminate” against drug addicts, drunks, etc based on their criminal background (or word of mouth from someone I trust). Our rule is that we won’t rent to anyone with a felony; more than 2 misdemeanors, or any drugs in the past 5 years. These are arrests - not convictions. If they don’t meet this criteria, we won’t take them and I don’t care whether they are recovering or not. This is perfectly legal.

Mike

9

Thanks Mike. You’re very knowledgable and straight forward with your responses. Have you thought publishing a book or have a website?

10

Surrealstate,

I’m afraid that people aren’t looking for the truth about REI in books and seminars, they’re looking for big promises of fast results (riches). In fact, this isn’t only true about REI, but MLM, selling ads, the stock market, wieght loss, etc. The TRUTH is that getting rich is a LOT of work and doesn’t end once you make it. How many hours do the rich work? Does Donald Trump just sit around all day and count his money? Do rich people just sit around all day on their yachts and sip tall drinks? No!

Probably not much money to be made in telling people that they need to become educated and work hard to get rich.

Mike

11

Mike

I have read a number of your posts. Question for you.

You state “You will not get in trouble for not accepting Section 8. … It is completely legal to discriminate against potential tenants for a variety of things. …”

How would you recommend that I check out potential tenants via internet? Do you know a reliable and reasonably priced website for that purpose? If not how else would be best?

I have bought t and sold a number of homes - never been a Landlord - but I now have a condo I must rent and probably as Section 8. I need to check out and cull the deadbeats and loosers.

Any Help?

Jess

12

I believe it is actually illegal to advertise that you will not accept section 8. Not sure if it’s a state thing or a federal thing.

However you can setup your own guidelines where the rent has to represent less than 30% of their income. By default, section 8 tenants are on it because they don’t meet this guideline and your basis for rejection is that you’re afraid they wouldn’t be able to cover the rent.

Oh, and the way to check out a tenant is with a credit check. There’s several websites that will do it for you, most charge a setup fee and then it’s about $10 to run a report. Some will also do criminal background checks and eviction checks. You may also want to see what kind of reserves they have. See what they have for savings, 401, IRA, etc. The should help you determine if they’ll be able to pay the rent if they’re laid off for whatever reason. You can also tell them to fill out an application which you could probably get from your local real estate board. Then tell them the way the rental process will work is that it will cost them $25-$35 which they don’t get back so you can run the credit check. If everything checks out, the apartment is theirs. Otherwise they lose the $25-$35.

I’ve killed several deals this way, but I feel it’s better to find out ahead of time. Usually I don’t even get to the $25-$35 phase, I just tell them to fill out the rental application and usually they’ll say they’ll take one and send it in once it’s fill out. People who want the appartment fill it out on the spot.

Now another realtor tells me what he does is actually visit the tenant and see how clean they are. Then he also calls up the previous two landlords and checks their references. In this state, the owners of a property are public records so he double checks the names of the landlords against public records to make sure they’re not using a friend who claims they’re a landlord.

13

Jess,

Federal Law makes it illegal to discriminate in connection with rental housing based on race, color, religion, sex, handicap, familial status, or national origin. You can discriminate for many other things. I discriminate all the time. I won’t accept anyone who has had a felony or more than 2 misdemeanors in the past 5 years. I won’t accept anyone who has been evicted in the past 5 years. I won’t accept anyone who has had their utilities shut off in the past year. I won’t accept anyone who has any record of illegal drugs in the past 5 years. I won’t take anyone who looks like a hoodlum. People with tattoos all over their face and hands; baggy pants that must be held up with one hand; showing up in a car that is filled to the windows with beer cans; are not acceptable to me. This is not personal. In fact, I could care less if a person has 100% of their body covered in tattoos; has to use both hands to hold up their pants; or has enough beer cans to start a recycling center.

My business is about making money. People who try to look like hoodlums usually are hoodlums. Accepting hoodlums into your rentals is not a good business decision, because they have a high probability of becoming liabilities and costing me money.

Back to your question. It is completely legal under the federal anti-discrimination laws to not accept Section 8 tenants. Do a google search of “federal fair housing law”. You might also want to search your state fair housing law. I assume that Henry lives in Ma, which is a blue state. Blue states and some big cities may certainly have more restrictive local laws concerning discrimination. It is absolutely imperative that you know all of the laws and rules in your investment area! I am not aware of any law that prevents advertising “no section 8” tenants here in Ohio, but that is like proving a negative. Advertising “No Section 8” tenants may indeed be illegal in your area.

From a practical standpoint, I would not discriminate against Section 8 tenants. They are absolutely no different than any other tenants - no better and no worse. The only negative with Section 8 tenants is the hassle of the paperwork and inspections that Section 8 requires. Otherwise, the tenants are exactly the same.

If you can get the rent you want, then I would take the first suitable applicant, whether they are section 8 or not.

As for screening, I agree 100% with Henry about getting an application fee. You can find tenant screening companies by doing a google search for “tenant screening”. National Tenant Network is one company that does these screenings, both credit checks and ciminal checks.

You can often do a local criminal check for free from your computer. Siimply visit your local court websites (both municipal court and common pleas court) and search the docket for your applicant. Very easy and free.

I am not a lawyer and don’t even pretend to be one on the internet. This is not legal advice, blah, blah, blah, blah.

Good Luck,

Mike

14

Im sure many will have issue with this I AM NOT AN EXPERT LANDLORD, I can only offer what I do.

Whenever I am meeting with someone questionable to show a home I tell them ahead of time that I think somebody else has already taken the home, but if they would like to be considered as next in line they are welcome to fill out an application. If I like them, then I just say the other person went away, if I dont then I say the other person called and is taking the home. This eliminates any need for me to have to provide them with evidence of why I didnt accept them.

Go ahead come gunning at me “Experts”

Eric Medemar

15

There’s no problem with your approach per se, but what happens when you say someone else took it and then you still have it advertised a week or two later and they call you back up?

Tenants don’t keep track of who they call either, they call whoever has a place advertised.

Do a good screening and you won’t have to resort to these measures. But hey, we all get lazy sometimes and sometimes you don’t get burned and sometimes you do. I think if they have a good fico score, have reserves, good references, keep the place clean, want to stay long term, rent the place to them. People questionable don’t fit those criterias and it’s perfectly acceptable to say no.

Oh, I should chip in with my lawyer story. It seems that one landlord discrimated against lawyers, wouldn’t rent to them because he felt they would cost too much money. One lawyer sued and the court ruled against him and sided with the landlord because the lawyer did raise his costs and lawyers are not a protected class. You can discriminate all you like, just as long as it’s not a class prohibited by the government/fair housing laws.