The Government is dropping my rent 10% ... should I let them? (What would YOU do?)

[Brandon Turner]

Here is a situation I'd love your feedback on: 

My first rental property (the Kurt Cobain house) has had a little old lady living there since I moved out 6 years ago. She has been paying $510 pretty much all along. 

The tenant just got on Section-8 and they will only pay $465 and told us they will not allow her to pay any more out of pocket. Which means her total rent will now be $465, down from $510, about a 10% drop, or $45 a month which is $540 per year. 

So here is the question: 

If she moved, it would cost me about $2,000 to fix up the unit and lost rent. Would you keep her and lose the rent?  She's been a great tenant and if I accept the decrease, she'll likely stay until she passes away 10+ years from now. 

What would you do?

[Brian Tome]

Brandon,

I have no experience, so take my advice for what it is worth, but I would be inclined to keep her if you can.  Accepting your numbers alone, it will take you 4 years to recoup your expenses, and if she has been a good tenant, she is worth the loss.  What vacancy rate would you figure into accepting a new tenant anyway?  If it is 5-8%, you will be pretty close to breaking even if she stays at the rent decrease.

Also, you are developing a reputation as a great landlord, and a principled professional, especially when you are taking care of an elderly lady.  I am a big believer that reasonable compassion and good business are very rarely at odds with each other.  For example, I would rather do a deal with a guy who let a good tenant stay and decreased his profit by 10% than a guy who evicts a good tenant over a rent reduction she can't control.  So by taking a little loss, you may be advertising your character to someone who will bring you a really good deal that makes you so much more than you lost.

Hope that helps.