How to implement best practices when renting to friends and family
Renting your home or apartment can be a great way to make extra income or cover expenses while investing in another property. Whether you’re a long-time landlord or new to property management, finding the right tenants is key to the rental process.
Renting to friends or family may be a dependable way of finding trustworthy tenants--but you need to be confident this won’t complicate your relationship. Here’s what to know before handing over a lease to friends and family--no matter how close they are.
What to consider when renting to friends and family
The decision to rent to friends and family is not one to be taken lightly. Remember, you’re still a landlord, at the end of the day. Although your new tenant may be a loved one, it's key to consider the following:
Is your friend or family member disorganized and forgetful?
Is your friend or family member reliable? Can you trust them to maintain your property and not cause damage during their stay?
Is your friend or family member in healthy financial standing?
Additionally, it's easy to skip some of the legal tasks because you're renting to a loved one, but remember to always do the following:
Maintain professionalism when discussing the rental agreement
Conduct a credit and background check
Agree upon key terms of a lease agreement, deadlines for rent payments, and other key rules for living on property
Treat overdue payments or breaches of contract like you would any tenant
Ensure that your tenants apply for renters' insurance and receive the appropriate coverage, in case of damages
The pros in renting to family members and friends
There are many pros to renting to a friend or family. In many cases, living with a loved one can provide a built-in support system; and having someone familiar to share your living space with can contribute to a more comfortable and enjoyable atmosphere. Below are additional reasons to consider renting to family members or friends:
Helping a friend or family member in need: If your loved one is in a bind, looking for a place to live and you have an available property, why not help them out? You can potentially help support a friend or family member, by providing them a safe and secure place to live
Established trust and compatibility: Since you know your tenant's background, you can lower your risks by renting the space out to them, rather than someone you're unfamiliar with
Lessen the time and money to find a tenant: You don’t have to advertise the space and put extra effort into finding a tenant, including interviewing potential candidates and touring the space.
Sharing the cost of a home: Renting with a friend can make the financial burden more manageable, especially if you're also living in the home. Splitting rent, utilities, and other household expenses can lead to significant cost savings for both parties.
The cons in renting to family members and friends
Renting to loved ones might seem like a win-win situation, but there are several drawback to consider. Unfortunately, sometimes friends or family members make terrible tenants; and allowing them to move in can end up costing you more than necessary in the long run. Below are important drawbacks to consider:
Taking advantage of your generosity: Your friend or family member may use your relationship as a way to take advantage of your agreement. For example, they may start looking for a discount or extension after a few months. Late rent payments or property damage can have financial implications and strain your relationship.
Blurring professionalism and boundaries: Renting to family or friends may blur professional boundaries, making it challenging to address issues objectively. Maintaining a professional approach to responsibilities and conflicts becomes crucial in such situations. For example, a relative might think that calling you at 3 a.m. about a leak is appropriate, whereas a stranger would likely never do such a thing.
Risking a close and important relationship: If anything goes wrong, it could affect your relationship. Mixing business with friendship can sometimes strain the relationship. Conflicts about bills, chores, or other living arrangements may affect your relationship if not handled carefully.
The bottom line
If you set the right boundaries and know someone you can trust, renting to friends or family can be a great experience. It's crucial to approach the decision with open communication, clearly defined expectations, and a realistic understanding of the potential risks. While renting to family and friends can be a win-win situation, both parties must be willing to navigate challenges professionally to maintain a healthy friendship and living arrangement. Remember, careful consideration and communication are key when deciding whether to rent to a friend.