Can the PM also be our tenant?

[Rob Horon]

Curious what people think about renting one of your properties to your PM.  Is this okay, allowed, or does it set you up for conflicts of interest down the road?  Does anyone have any experience / stories with such a situation before?

[Suzy Sevier]

@Rob Horon I don't have experience but I have heard good stories from others. It is definitely allowed. 

[Anna Sagatelova]

The questions to ask include: Who will you turn to if your PM doesn't abide by the lease? What if they don't pay their rent? Will you personally handle the eviction? Are you paying them for the management of that home/discounting the rent in any way?

The closest thing to this that I know works is providing one apartment unit as partial compensation to an on-site leasing/maintenance manager of said apartment complex, and correspondingly reducing their salary. But that is not a PM/client relationship, it is employer-employee.

At the end of the day, what is motivating you to consider this? Is it just that your PM asked? I would certainly have a red flag go off.

[Nathan Gesner]

It's certainly not illegal or immoral, but it's unwise. It creates a major conflict of interest because the PM is looking out for their own interests, not yours. How will you know they're renting it at market rate? Are their maintenance requests legit? What if they stop paying rent or want to break the lease early? 

I don't like to mix business. I don't like to rent to my tenants or contractors or family members. It seems to almost always turn bad on me.

[Rob Horon]

Thank you all and I appreciate the responses. Yes our PM asked to rent one of our homes. 

[Ujwal Velagapudi]

I've inherited or have done this on a few properties. One, it was a true on-site maintenance/manager who was getting nearly his full rent subsidized. However, this was an apartment building so we still had a full time, off-site PM. We eventually let the on-site manager go, it just was getting to be too big of a headache, asking for additional payment for work that was unnecessary. We just let the actual PM deal with the property and hire out any work needed. 

On the other hand, I did inherit a tenant who would mow my grass, clean up the sidewalk, etc. and be my eyes and ears around the building for my commercial retail strip. This worked out well since it was just a $100/mo discount, and he truly was a great lookout helping me to get a better feel for the area. I never asked him to step outside this agreement though, and never compensated him with anything further. 

Now this next scenario is what I would advise anybody if you didn't inherit any of these on-site managers and this is a setup you want to have. I had a mixed use building where my tenants were absolutely phenomenal. They never bothered me, and would always be very helpful with accommodating maintenance worker schedules so I didn't need to be always be there (they leased the basement unit with the boilers as well). They helped with many other aspects throughout, were clean, would help out our neighbors on the block, etc. After a 3+ year relationship, I asked them to be my on-site PM if I absolutely could not do something in person as I was always travelling. I paid them an excellent hourly rate to perform tasks I personally couldn't if I wasn't able to (going to the city office, showing a unit, overseeing a maintenance request, etc.). They were sweet enough to do it without asking for anything in return, but I think as a landlord you will figure out if a tenant of yours is trustworthy enough to be in this position for you.

Like the others have said, I still think there is some conflict of interest, and I wouldn't recommend keeping any management agreement for a tenant you inherit, but it doesn't mean you can't have a successful on-site PM after cultivating a good relationship over the years.