Slumlords

by Mr. Cheap

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It wasn’t long after I’d bought my investment condo that I was called a slumlord for the first time (jokingly by a friend’s father).  I think most people who rent out real estate get called this at one point or another, and it’s a popular view of people in the business of providing housing.

A slumlord is a property owner who rents the property “as is” to poor tenants, then provides minimal (or no) maintenance to the unit (while doing everything possible to collect rent).  In some ways I feel that my current landlord is a bit of a slum lord (it took her 2.5 months to replace a broken dryer, after MANY messages from myself and the other tenants, and she blew me off when I had a insect infestation shortly after I first moved in).

PERSONALLY, I wouldn’t be interested in offering this type of housing, but in many ways I don’t have a problem with those who do.  Anyone who can afford properly maintained housing will do so.  The slumlord offers low-cost housing to people with low-income or poor credit.  As a tenant, I could certainly pay more and get a nicer place, but I’d rather have lower rent (and am willing to accept a “less responsive” landlord).

Many governments in developed countries have made typical slumlord behaviours illegal, which led to landlords not offering housing to tenants who would typically be renting such accommodations.  The reaction to this was to then offer incentives to get landlords to provide such house (Section 8 in the US, or the Canada-Ontario Affordable Housing Program in my neck of the woods).

There is a desire that the poor be provided with middle-class style accommodations, which is fine as a desire, but for this to happen SOMEONE has to pay the difference in the rent rates.  Either it will be landlords (losing money on low income tenants), or the tax payers (in the case of Section 8 style programs or community housing).  Since it’s difficult to force people to become / remain landlords if they don’t want to (they’ll just move capital to more lucrative investments if housing becomes over-regulated) the tendency is for these things to become an entrenched part of the bureaucracy.

W5 (a Canadian investigative news program) did a show called “Canada’s worst landlord” (links to video from the actual program on the right hand side), which was about Toronto Community Housing (where a friend of a friend works).  They are able to provide disgusting conditions for their tenants which would never be tolerated if it was an individual or company providing them, but *is* tolerated because it’s government housing.  Unfortunately I think this is the inevitable direction community housing drifts in.

Because there’s such a dim view of slumlords (and the term is applied so broadly) and regulations, I can’t understand why ANYONE investing in real estate offers low-income housing.  The tenants will often have time and resources (free legal aid and whatnot) to enter into disputes with you, the law often provides them with a great deal of protection (which is often one-sided), and society won’t even appreciate the service you are providing (I’ve never heard of anyone being lauded for providing low-income housing, the view is usually that they’re exploiting the poor).  By targetting middle / upper class tenants you avoid these issues entirely.

The counter-argument would be that since it is a pain-in-the-butt, fewer investors will be trying to purchase such properties (or offer them for rent) and it will be a more lucrative investment.  I have my doubts overall, but even if that was the case, it wouldn’t be a worthwhile trade-off for me.

Do you have any slumlord experiences?  If you were investing in real estate, would you consider offering low-income housing?  Do you have any personal experiences (good or bad) doing so?

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{ 7 comments… read them below or add one }

1 Sean

My fiancee, while a student doing her undergrad degree, lived in a house that had been converted into 3 apartments. Her original landlord was just fine to deal with, but then the house was sold to new owners who can only be described as slumlords.
They were never reachable or never responded to multiple voice messages or e-mails when requsting maintenence for numerous problems such as a rotting window frame, a roof leak, or a broken oven. The other tennants had similar issued with them.
When my fiancee and her roommate decided to move out, they started trying to contact the landlords weeks prior to their 60-days notice required. Finally they were reached with and given notice 53 days prior to the move date.
When they landlords found they were having trouble renting the apartment in the state of disrepair they had let it devolve into, they tried to strongarm the girls into paying an additional months rent because of the lack of 60 days notice. This culminated in a driveway shouting match where the landlords threatned to take the girls to court while we were moving them out. We informed them to go ahead, because we had written and photographic evidence of the disrepair and code violations the house was in. Needless to say, they did not follow through with their threat, but it was quite unpleasant nonetheless.
Apparently they owned a number of properties, and I honestly feel bad for their tennants. Luckily I’ve always had good and responsive landlords when there’s ever been a problem, and if I end up being one someday, I have good examples to work from.

2 Mr. Cheap

Sean: That definitely sucks. Having the “rules of the game” changes half-way through your fiancees lease when the property was sold is not cool.

There’s the need for “clean hands” if you’re going to start threatening lawsuits. Good for you guys for standing up to them!

3 Salipok

Athough I don’t agree with slumlords, I do agree with free market. It is everybody’s right to choose where they want to live and how they want to live. If you don’t like how your landlord is treating you, how the place is kept, move. Soon the landlord won’t have anybody renting from them and maybe forced to change there ways or quit being in the business of providing housing. My view is that the government is the worst of all landlords and has created a bad name for us really good ones. I also have a few rentals and can say that I had my fair share of deadbeat tenants, but that has only improved my screening process to better filter out the free loaders. Hence that is why my rentals now are one of the more expensive ones in any given neighborhood. At the end of the day you get what you pay for. So my tenants pay the extra few bucks to have a clean, safe place to live and they’re happy. I even send them birthday and christmas gifts as a thank you for being my customer and sometimes hold a BBQ too. Most of us have a conscience, the few that don’t make life a little more entertaining for the rest of us. Cheers.

4 Alexandra

I guess we can be considered “slumlords” in that we do provide affordable housing, and while they are clean, they are also in an older home so the apartments are a little worn, although they do have charm.

We have been fairly lucky in our choice of tenants…no one has ever trashed the places, and they are all in decent shape, especially considering the age of the place. The worst thing that has happened has been that more than a few of them have broken their leases without much notice.

As the landlord of an older building, we did experience a lot of stress trying to keep up with the repairs that are inevitable, but we now have a tenant who is very handy and is handling the repairs for us in return for reduced rent and sole use of the backyard for growing his vegetable garden. He has a list of our approved contractors who he can call if something breaks that he cannot repair himself. Being a tenant in the building, he has a vested interest in being responsive to the complaints and needs of his fellow tenants.

We just decreased the size of the basement apartment in order to provide all three apartments with a community laundry room, complete with a brand new washer and dryer. My husband wants to attract a higher calibre of renters with these additional amenities – hopefully people who will stay longer than the ones we have had in the past.

When you rent to the “lower” end of the rental market, you will always be able to find a tenant because there are people who need housing who can’t afford the fancy new downtown condos. But the flipside is that you have people “on the move” a lot – they are either young couples or students or immigrants moving up in the world, and sometimes people down on their luck moving down. Few are complacent enough to stay put, so a part of your budget needs to be spent on posting ads for new tenants and finding the time to do showings.

I consider myself to be a slumlord in the literal sense of the word – I provide cheap housing – but I don’t think anyone would think we were non-caring, non-responsive landlords by any means.

5 Mr. Cheap

Alexandra: My hat is off to you. I consider landlords like you to be the unsung, unappreciated heroes of the real estate investing world.

6 Amy

After being told we wouldn’t have to move from our 4 bedroom 1 1/2 bath. We were told the church wanted it as a parking lot and would have to move after all. To stay with in our budget and in a place that allowed pets (cat) we chose a trailor. My experience was not the best. We had a gas leak under my trailor. for a month it took me calling the gas company out to get something done. Our furnace gave out in mid April. Thankfully weather was good. Our furnace was not replaced till October when we had to go to a building inspector and tell him what was going on. I could go on about my experience since I lived there for almost 10 yrs so I’ve been through a lot.

7 Raymond

I am new to this board and have some very interesting posts. I own 1 semi, 2 condos, and a detached house. I got into rentals about 4 years ago. But I firmly believe in providing a clean, up-to-date property to my clients (tenants). Yes, they pay more (on avg I charge $900-$1000 for 2 Bdrm basement compared to $800 in the area), but for that they get a property that is nice and clean, their concerns taken care of immediately (within 24 hrs), WORKING appliances etc. So far it has been great. My target is to keep each tenant 2 years MINIMUM in my unit, anything more is bonus. Every time a tenant moves, I clean the place, paint if necessary or give tenants the choice to paint with my footing the bill for the painting supplies etc. I have seen MANY potential investment properties currently rented. If I compare my units to those, I think my units would be Four Season vs Ont Govt Social/ Community Housing.

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