Podcast 382: Are Section 8 Landlords in Trouble?

In this week’s episode, Podcast Host, Property Manager & Business Owner, Andrew Schultz, chats about one story in Denton County, Texas where Section 8 Landlords are going to start getting fined $300.

When the water is slower than usual in your rental property or any property for that matter, where’s the first place you should investigate?

Last, but not least, at what point should you pass over your property’s bookkeeping to a professional? Find out in our latest podcast.

Andrew Schultz: (00:00)
Hey everyone. Welcome back to another episode of the Rent Prep for Landlord’s podcast. This is episode number 382. And I’m your host, Andrew Schultz. On today’s episode, we’re gonna be talking about an HOA in Texas banning section eight tenants, how to hire a bookkeeper for your rental properties and how to investigate plumbing issues. We’ll get to all that right after this.

Voice Over: (00:25)
Welcome to the Rent Prep for Landlord’s podcast. Now your host, Andrew Schultz.

Andrew Schultz: (00:30)
If you joined the free Rent Prep for Landlord’s Facebook group, we’re on the push for 13,000 members. If you have a question or a situation that you’ve never encountered before, or you just need to bounce an idea off a big group of housing providers, this is the place. If you haven’t checked it out yet, do it today. Over at facebook.com/groups/rentprep. Don’t forget to mention the podcast when answering the questions so we know how you found us. So we’re gonna kick off this week’s episode of the Rent Prep for Landlord’s podcast with an in-the-news article. This is a pretty interesting one coming to us out of Denton, Texas reported by the Denton Record Chronicle title of the article is section eight landlords to be fined $300 weekly until tenants are ousted. HOA says, let’s go ahead and jump into the article.

Andrew Schultz: (01:16)
Landlords in the town of Providence village can expect to start receiving weekly fines of $300 for housing section eight tenants following a vote last week to implement new rules made by the Providence homeowners association voted in by the Association’s board on June 6th, the regulation bans, any tenants who participate in the housing choice voucher program also known as section eight from living in homes that are part of the HOA. The rule also forbids owners from having more than one rental property and effectively prohibit short-term rentals made popular by sites such as Airbnb and VR, B O about 2200 homes are part of this association, tenant REIA threats who participates in the voucher program, emailed the Association’s manager, following the vote. She asked if she could still finish out her lease, which is scheduled to expire in May of 2023 before moving that’s. When she was told that the fines imposed on her landlord will start.

Andrew Schultz: (02:07)
As soon as the regulations are filed with the Denton county clerk’s office and become enforceable, which is expected to happen this week. Homeowner Judy RER, who oversees about 23 properties in the town east of Dutton through her property management company said HOA manager. Cody Watson also told her that the fines would begin right away unless the section eight tenants move out or landlords withdraw from the housing program and begin charging tenants, full rent, but she and other landlords say it isn’t what they were told before the changes were approved. They, the association said all section eight tenants would be able to complete their lease and would not be immediately kicked out, said landlord, Alicia Mackey, who has three homes with section eight tenants in the town, people voted based on that assumption. The homeowners did not get to vote on the rental rules themselves. They did elect to give the board the authority to make the rules by amending the neighborhood covenants.

Andrew Schultz: (02:58)
A draft, the proposed rule changes was presented to residents before they were asked to vote to give the board authority to impose rental restrictions. The final version does not represent what was initially presented to us. Mackey said I feel like we’ve been duped though. Threats and RER were told after the rules were approved, that fines would begin immediately. Watson told Mackey in an email that landlords will have 30 days before charges are billed, but tenants argue that isn’t enough time to find a new home. And it does not allow landlords to fulfill federal regulations regarding eviction notices. Landlords must meet additional requirements to evict tenants from federally subsidized housing or terminate a section eight voucher. According to the US department of housing and urban development, permissible grounds for eviction include serious lease violations, nonpayment, or the tenant being convicted of certain crimes, along with a handful of other specific grounds, even with just cause landlords must give tenants 90 days, notice of eviction, according to federal rules, if tenants wanna voluntarily move, but remain part of the voucher program, they must get relocation approval from their local housing authority move requests are typically not approved.

Andrew Schultz: (04:00)
If a tenant is under a current lease or within an initial 12-month lease term, she has had some tenants and landlords feeling like they’re up to against an impossible situation. If they would have honored their deal and said, Hey, we’ll let you finish up your leases. So no one’s breaking any contracts. It would’ve been okay. Mackey said the voting process itself and campaign activities by board president, Jennifer Dow rich have also been called into question by several homeowners board members and staff of the HOA run by first service residential, keep a close eye on the daily vote totals and mobilized to persuade homeowners that they should. Okay. The amendment by using scaremongering tactics, resident Daniel puffer said the association did not respond to request for comments for the story. Mackey and RER said that they were also told that homeowners with more than one rental property would be allowed to keep them, but they could not acquire more in the future though.

Andrew Schultz: (04:51)
The written rules do not specify either way. The pair said the HOA has told them both. It will keep promises regarding prior ownership. The new rules also have divided residents while proponents of the ban say they believe section eight renters have been the source of a rise of crime in the area. Those against the bans say the claims are baseless. Anytime, anything bad happens in the neighborhood, it’s always put on. Section eight threat said the HOA office in itself is closed temporarily following threats against members of the HOA and the HOA office. According to an email sent to residents, the email does not give specifics on the alleged threats. Ricker said she and several other property owners are planning to file a lawsuit against the association. Following the changes. In the meantime, the future looks uncertain for tenants. I have one landlord who already started evicting tenants because they didn’t want to deal with the fines. RER said.

Andrew Schultz: (05:47)
So I guess I’m gonna start my response on this by saying that honestly, HOA just suck pretty much everyone that I know who’s lived in a property that has an HOA has had very little good to say about their HOA. More often than that, these HOAs are governed by people with nothing better to do than make headaches for other people that are more often than not just trying to enjoy the property that they spent a boatload of money on the people who are running this homeowner’s association. It doesn’t sound like they have a real good grasp on what the legal landscape is and what they can and can’t do because they’re basically enacting rules that can’t even be enforced when they enact ’em. So we’ll jump into that in a little bit here. There’s also good HOAs. I’m not trying to say that every HOA is bad and paint with a paintbrush here, but there are some good HOAs, you know, there are HOAs where you get fine because your grass is four inches tall, or they don’t like the color that you painted your front door, or you have polka dots on your curtains when you’re supposed to be sheer white, by the way, those are all actual HOA complaints that I’ve come across throughout the, my years working in the industry.

Andrew Schultz: (06:49)
Um, like, and then there’s the good HOAs, the HOAs that are genuinely committed to making the community enjoyable. They host community events. They take care of the community gardens and playgrounds, the pool grounds, whatever stuff like that. There really doesn’t seem to be much in the way of middle ground. From what I can tell when it comes to HOAs, they’re either really good or really bad. And it doesn’t seem like there’s a whole lot of in-between. And honestly, it seems like this HOA that we’re discussing today fits pretty squarely in that first category. But let’s go ahead and jump into it here. So what are the rules that the HOA has actually enacted? There were three mentioned in the article. Number one, no section eight tenants, number two, no short-term rentals. And number three, you can’t own more than one rental property in this HOA.

Andrew Schultz: (07:30)
So we’re gonna start with the no section eight. Do homeowners associations have to follow fair housing laws? The answer to that question is yes, they are bound by the same fair housing laws as the rest of us. So they cannot discriminate based on race, color, national origin, religion, sex, family status, or disability. Some states have additional fair housing or human rights protections in place. So for instance, here in New York, the human rights law prohibits discrimination on some more factors, such as age, marital status, military status, sexual orientation, gender identity, and here’s the kicker lawful source of income. We’re gonna come back to that in just a minute. So in this article, they actually provide a PDF copy of the rental and leasing rules. And I had a chance to review it a little bit. And in the section talking about section eight language, they basically wrote the language as follows.

Andrew Schultz: (08:21)
A rent house may not be used for a publicly financed or subsidized housing program, such as section eight, housing that’s word for word, how the rule is written in their, um, I guess their bylaws. So Providence village is located near Denton, Texas. I did a little bit of research online. I called a public housing agency in Texas and spoke to a case worker. I even talked to a couple of property managers that I know in Texas in Texas lawful source of income, including section eight vouchers is not considered a protected class. That’s something that went into effect in New York back in 2019. And we actually had that protection in Erie county in, I wanna say 2018, uh, maybe even 2017. So I know that there are some states that have this and some states that don’t, and apparently, in Texas, there’s no state regulation that says that a lawful source of income is protected as part of the fair housing law there.

Andrew Schultz: (09:11)
So the question is, can this HOA in Texas say no to public housing vouchers? And, it appears to me at least that the answer in this instance is yes, in other states, the answer would be no in New York, the answer would be no. And this is why it’s so critical to understand the industry that you’re operating in at a local level so that you understand what the rules and regs are, where you’re actually working out of. Let’s take a quick look at a couple of the other rules that they enacted here, the no short-term rentals rule. So the language that they used on this was any lease must be for an initial term of not less than 90 days. Uh, I think this one is probably pretty easy to subvert if you really want by basically having a master lease and then subleasing essentially to whoever the guests are.

Andrew Schultz: (09:55)
However, it does say any lease in the language of the rules. And it also mentions in another section that the lessee has to be given a copy of the HOA rules as a condition of entering the lease. So essentially at that point, everybody who signed that lease would be knowingly committing fraud, probably not the best route to go, but onto the one rental home limit. Here’s the language from the HOA rules. A person may own only one rent house in the subdivision at a time rent house means an occupied house that is not an owner-occupied home or a house that has been vacant for three or more months. Owner-occupied homes mean a house in which at least one occupant is an owner or an owner’s spouse, or is related to an owner or an owner’s spouse by blood marriage adoption or formal guardianship.

Andrew Schultz: (10:44)
And for which occupants do not pay rent. So this one seems pretty clear. They really do not want their HOA turning into a bunch of short-term rentals or long-term rentals, really. Um, then they’re doing everything in their power to essentially prevent you from doing that. The bottom line here, at least from where I’m sitting is to try not to invest in areas where someone else has any say over how you control and operate your asset. It simply does not make sense in most areas of the country to purchase property where you’re under some sort of a condo association or a homeowner’s Association’s thumb. That might just be my geography talking here in Buffalo. We typically don’t have a ton of HOA communities. So it’s not a problem to find property that isn’t bound by these nonsense terms and conditions in other areas of the country, especially areas that have grown at a rapid pace in the couple last couple decades that may not be the case. The HOA may be fact of life in those areas. And unfortunately for investors buying in those areas, it’s just one more fly in the ointment. My recommendation is, again, look for properties where you have total control of the asset and someone else can’t turn around and interrupt your business because of how they perceive other people or how those people receive their rent, money,

Voice Over: (11:56)
Water, cooler wisdom, expert advice from real estate pros.

Andrew Schultz: (12:05)
We’re moving right along into water-cooler wisdom. This time we have an interesting question on how to scale your operation up. Uh, I’m an owner-operator and manage multiple residential doors as well as a multi-suite commercial building. I do almost all of the maintenance and repair work and bookkeeping. The bookkeeping is by far the most challenging piece. I’ve always thought that to hire a bookkeeper, wouldn’t be of any value because I’d have to organize all the data for her to process, and organizing the data is the challenging part. If I could do that, then 90% of the work would be done already. So my question is, has anyone that manages their own properties, used a bookkeeper? And if so, how does that work? So here at Own Buffalo, we have an office manager that handles pretty much all of our data entry, including entering the bills.

Andrew Schultz: (12:50)
And I’ve gotta tell you that making the decision to hire a good office manager that I could offload things to was probably one of the best decisions that I ever made over the course of the years. We’ve had different people in that role, but it’s a key role inside of our organization. The office manager is responsible for a lot of various day-to-day type stuff, including things exactly like what you described with organizing data and data entry. When you say that you need to organize the data. I’m curious as to what it is that you need to organize and why someone else can’t do that for you typically speaking. And this is something that’s taken me a long time to get past, and I still have to work through this from time to time. The thing that holds you back is the fact that you think that you are the only one who can do something, or you are the only one who can do something, right?

Andrew Schultz: (13:37)
I’m here to tell you that I’ve lived through that. And I can simply tell you that it’s not the case. You are not the only person in the world out there managing rental property. There are a bunch of us out here. We all have to do the same job. The way that we all manage to do the same job is via systems and processes that we put in place. Every person and every company has a little bit different systems and processes obviously, but universally the world over things don’t get done without there being some kind of a system or process in place. Do you know why there’s an Applebee’s in a McDonald’s at pretty much every single highway exit and rest stop because people know that they can walk into a McDonald’s or an Applebee’s and they’re gonna get the same crappy meal in Buffalo, Chicago, Los Angeles, Miami Paris, wherever they happen to be the reason that Applebee’s and McDonald’s can manufacture that exact same crappy meal anywhere around the world is because of systems and processes and recipes?

Andrew Schultz: (14:34)
There’s a reason that McDonald’s is able to franchise locations all over the globe. It’s because of the systems and processes and recipes. Essentially, you are at a point in your business where it’s time for you to start writing down the recipes so that another cook can work in the kitchen alongside you. And that’s essentially what it boils down to when you start talking about building out systems so that other people can come into an organization and help you grow. It literally starts with pen and paper and writing down step by step, everything that you have to do to complete a process, and there’s gonna be multiple iterations of that process. We still refine processes all the time here inside of our company, to make sure that balls don’t get dropped and that loose ends get tied up. It’s always a work in progress, and it should be a work in progress because you should always be working to make improvements on your business.

Andrew Schultz: (15:20)
So going back to the organizing the data, which you say is the most challenging part, there must be some way that you can describe to someone else how that data needs to be gathered and organized so that it can be processed. You have a method that you use every single time that you go through to organize this data. You just need to figure out how to explain it to somebody else. Maybe it’s something that can be written down with pen and paper. Maybe it’s something where you have them physically follow you through the process. Maybe it’s something that can be done with screen recording software, showing how you pull reports, how you organize the data digitally. Basically what I’m saying is there’s a lot of options out there to help you get this stuff down and get over this hurdle that you have in front of you.

Andrew Schultz: (15:58)
There are also companies out there that will literally help you build your systems and processes and help you grow your business. And they can also help you with things like automating different parts of your business so that you don’t have to have a physical interaction with it. That’s way outside the scope of what we’re talking about here in this conversation. But if you’re at a point in your growth strategy where that’s something that you need to start discussing, it’s time to hop on Google and do some research. There are a bunch of companies out there that can also help you find full-time or part-time staff both locally or remotely to help you fill your positions. And this exists at every single level. By the way, there are companies that have fractional bookkeepers, marketing people, fractional C-suite staff, et cetera. And essentially all that means is that it’s not a full-time staff member dedicated to that company. Typically it’s a contractor that’s gonna work for multiple companies, but if you think about it, not every company needs a full-time bookkeeper or a full-time chief financial officer. There are options out there for smaller companies that are coming up currently that simply weren’t available in the past. I really do encourage you to look at ways that you can leverage the world around you. That may be less expensive and more efficient than you ever would’ve imagined when it comes to adding staff to your company,

Voice Over: (17:13)
Forum quorum, where we scour the internet for ridiculous posts from landlords and tenants.

Andrew Schultz: (17:22)
Last but not least. We have our forum quorum segment. And this week we are pulling from the Rent Prep for Landlord’s Facebook group. This is a plumbing issue that one of our landlords is experiencing, and they were looking for a little bit of advice. Let’s go ahead and jump right in here. I have a three-bedroom house and suddenly all three of the bathroom toilets are not burping as they flush. So they don’t flush completely. The shower is also very slow to drain. Sewage does not seem to be backing up anywhere in the house. Do you have any suggestions with this before I call a plumber, I was thinking maybe one of the air vents and the roof was clogged. I was hoping I could try and work on this myself. This sounds to me like you have a partial block somewhere along the sewer line that needs to be cleared.

Andrew Schultz: (18:01)
I don’t think that this has anything to do with your air vents because I’m pretty sure if the air vents were blocked off in theory, nothing would be moving through the pipes at all. I’m not a plumber, so don’t hold me to that. But I’m pretty sure if you lose your air vents, that everything just kind of starts to run much, much worse. Um, the fact that you’re getting some movement tells me that it’s more than likely in the sewer line itself. A lot of times you’ll get a partial clog in the sewer line that may not make itself apparent until things get worse. And depending on how old the sewer lines are and what material they’re made out of, you could wind up with more clogs as the sewer degrades. So for instance, if you have an old cast iron sewer pipe over time, that pipe is gonna degrade on the inside, as it degrades and corrodes, there’s going to be more opportunity for things to catch on the inside of the pipe and create buildup, which eventually will lead to a more serious blockage.

Andrew Schultz: (18:47)
And back up into your home. All it takes is someone to flush a wipe, which we all know aren’t flushable or feminine hygiene product or a condom or anything along those lines, paper towels. That’s another one that we see a lot of paper towels because they don’t break up in sewer lines. Anything that can catch on the little sharp jagged inside, you know, corner bits inside of a pipe or anything along the, the base of the pipe that has a little bit of a jagged hook in it or something it’s gonna get caught on the inside of that pipe. And it’s gonna start to become a clog. This tends to happen a lot less with other materials such as PVC. And in addition, you do also have situations where pipes can shift underneath the ground over the course of time. Um, so you may have a pipe that’s shifted and become disconnected or out of sync with pipes near it, which then causes it to back up the line.

Andrew Schultz: (19:34)
For instance, you have a pipe that shifts down suddenly you don’t have that nice straight line and the water’s not flowing the way that it’s supposed to anymore. There’s also other options as to what this could be. You could have other external factors such as tree roots or rodents getting into the line and causing issues. And yeah, we’ve legitimately had rodents cause issues in sewer lines before. Um, as a matter of fact, we had a rodent that I don’t know how this managed to happen, but this rat went all the way through the sewer line, under the basement, climbed up the inside of the sewer line, and drowned in the PRAP on a toilet. And the tenant found it the next morning. And of course, we got the phone call asking why there was a dead rat in their, in their toilet. Uh, and obviously we went and investigated, but the nearest that we could come up with is that this rat must have entered the sewer somewhere away from the house, come up through the line, and drowned in the PRAP of the toilet.

Andrew Schultz: (20:25)
It was an insane story, but we have had it happen more than likely, much more likely than a rat crawling through your toilet would be some sort of a route or a blockage in the line from a tree or something like that. Um, if you get a line shift and a root grows into it like that’s almost guaranteed to turn into a clog at some point. And if you do have a broken pipe and there are trees nearby, that’s the first thing that those trees are gonna start doing is growing root systems towards the area where there’s constantly nutrients and constantly water. And once those roots do find their way inside of your sewer lines, obviously that’s gonna be a pretty substantial repair at the minimum. You’re running a snake with a cutting bit down through there, or you may find yourself in a situation where you actually have to dig and do repairs.

Andrew Schultz: (21:09)
Anyway, getting back to the root of the question here, I think the best course of action is to have a plumber come out, run a snake down through everything from the house to the street or the house to the septic, and make sure you don’t have any partial clogs in the line. You may find that somebody flushed something that they shouldn’t have, or you may just find that there’s been a buildup over time, but what you don’t want is sewer backing up into your home. So this is something that you’re gonna wanna take care of now, before it becomes a much larger situation based on what you’re saying with the three toilets in the shower, all being problematic. I do think that this is probably located in the main sewer line running out the house. If it was one or two of the toilets or just the shower, I would place the issue more than likely in the drain of one of those fixtures.

Andrew Schultz: (21:49)
But you are, if you’re really feeling adventurous, I suppose you could DIY this. You could go buy or rent a sewer snake and pull a toilet and get after it yourself. But honestly, on something like this, I think I would rather just call a plumber. Are you thinking about getting into short-term rentals, Rent Prep recently put together a guide on how to get started in Airbnb or VR B O including how to price, how to handle maintenance and so much more check that out today, over at rentprep.com slash blog. That pretty much wrap things up for this episode of the Rent Prep for Landlord’s podcast. Thank you all so much for listening. We truly do appreciate it. Our goal with the podcast is to help as many people as possible make educated decisions when it comes to real estate, and you can help us to reach our goal.

Andrew Schultz: (22:31)
If you heard anything in this week’s episode or any of our other episodes that would benefit someone, you know, please do us a favor and share it with them. If you’re looking to get in contact with me, I can be reached over at whatsdrewupto.com from there, you’ll find links to everything going on with me over at Own Buffalo, as well as other projects that we’re working on. Grab a copy of our free deal analysis tool today over at whatsdrewupto.com. There’s no obligation and it comes with a companion video showing you how to use it. If you’re looking for top-tier tenant screening services, head on over to rentprep.com, there are multiple products to choose from including a tenant-paid option. And if you’re over 50 doors, ask about the enterprise-level programs in pricing. I’ve been an enterprise user of Rent Prep for years now, and it’s absolutely changed the way that we screen our tenants. Check that out today, over at rentprep.com. Again, thank you all so much for listening. We’ll be back in two weeks with an all-new episode that you won’t wanna miss until then. I’m Andrew Schultz with ownbuffalo.com for rent prep.com and we’ll talk to you soon.

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