It’s the million-dollar question every landlord will face at some point. A friend, an extended family member, or someone who better fits the label of acquaintance will approach you about renting one of your properties. Other friends and family, colleagues, the mail carrier, and the grocery cashier will be quick to weigh in with their opinions either strongly for, adamantly against, or somewhere in the confusing middle.

The truth is that renting to a friend can be a smashing success. But it can also be a devastating failure. Understanding the pros and cons can help you approach the matter with wisdom and clear thinking rather than emotions or a sense of obligation.

The PROS:

• The potential pool of tenant candidates increases when friends/family/acquaintances factor in. And since a steady stream of income requires occupied properties, more potential tenants can help your bottom line.
• You already have personal knowledge of the person(s) background and personality, habits, work history, and lifestyle. However, a stranger can describe any number of excellent characteristics with little or no proof to back up the claims.
• Because of the existing relationship, a friend may be more conscious of paying rent and covering expenses promptly than someone who doesn’t know you.
• Someone who knows you may be inclined to remain your tenant longer, increasing your tenant retention rate. More extended occupancy saves money by avoiding frequent “new tenant” costs related to deep cleaning, re-painting, downtime between tenants, etc.

Sounds pretty good, right? But one must also consider . . .

The CONS:

• Some friends will take advantage of the existing relationship by pushing rent payment deadlines, feeling entitled to stay longer without an official lease renewal, and so on. In addition, they may try using the friendship to make the landlord/friend feel obligated to bend the rules.
• An acquaintance might think their poor credit or shady past rental experiences won’t matter to you because you know them. WRONG. They may react with a “How could you?” attitude at the mention of running a credit check and confirming employment.
• An extended family member may expect perks because of your relationship with them. When they don’t get special treatment, they may become angry with you, which hurts both your professional and personal relationships. Again, some may take advantage of the friendship, making excessive maintenance and repair requests.
• A lifelong friendship can be shattered by disagreements and hurt feelings arising from the tenant/landlord relationship.

 

The BOTTOM LINE:

While helping out friends in need of housing feels good, it’s imperative that said friends be treated like any other tenant. Make it clear from the first mention of a possible rental relationship that it will indeed be an official landlord/tenant relationship, where—

• Friends will be vetted with the same background check and employment verification every tenant undergoes.
• They must sign a lease.
• The same rules will apply as do for other tenants.
• Rent must be paid on time.
• Their needs and concerns will be handled in the same manner as other tenants.

Renting to friends could very well work out for you. If you decide to move forward, do so with caution and a commitment to treat all tenants, regardless of existing relationships, the same.

About Rentals America 

Rentals America provides full-service property management for residential rental properties. Our team is completely dedicated to property management and we’re here to help landlords navigate the rental market.