I met my new Section 8 Tenant over the weekend. She seems really sweet. She was well dressed, asked good questions, was polite and respectful, and doted on a beautiful baby girl the whole time.

She also drove what appeard to me to be a 2010 Jaguar – with flashy rims that had to cost well over $1,000.

When my first Section 8 tenant met me in a Mercedes, I was completely aghast, if you recall. Just a few months later I’m barely surprised at this and not incredibly offended.

My first Section 8 tenant traded her Benz for a Dodge SUV. I’m not sure what my second Section 8 tenant drives, but I know her mother who is around most of the time drives a new silver Mercedes. All the people I’ve interacted with who have even a loose affiliation with the Secion 8 housing program drive nicer and apparently newer cars than I do.

My shock and offense at this and at others who appear to be taking advantage of this government program has faded into curiosity and vague but unsettling concern as I am exposed further to a fascinating culture that is radically different from mine.

I closed on my new duplex last Friday, and the place was completely vacant. Since then I’ve collected deposits for both units!

Both new tenants are single mothers on Section 8, so their rent will be paid to me directly by the Housing Authority. I’m hoping they will stay put for years because they have kids and because Section 8 units (especially newer ones like mine that are in great condition and particularly 3 bedroom units) are hard to come by.

They both want to move in ASAP, so I’m scrambling to get the place fit for inspection.

One lease will have to start May 15th because her Housing Authority only begins leases on the 1st or 15th. It takes a week for them to come out and inspect, so there’s no way it’ll be done by May 1st.

The other tenant’s housing authority will prorate the rent and allow her to move in on any day. She signed a lease to move in May 1, but if I can’t get it inspected tomorrow then I’ll have to put her off for a few days.

Yesterday I divulged that my prospective new tenant basically admitted that she is defrauding the Housing Authority; she asked me to lease her the place for a lower rent than I normally accept and promised to pay me the difference in cash each month.

The Housing Authority has to approve the lease and will only approve her for rent of $850, based on her income (to their knowledge) and the fact that she only qualifies for a 2 bedroom (my unit is a 3 bedroom). She really wants to live there anyway because it’s near family, and she claims she can come up with the $250 difference in cash to get me the $1,100 a month that I normally charge.

I actually considered this offer briefly, crazed as I was at the prospect of getting a long term tenant in my new (vacant) property immediately.

But as many readers pointed out, the bottom line is that this sort of deal would be unethical at best, and fraudulent at worst. Even if I thought she were being honest about her income with the housing authority (perhaps her family members would help her with the additional $250 a month so she could live close to them), it would be ridiculous to risk my reputation and my CFP(R) Designation by averting the system and agreeing to any kind of side deal.

In addition, one commenter questioned the tax consequences, which hit me even closer to home for me for some reason. I have always been peculiarly sensitive to the idea of tax fraud. I make sure to claim every dollar of income I receive, even though much of it is cash income and could easily be “overlooked” or “forgotten.” If I took $250 in cash from this woman, I would certainly still deposit it and claim it as taxable income. But any discrepancy between my rental income claimed and what the Housing Authority has paid me can be cause for a red flag, as they have the ability to cross reference that.

In any event, I’ve decided not to set up any side deals with this woman. I’m going to try to rent the place out at my asking price of $1,100 a month, and if I don’t get any other bites in the next week I will attempt to legitimately rent it out to her for only $850. But under no circumstances will I lie to or mislead the Housing Authority about what I normally charge or anything else.

The only thing I might do to try to make up the difference is to ask her to pay a higher deposit than I normally would and to pay for any maintenance expenses out of her pocket that come up. I’ll have to research what I’m allowed by law and/or by Section 8 to ask of her though.

I don’t have any proof that this woman is defrauding the housing authority, so I’m hesitant to report her – though I’m considering that as well. All she did was offer to come up with the difference between what I charge and what Section 8 will pay. I don’t know how or whether she could even do that, so I don’t really have anything specific to report. Plus if I do, her family members (my tenants) could rebel against me and walk out on their leases and/or damage the property out of spite.

I will keep you all updated as the situation progresses!

I am spinning down the Section 8 spiral these days, learning all sorts of things about the tenants, the inspections, and the housing authority.

It turns out that my new prospective Section 8 tenant has been trying to move into the neighborhood for months. Two of her family members live in one of my duplexes there, and she wants to be near family.

She immediately called me hours after the “for rent” sign went in the yard – a phone call which was quickly followed by calls from both my tenants on her behalf. And she’s ready to give me a deposit and sign paperwork before I’ve even closed on the place! Plus she offered to buy a fridge since the unit doesn’t have one (she didn’t even ask me if I was planning to put one in).

In my few conversations with her she seems polite, eloquent, determined, and organized. One of her family members has been my tenant and paid regularly for over a year, and so far her sister (my first Section 8 tenant) has worked out well too. I’ve had no serious issues with either of them (I don’t consider this or this serious).

Given all this good news, how should I handle the fact that my new prospective Secion 8 tenant has admitted openly that she is gaming the system and would like my explicit cooperation?

She asked me how much the rent is (and I told her $1,100), and she told me that Section 8 would only approve her for a rent of $850 – $35 of which she has to pay to me directly and the other $815 of which comes from the housing authority.

She said she would have no problem paying the $250 difference between what I charge and what Section 8 will approve, that she “has other income” – which apparently they don’t know about. And she reiterated that it was important to her to be near family so she’s willing to pay that price.

But here’s the kicker: she asked me to put in the lease (which Section 8 has to approve) that I’m only charging $850 – otherwise they won’t approve it. But she promises to pay me $250 in cash in addition. The Housing Authority does not know that she has no ability to pay me $285 a month – and if they did know that then she’d be required to pay more from here on out or even lose her Section 8 status if she makes too much.

Does it make me a terrible hypocrite that I want to make this deal? Technically I would simply be agreeing to lease this place out for only $850, as opposed to my normal fee of $1,100 or more. I’d be taking a risk by assuming this woman will keep up her end of the bargain by paying me an extra $250 a month, but legally I’d have no ramifications if she failed to.

The upside is that I have an immediate tenant ready to move in who is anxious to get and stay in my neighborhood and apparently has more than enough cash flow to make ends meet.

If I refuse to go along with this on principal, she will continue to game the system (and taxpayers) with another landlord, and I’ll simply lose out on at least one month’s rent while I search for other tenants. And I’ll probably end up with somebody who’s also gaming the system; they may just not be as up front about it.

UPDATE: See my further thoughts and decision about this here.

Well, I’m doing it. I haven’t even closed on my new property yet, and I’ve verbally agreed to lease one of the units to another Section 8 tenant. This year sure is shaping up to be a learning curve in the property management department!

I just got off the phone with my new Section 8 (prospective) tenant, and like my other Section 8 tenant (her sister) who just moved into one of my units across the street, she sounds eloquent and determined. She promised to give me the deposit ($1,100) this weekend and present me with all the forms I’ll need to fill out. Then Monday morning she’ll bring them to her housing officer who will call me to schedule the inspection that week.

There’s a chance we can have this all wrapped up so that I have Section 8 approval by May 1! More likely we’ll miss the deadline because I need to get a handyman out there to fix a few things before getting the inspection though, which means Section 8 won’t start paying me until June 1.

I’ve learned from experience however that the tenants somehow seem to have enough money to pay the deposits and first month’s rent even without Section 8 assistance. My new tenant is already supposed to be out of her last place, so I told her if she can pay cash for May’s rent (plus the deposit) that I can go ahead and let her move in – of course she’d have to leave again if for some reason we didn’t get approved, but that way I don’t lose out on a whole month of rent while waiting for Section 8 approval.

Woo hoo! This means that I’ll probably be getting $2200 cold hard cash within the next week. I swear so far my Section 8 tenants are the most responsive and prompt and seem to have the most cash flow!!

This past weekend my existing tenant called and said she was out shopping with her sis (my prospective new S8 tenant) and wanted to know if they needed to buy a fridge for my unit. I had been planning to put one in there myself, but I politely told her the unit does not currently have a fridge. There’s another $500-$1000 saved by me!

I went ahead and put a For Rent sign in the yard while I was at the foreclosure yesterday, since the inspection went well and I’m set to close on the purchase in only 4 days.

In less than a few hours I got a call from my tenant across the street (the non-section 8 one, though both are related). She said her cousin really wants to move over there and asked if I’d accept her as a tenant; she’s on Section 8. I assured her I’d consider it, but told her we’d have to wait until after Thursday when I officially own the place to start the paperwork.

An hour later the Section 8 tenant called me with the same story/request about a cousin who wants to move in. I assume they are talking about the same person since she and my other tenant are related. She wanted to know how soon we can start the paperwork, and I gave her the same answer.

Then I got a call from the potential tenant in question! She left a message saying she was VERY interested and PLEASE don’t give it to anybody else; she is ready to sign a lease.

Looks like I’ve got another Section 8 tenant – and another family member – to add to the block.

The good news is that I’ll be paid automatically for the rent, and all my tenants will have more roots on the street (i.e. less reason to leave). Maybe I can get another of their family members to rent the second unit, and then all 4 units on the street will be occupied by members of the same family!

On Saturday afternoon I went out to meet the appraiser at the foreclosure I’m purchasing next week. It is right across the street from the property I already own, which is occupied by my new Section 8 tenant. If you remember, my handyman recently warned me that there may be several more adults and kids living there than are on the lease.

I needed to collect the portion of the rent that my Section 8 tenant owes me, so I’d asked her if I could stop by and get it while I was up there to view the other property. She asked me to call ahead so she could have somebody there to meet me, as she would be at work.

So I did call ahead, though she didn’t answer. When I got there I pulled into her driveway and found 3 children playing out front. One of them opened the front door for me and tried to usher me inside, but I told him I wasn’t trying to come in; I was just looking for his mom…or any adult.

The front door opens into the den/kitchen, but it was as dark as night inside except for the glow of the enormous television set. A woman’s head popped up from the couch, and she stumbled sleepily over to greet me. Apparently she is my tenant’s sister and the mother of a few of the superfluous kids outside. I explained that my tenant had told me to stop by to pick up the rent. She didn’t seem to know what I was talking about and tried to dial her sister/my tenant, so I offered to come back in 20 minutes or so.

Meanwhile a second woman appeared from inside and walked me out, wearing no bra under her thin tank and mens briefs as shorts. She started shrieking incomprehensibly at the kids to help her clean up, and they all started picking up the litter that was scattered around the yard. I appreciated her effort, though I wasn’t really concerned about the minimal amount of trash. Then the other woman came out and jumped in her car, saying she was running around the corner to get the rent money from my tenant.

So I walked back across the street and met the appraiser. He finished up early, but I was waiting for my realtor to come and go over the inspection report as we walked through the property. So I stood inside the open front door and spied on my tenant(s) across the street. I counted two women (both her sisters?) and a semi-adult male milling about outside, plus five children, still cleaning up trash and sweeping the driveway (God bless them). The garage door opened at one point and seemed to contain nothing other than a car (as opposed to my handyman’s story about racks of clothing).

They played and ran about normally, and eventually the guy/man drove off and the other woman went back inside. I saw the aunt come back (presumably with the rent), so I went back over. As I approached, I asked one of the kids if he lived there. “Yes. I mean no. We live down the street” he sputtered before running off. Hmmm.

I got the money and went back over to the foreclosure. I relayed the whole story to my realtor who has been a Section 8 landlord for many years. He shrugged and brushed aside my concerns, seeming to think the situation was normal. “That kind of thing is really difficult to enforce.” But what about the wear and tear? Shouldn’t I be concerned? He shook his head. “They are going to tear up the place either way.”

Honestly I don’t care if my tenant’s family members are over there half the time to watch the kids or whatever so my tenant can go to work. The other side of the duplex contains the tenants I’ve had for over a year, and apparently they are related to my new Section 8 tenant as well! So they are probably all helping each other. They all seem nice, the place looks like it’s in good condition, and both sides of the duplex are getting along, so I’m not going to worry about it!

I finally called back my handyman the other day; he’d left me a voicemail saying he wanted to discuss something about one of my properties he’d been out to recently. It happened to be the one that I just leased to a Section 8 Tenant.

I’ve already observed that this particular tenant embodies several Section 8 stereotypes: she doesn’t have a job; her primary source of income is child support; she drove up to sign the lease in a new Mercedes (which could have belonged to anybody); and then she bought a brand new car only a few weeks later.

And now a new stereotype, perhaps not well known by some, appears to be in practice. According to my handyman, it looks like she’s letting about a dozen relatives live with her in my rental property (which is a 3 bedroom).

The only people on the lease are the tenant and her three kids, but the handyman said there were about 4-5 adults in the house who appeared to be living there, including the tenant’s mother, and also around half a dozen kids running around.

I asked if it was possible they were having a family barbeque or something, but he seemed concerned and said no. He described clothes and belongings everywhere; they’ve even brought in retail-style racks and filled the garage with clothes. They didn’t seem to be doing or planning anything; they were all just hanging out.

First of all, it’s vaguely disgusting to imagine a dozen people hanging out half-dressed in a 1250 square foot home in the middle of the day. Don’t any of them have school or jobs or errands or something?

Honestly I wouldn’t care if she let her mother move in, or anybody else who might help watch the kids so she can work or have some time to herself. But there is no way I can allow more than five or six people to live in that unit, all of whom would have to be screened and added to the lease. Otherwise the wear and tear would be tremendous and goodness only knows what kind of complaints I’d start to get from the neighbors.

How do you think I should approach the issue with her?