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Renting to Friends/People You Know
Pros and cons of renting to people you know? We have some interest from a few acquaintance/friends about our rental. We’re building a business and this is our first owner occupied duplex. What are some tips to keep things professional? Situations to watch out for?
I make it a policy to NOT rent to friends or acquaintances. If things go sour it will ruin your friendship and with acquaintances it makes the mutual friend(s) feel awkward. Some friends tend to take advantage of the situation. It is more difficult to enforce the tenancy agreement or raise the rent every year with friends. Also, the friend may not report problems with the property because they don't want to "be a pest" therefore causing some deferred maintenance. We rented to a "friend" and when we asked them to move so that we could sell the property they tried suing us. Yes, for real! You can't make this stuff up. It was a mess and is the reason we don't rent to friends or acquaintances anymore.
In your situation, think about whether the upsides outway the potential risk of renting to them. Hope this helps.
When I first got into rentals I took a one day class at the local college called "Managing Rental Property". It was taught by the president of the state apartment rental association who'd been in the business for like 30 years. I kid you not, the very first thing she said was "Don't ever rent to friends or family." It was my number one takeaway from that class. It rarely (if ever) ends well.
I've found that some people still want to do it though. If you're one of those, then my next best advice would be "Don't rent to friends you're not willing to lose." Because things will likely go bad at some point, trust me. Like when you have to raise the rent and they start to resent you because they know you're going on vacation. One has nothing to do with the other, but they'll think they're paying for your vacation. Or if they stop paying you rent and you the "cold hearted" landlord have to evict them (how could you, after all, you're friends and you should give them a free place to live), it's not likely you'll remain friends after that.
Personally, I don't think there's any advantage to renting to friends. Only potential disadvantages.
I'm in a similar situation, I'm about to purchase my first house hack and ALREADY have 2 real good friends offering to move in. At first I was against it but I also don't want to live alone so I was thinking about charging cheap rent and just being like roommates. Internally I really want to rent to friends but realistically thinking it's probably best not to rent to friends you don't want to lose.
Another option I am contemplating if I don't rent my spare BR to friends is renting my bedroom on airbnb or VRBO just like @Craig curelop mentions he did in his book "The House Hacking Strategy". Of course this option works best if your single and flexible.
Anyways, good luck and I hope this thread helps!
@Cassandra Brown to add my take on it. Been there done that ( more than once) 💯 fail rate so far.
To be frank @Kyle J. wrote a super post already above and not likely it will be topped.
@Kyle J. Thanks so much for your advice. It’s a tricky situation, and my husband and I will have to have some further conversation about it. It seems unanimous that renting to friends is a lose/lose situation!
Do NOT rent to friend or family. In the end you will likely not be friends any more and your whole family will think you are a greedy money grabber or worse.
But, if you decide to disregard this advise and do rent to friends or family, here is some additional advice to ignore:
1. Start out like they are strangers. That means do a background check, really, yes, do it, you may not know everything you think you do about them. Check their credit score. Call their past landlord and check if they paid on time, trashed the place, etc. And call their employer and verify their income and their work habits.
2. Compare the information found in number 1 with your business model. Are you willing to rent to a stranger with their background? If not, do not rent to them.
3. Tell them upfront that this would be a business relationship and you will be treating them the same way you treat all potential tenants. Have a written lease, or month to month (maybe better as you can dump them faster). Same lease as everyone else--how many visitors, how many nights a month, etc. rent due on a date, late fee, etc. And make them follow it and you follow it. Yes, do not wave the late fee. Late rent gets a fee. Yes file for eviction when one day over the grace period. Yes, all adults get to be screened before moving in. New special friend to your tenant that you like, and go out with for dinner, parties, and fun, still gets screened when she wants to move in. And do the inspections of the house, everything like a stranger would get.
4. Put right in the lease that there is a 3% rent increase on odd years and 5% on even years, or what ever. It makes it easier to give them a reminder letter of their new rent amount and lets you refer to the lease rather than discuss the rent increase. 'cuz in the end you won't increase their rents 'cuz they are friends and family.
5. Do not discuss your personal finances with them ever again. No vacation plans/photos, new car, expensive jewelry discussions ever again. They will feel that you bought those things out of 'their' money.
@Cassandra Brown
There are no cons of you are willing to loose the personal relationship over the business. That will happen if the business relationship gets rocky. If you are okay with that possibility then go for it. If not, don’t.
@Cassandra Brown - You are always going to pay for comfort. This is no difference when renting to friends/acquaintances than it does to buying a house. In almost all scenarios, you are going to have to (or want to) give your friends a "family and friends discount" on the rent.
Additionally, I have heard countless stories of people renting to their friends and their friendship ends a few months after they move in. Not because they aren't paying rent, but because living with someone is much different than being friends with someone.
To keep things professional, I would set the ground rules up front. Tell them that you are first their landlord and second their friend. It is a business and you need to run it as such. I naturally became friends with my roommates and 99% of the time you blend in as another roommate. When things do come up, be sure to let them know that right now you are wearing your "landlord hat" and you are not their friend.
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@Craig Curelop. Very true about the convenience of renting to friends. We aren’t intimate friends with this family, but we have known them for years and they have owned their own house (and kept it well cared for) for several years as well. We feel that we would be able to line up a lease agreement to keep everything on the landlord side professional. And we would be comfortable lining out that our lease is a business agreement from the beginning. Thank you for your words of wisdom!
@Lynnette E. Thank you for your thoughts on the matter, and for offering tips for if we were to decide to move forward in renting to them. We do feel that there are certain friends we would not tent to, and others where we would be able to successfully balance the personal and professional aspects. These friends in particular are a young family who are actually looking to move out of their single family home and start renting, as their current home isn’t conducive for their family.
I agree that each applicant should be screened as if they were a stranger. This will keep us covered in the event that an issue did come up legally at a later date. Again, thank you for the advice.
@Cassandra Brown
It wouldn't work for me. It really depends the type of person you are with the people you care. I wouldn't evict a friend or family member, unless they become annoyance and situation get out of hands. That wouldn't happen if I'm renting to other people.
@Cassandra Brown I have done it a couple times, both times with regret.
Even the best of friends will take advantage of you if given the opportunity.
Just tell them their friendship is too important to you. I even had trouble just becoming friends with tenants who lived in my building. They will ALWAYS ALWAYS ALWAYS end up wanting a favor of some kind that puts you in an awkward position, and they will expect special treatment because they are your pal. Did I say ALWAYS?
It went from things like wanting me to let them have a washing machine in the unit even though the owner said no to them and after I explained it's because the pipes can't handle it and sorry, I'm not losing my job over it for you (in a very nice way) -- furious reaction, no more friendship.... to wanting me to tell their neighbor to stop having such loud sex (not kidding) and when I said I don't tell other tenants how to have sex (again in a very nice way, while giggling no doubt), I lost that friendship. To parking across 2 parking spaces constantly and when I said I was going to have to give them a warning because I'm getting complaints and I'd already asked several times and the owner was breathing down my throat about it (in a very nice way)- I got screamed at and that was the end of that friendship.
Now, prior to being their friends, there were none of these issues. Zero. They were perfectly reasonable, fantastic tenants. And these people weren't even friends prior to being my tenants.
Just don't do it. People get so weird. And if they aren't happy with owning their own home and want to rent, I will bet you my first born that they have some underlying jealousy already. They will be wanting favors and sure as heck won't want you raising their rent or asking them nicely not to do something.
I really hope you don't have to learn the hard way and lose a friend over it. The sayings like don't mix business with pleasure and the one about not lending money to friends are all popular old sayings for a reason.
I can't say that I'd recommend renting to friends or family, but we've done it with no problems. We currently have 3 houses rented to friends, including the pastor of our church. We have another house rented to relatives of friends.
One of those has rented from us since we bought the house in 2011, and it's the most problem-free rental we own.
We tell all our tenants, including friends, that because of fair housing regulations, everyone is treated the same. Same application, same lease, same rules. No, we don't think you do drugs, but we will still tell you (and our police officer tenant) that any drug related crime on the premises will get you evicted. :-)
We do have friends that we wouldn't rent to. Fortunately that hasn't been a problem so far.
Originally posted by @Account Closed:
Just tell them their friendship is too important to you. I even had trouble just becoming friends with tenants who lived in my building. They will ALWAYS ALWAYS ALWAYS end up wanting a favor of some kind that puts you in an awkward position, and they will expect special treatment because they are your pal. Did I say ALWAYS?
It went from things like wanting me to let them have a washing machine in the unit even though the owner said no to them and after I explained it's because the pipes can't handle it and sorry, I'm not losing my job over it for you (in a very nice way) -- furious reaction, no more friendship.... to wanting me to tell their neighbor to stop having such loud sex (not kidding) and when I said I don't tell other tenants how to have sex (again in a very nice way, while giggling no doubt), I lost that friendship. To parking across 2 parking spaces constantly and when I said I was going to have to give them a warning because I'm getting complaints and I'd already asked several times and the owner was breathing down my throat about it (in a very nice way)- I got screamed at and that was the end of that friendship.
Now, prior to being their friends, there were none of these issues. Zero. They were perfectly reasonable, fantastic tenants. And these people weren't even friends prior to being my tenants.
Just don't do it. People get so weird. And if they aren't happy with owning their own home and want to rent, I will bet you my first born that they have some underlying jealousy already. They will be wanting favors and sure as heck won't want you raising their rent or asking them nicely not to do something.
I really hope you don't have to learn the hard way and lose a friend over it. The sayings like don't mix business with pleasure and the one about not lending money to friends are all popular old sayings for a reason.
Yes, my thoughts were on the going from home owner ship to a renter again and what personality that would end up being. If they kept up on the maintenance they likely would just sell the house and buy a more suitable house for their family. I am guessing that they will be pretty demanding of each and every thing they want repaired being fixed immediately 'because that is why they rent' so they do not have to do maintenance.
A few months back I rented to a person that has this mentality. He constantly has a complaint. Last one was that the bath tub was "defective". They can not take a bath because the drain plug does not hold water. They can not use a rubber one in the mean time because their tub has metal one and they want that one fixed immediately. Friday evening complaint. I made them wait until Monday. Sent out the plumber. Metal plug would not go down tightly BECAUSE IT HAD SO MUCH HAIR WRAPPED AROUND IT IT COULD NOT FIT. The hair was removed, bug wad of it around the drain plug and in the drain. Told them that in the future that was their responsibility to remove the hair. They do not think they should have to do maintenance. Next time it will be their bill!
Previous one, they blew out an electrical plug. The had brought in an extra frig for one side of the plug. The other side and a 3 plug insert they added and they plugged in a microwave, coffee pot and a mixer. Had all 3 going and the breaker shut them down. They tried it again and the breaker did its job again. So they called because the breaker was 'bad'. Electrician explained that one to them.
Originally posted by @Lynnette E.:
Originally posted by @Account Closed:
Just tell them their friendship is too important to you. I even had trouble just becoming friends with tenants who lived in my building. They will ALWAYS ALWAYS ALWAYS end up wanting a favor of some kind that puts you in an awkward position, and they will expect special treatment because they are your pal. Did I say ALWAYS?
It went from things like wanting me to let them have a washing machine in the unit even though the owner said no to them and after I explained it's because the pipes can't handle it and sorry, I'm not losing my job over it for you (in a very nice way) -- furious reaction, no more friendship.... to wanting me to tell their neighbor to stop having such loud sex (not kidding) and when I said I don't tell other tenants how to have sex (again in a very nice way, while giggling no doubt), I lost that friendship. To parking across 2 parking spaces constantly and when I said I was going to have to give them a warning because I'm getting complaints and I'd already asked several times and the owner was breathing down my throat about it (in a very nice way)- I got screamed at and that was the end of that friendship.
Now, prior to being their friends, there were none of these issues. Zero. They were perfectly reasonable, fantastic tenants. And these people weren't even friends prior to being my tenants.
Just don't do it. People get so weird. And if they aren't happy with owning their own home and want to rent, I will bet you my first born that they have some underlying jealousy already. They will be wanting favors and sure as heck won't want you raising their rent or asking them nicely not to do something.
I really hope you don't have to learn the hard way and lose a friend over it. The sayings like don't mix business with pleasure and the one about not lending money to friends are all popular old sayings for a reason.
Yes, my thoughts were on the going from home owner ship to a renter again and what personality that would end up being. If they kept up on the maintenance they likely would just sell the house and buy a more suitable house for their family. I am guessing that they will be pretty demanding of each and every thing they want repaired being fixed immediately 'because that is why they rent' so they do not have to do maintenance.
A few months back I rented to a person that has this mentality. He constantly has a complaint. Last one was that the bath tub was "defective". They can not take a bath because the drain plug does not hold water. They can not use a rubber one in the mean time because their tub has metal one and they want that one fixed immediately. Friday evening complaint. I made them wait until Monday. Sent out the plumber. Metal plug would not go down tightly BECAUSE IT HAD SO MUCH HAIR WRAPPED AROUND IT IT COULD NOT FIT. The hair was removed, bug wad of it around the drain plug and in the drain. Told them that in the future that was their responsibility to remove the hair. They do not think they should have to do maintenance. Next time it will be their bill!
Previous one, they blew out an electrical plug. The had brought in an extra frig for one side of the plug. The other side and a 3 plug insert they added and they plugged in a microwave, coffee pot and a mixer. Had all 3 going and the breaker shut them down. They tried it again and the breaker did its job again. So they called because the breaker was 'bad'. Electrician explained that one to them.
Wow. Them are some expensive teachers - plumbers and electricians. I bet you are counting the days to the end of their lease.
Family yes but friends no. Especially NOT friends of friends or their kids.
An old classic.
We had an old aunt who 'rented' one of our rehabbed family homes for many years. BUT then she began to spend the 2 months over Xmas with her (recently moved away) daughter. So she neglected to pay the rent for that 2 month period. When we asked why she replied she wasn't there, so wasn't using the place. So we got 10 months rent/year.
Back in the '90's she begged her daughter to get her a cell phone 'for the guilt trip safety concerns' & insisted that she would pay for it. But the old girl would then count her minutes & only pay for the time she used NOT the ongoing monthly costs.
We loved her dearly (RIP) & I'm sure she's is up there doing someones accounting.
@Cassandra Brown from a personal standpoint I found that when I was house hacking using roommates it was much easier renting to people that I knew just because most of the house is shared space. The ability to keep an eye on things was just much easier. With MFH/SFH I found it was a lot easier to avoid renting to friends/family because with my experience, friends and family tend to think that you can give them a break on rent, pay you last when payday hits, etc. It just clouds the relationship eventually.