Hello, I am Jamie Swalm and I’m here with Connor Swalm and we are the hosts of the Landlords Resource brought to you by Swalm Property Management where each week we provide practical content to educate and empower landlords.
Welcome to another episode. Connor, how are you doing? I’m doing great today. Alright, well we’ve got a special episode for you. Today we’re going to be talking about government sponsored or government subsidized housing. Now, there are many programs that vary around the country. Some are national programs, some are state programs, some are local programs. We are not going to get into the specifics of each program, but we’re going to talk in general about the pros and the cons of using government subsidized housing. Many of the landlords we talk to want to know whether they should move in that direction.
Let’s jump right into it. What’s the first pro of using government sponsored housing? Well, first and foremost, the most easily recognizable benefit of government sponsored how housing is a guaranteed rent check. Usually, you will receive 100% of your rent check on the first of the month. That is the largest reason to use government subsidized housing. You don’t have to track down late fees. The rent is always paid on time.
Often that’s enough for a lot of homeowners. So that’s pretty much the greatest pro that you could recognize right away. Secondly, the tenants are often more well behaved in that they take care of the home in general because they’re subject to inspections from their government programs. They’ll have some type of regular inspection. Then they have regular inspections with us and if there is clear damage that they are doing to the home, so it’s not a normal maintenance issue. If they’re putting holes in the wall or doing a whole bunch of bad stuff to the property, then they could lose their benefits and a lot of tenants understand that and if they don’t, they don’t want that to happen. So they normally take very good care of the home while they’re there. So that’s also another benefit that sometimes people overlook.
Third, if the tenant is there, they’re in place with the program, they typically don’t move, so they’re going to be there long term. So I mean we signed leases only for a year, nothing shorter. Um, and typically we see that any government sponsored tenants that we have, they are there longer term than normal. So they, they typically are there for multiple lease signings and they, like I said, take good care of the homes that we’re happy to release them and the rent is paid on time. So you really get a guaranteed rent for a very long time. And a good tenant in that home for a very long time. Another thing to think about is the most significant cost to an owner is incurred when you have to re tenant the property. So for any reason, if a tenant leaves and you have to reach out to the property or if you evict a tenant, you have to retain it.
A property or if it was just vacant to begin with when you took it over, the most expensive part of property management for an owner is re-tenanting the property. And it is very easy to find tenants when you are connected with these government programs. Normally they just have, they have a housing shortage. So normally they’re looking for these quality homes to put these tenants in and to give you the rent. So if you, if you, if you are one of those homeowners that allows government sponsored tenants in their homes, then you will have a much easier time finding tenants. I mean, we have some owners that prefer not to have government sponsored, um, a tenants in there just because they want, they don’t want that rent check coming from the government programs in that way. Uh, and we’ve actually had tenants apply where that is the case and they’re not aware.
And then we would have had the tenant, we would have had the property tenant that much faster if the government program that this tenant was using the owner wanted in their home. Uh, so it’s much easier to find tenants, much easier to place tenants that way because there’s much more of them choose from. So you see, you incur less costs and you get it turned around much quicker. Yeah. And at this point in our local area and I know that, um, you know, for the most part, this is the same around the country. It can vary in different geographies and there’s different national conversations happening about this. But, uh, but for us in our local area, it is purely the landlord’s choice on whether to go forward with subsidized housing or whether, whether to not go forward with subsidized housing. And ironically, I mean, we manage, we manage a lot of subsidized housing as well through the government programs.
And ironically, what we find is that, um, you know, many of our best tenants actually come from that environment because the tenants are very, very careful not to jeopardize their government housing. So, uh, you know, they uh, pay their portion of the rent on time. They usually take care of the property, uh, extremely well and are often very, very, very pleasant to deal with. And so our experience is that the tenants that are in those programs are actually, I’m usually very, very, very positive to deal with a, as, you know, as an owner. So, uh, so those are the pros of using subsidized housing now. Now there are some cons, uh, the majority of them, you know, deal with the extra complexity of dealing with a government agency. And so, uh, you know, let’s get into some of the cons. Yeah, uh, dealing with, in any sense, it’s not all rose pedals and it’s not all fun a first you’re dealing with a government entity.
This is not a private organization that is purposely running efficiently to make a profit. This is a government entity that is something at sometimes it’s slow and it’s painful and the processes are very old or sometimes don’t work. Um, sometimes, I mean, I had an experience where I left phone calls, voicemails. Uh, I even sent emails to different people. I even showed up at the government’s, uh, I even showed up at their offices where they said their offices were online and they told me they didn’t accept walk in and appointments, which really confused me because I literally could not get in contact with the, with the person I needed to, to answer some questions via any method. Even if I was physically there, they would not let me talk to the person who is right behind a wall right in front of me. So sometimes it’s, it’s extremely painful to deal with government entities.
Um, but I mean, so that’s what you’re getting into. Um, sometimes also there are stricter criteria for renting. So you’ll, like I said earlier, the tenant is subject to different inspections. You are as well. So they’re not just inspecting the home for damages caused by the tenant there, they’re making sure you’re doing a good job. And some owners, especially if it’s in a, if it’s a low income area and the home necessarily isn’t integrate area there, the, there will be definitely prepares that. They’ll say need to be made in order to get the rent check that a homeowner’s not willing to make a. and so sometimes you’ll be subject to stricter criteria then you’d like, that’s not necessarily a bad thing. Uh, it’s really keeping you. I’m at out of the slum Lord designation because you’re really there to provide good housing for these tenants.
Uh, another thing is it is very hard to raise rents on. So typically what we do is at the end of every lease, we’ll, we’ll look at the property, we’ll do a rental, cma will do a property value cma, and then we will adjust the rent accordingly or suggest to the owner that we, uh, change the rent accordingly with the government sponsored housing programs. That is not the case. Basically, if they, if you submit a request and they want to accept it, they’ll accept it. If they wanted to deny it for whatever reason, they will deny it and more often than not, you will not hear back from that government organization for I would say six months. So when we put in rent raises for, um, leases that ended in December, we actually put them in in June and did not get notification until a couple of weeks ago actually, that, uh, that the rent, the rent raise that we wanted at that point would have been accepted.
So it’s a very slow process, as I mentioned earlier, and raising rents is just one thing. It’s going to be very hard to raise rents, very hard to recoup any additional costs that you have to eat as a homeowner. Maybe your interest rates or your mortgage goes up or whatever, but very hard to recoup that through rent raises. Also, older homes are harder to get the code. I meant, I mean, I might have touched on this a little earlier, uh, when your subjects to more, uh, inspections. But if you have an older home, it’s going to be harder to rent with a government sponsored program because they’re going to suggest you bring everything up to code. Um, cause they’ll know exactly, especially if it’s a good home inspector, they’ll know exactly what is wrong with the home. They don’t have to open it up, don’t have to look in the walls, they’ll know exactly what’s wrong with the home, they’ll suggest the do remodels and sometimes the remodels that they suggest are more than the actual purchase price of the home.
So it’s at that point, it’s not in the owner’s best interest to do so. So that’s one thing to think about. You’re also at the mercy of government policies when you’re dealing with a government organization. So if they wanted to slow down the process even more, uh, or if they wanted to change the way you had to interact with your tenant or that organization that is completely in their power, you have no power when you’re dealing with the, went with these organizations, right? You, you may have a tenant in your property that is responsible to you, but you are responsible to these government organizations, so you’re completely at their will. If they want to do something, they will do it. Um, and you’ll pretty much just have to go along with it. Also, one thing that we’ve seen on average, uh, like, uh, he said tenants are more well behaved on average.
So on a, a government sponsor tenant and a normal tenant, I will take the tenant who has government subsidized housing because they typically behave better, but there is one outlier if you get a bad tenant that is sponsored by the government, it will be the worst tenants you’ve ever had in your life. There is, there is no in between. It is either a very well behaved, good tenant or it is a tenant that you will never forget for the rest of your life, not for good reasons. Um, so that being said, it’s what I’ve seen. It’s what we’ve seen as a company. It’s what I’ve heard from other landlords as well. Other property managers, for whatever reason, that’s just the case. When you get a bad one, they’re very bad and they are hard to deal with because now you’re trying to mediate between a government organization and this tenant and whatever story this tenant wants to spin is the story that gets spun, right?
Because the government organization is there to protect the rights of the tenant, not necessarily to protect your profit margins and make sure that you’re not operating at a loss if you’re the homeowner. Uh, so that’s one thing to always keep in mind. Also, if a tenant caused the damage, right, there is a reason that they have government subsidized housing. If they cause a lot of damage to the home, they will not have the money to pay for those damages. We see this time and time again, tenant causes damages to the home and then moves out. I mean, obviously we report this to the government agency, but we have never seen those checks. So if a tenant causes damage to the home, wants to move out, wants to vacate, they won’t have the money to pay for it. Uh, and so at that point the owner just has to put it out of their own pocket and they can request the checks from the government.
We haven’t seen any back, uh, so I wouldn’t hold your breath, but there is a process to supposedly deal with that from there. And in all cases that we have seen, uh, when it comes to simple to large maintenance expenses, the program has always 100 percent sided with the tenant even in non questionable cases where it was very clear a tenant caused damage to the home, the program’s sided with the tenant and we were forced to move forward with the owner as if it was not caused at this as if the damage was not caused by the tenant, which in our case wasn’t extremely, it wasn’t a huge amount of money, uh, in our case. But I’ve, I’ve definitely heard of stories where that was not the case where it was significant damage that tenant got away with because they were being protected by the government agency.
That was, that was with them in that home. So those are a couple of the pros and the cons. Like I said, pretty much the biggest pro is the guaranteed rent check. You can’t, you can’t really beat that. There’s um, I think the, I think the average, the national average is 92 percent, um, is what the 92 percent of your portfolio will be rented. So you’ll have that eight percent vacancy with section eight programs. I mean, that’s a national program with, with any government subsidized program, you, you pretty much won’t have that level of vacancy. You fill them quicker. Uh, you get your rent paid on time every month. Like I said, barring summit, some thing like this, a government shut down, but other than that you pretty much have it. You have less vacancy, get your rent every month on time. Uh, and in some cases you deal with the worst tenant.
Yeah. And I and I would follow up on the maintenance side of that. So, so as a policy, you know, with Swan property management, we only work with owners that are willing and able to maintain their properties, uh, for the wellbeing of their tenants. And so it, it’s important as a landlord to understand that if you do choose to work with a government organization that’s going to subsidize your tenant’s payment to you, that it’s, it’s, it’s very important to be able to maintain your home properly. And if you ever find yourself in a situation where you are unable or unwilling to do the adequate repairs when a government organization is involved, and rightly so, uh, it is a much, much bigger deal. In fact, we, um, you know, we kind of recently actually released a, an owner who was in that situation with one of our subsidized housing tenants and they were unable to, to fix an event that occurred in the home, which, which, which was pretty big event.
Um, and as a result, we were unable to get resolution with the tenant, with the government agency. And so our only option at that point was to simply release the property back to that owner because we were, we were unwilling to be between an owner that was unwilling to fix something and a attendant, rightly so, that was not having that fixed. So, um, overall what I would say, um, is that, is that if you, if you want to go into using government housing, do not be afraid of that. Most of the owners that we talked to have a story around that. And usually that story is based on misinformation or misperception once we begin to talk to an owner about why do you feel the way that you do. And so it’s important to say as a landlord, don’t, don’t be afraid, like there’s nothing to be afraid of in terms of dealing with subsidized housing.
Um, however, um, I would not suggest that as a landlord you attempt to do that yourself. So when you’re dealing with the government agencies, it requires a lot more expertise. So a lot more awareness of the laws. And the other thing which is very, very important is that locally, there are a lot of relationships involved. So we had swamp property management. We have a lot of relationships that we’ve developed over a period of time with a lot of the local boots on the ground government personnel that aren’t involved in this. And sometimes it goes a long way. Just to have a relationship with someone when you make a phone call and say, Hey, here’s a situation, how do we get this workout? So, um, so if you have any questions about government subsidized housing, we’re certainly available to, um, to answer them for you. So if somebody wants to reach out to us some more information as a couple of follow up questions, what’s the easiest way for them to get ahold of us?
Take a look at our website, small property management.com. We have all of our contact information on their phone number. We have an email form you could fill out. Someone will get back in touch with you or you can reach out at any of our social media as you’ll find us on Twitter, Facebook, Instagram, Linkedin, everywhere, pretty much. Um, and you can find us there. All right, well I’m glad you were able to join us for another episode of the landlords resource. And if you like what you hear, go ahead a jump on whatever platform you’re listening this on and give us a great review and we look forward to seeing you back next time.