Metropole Property ManagementMetropole Property Management
  • PROPERTY OWNERS
    • Why use Metropole to manage your investment property?
    • Our stress free property management services
    • Common Property Management questions
    • What our clients say
    • How will we achieve the top rental for your investment property?
    • Your Tenant is Vacating… What Happens Now?
    • Tenant Selection and Ongoing Relationship Management
  • TENANTS
    • Rental property search
    • Rental application
    • Maintenance tips for tenants
    • Maintenance request
    • Tenants guide
    • Common Tenant questions
  • ABOUT
    • About us
    • Meet the team
  • KNOWLEDGE CENTRE
    • First time investor
    • Switching property management agents
    • Renovating your rental property
    • Sophisticated investor
  • CONTACT
    • Our Offices
    • After Hours Emergencies
    • Maintenance Requests

Should I rent to friends or family?

by Michael Yardney / Thursday, 08 November 2018 / Published in Sophisticated investor
Three cute kids using a digital tablet.

In most investor’s journeys there comes a time when a friend or family member could potentially become a tenant.

The question, of course, is should they?

There are benefits to having someone you know and trust living in one of your properties, but the line between a personal relationship and a commercial one can be a difficult one to traverse.

So, what are the pros and cons of the strategy?

 

1. Unique understanding

One of the benefits of having a friend or family member as a tenant is that you understand them better than a tenant who randomly applies for the property.

You might know they are trust-worthy, have a good stable job, plus you have probably seen how they live so are confident they will look after your property like it is their own.

Questions Previous Landlord Maryland Tenant

On the other hand, though, if they are forever changing jobs, have a habit of running out of money before the end of the month, and have never owned a vacuum cleaner, then it wouldn’t be a smart move to rent your property to them.

The thing is, while blood might be thicker than water, you still need a tenant who will pay the rent on time and who will look after your property.

You should never lower your tenant standards just because you share the same last name as someone or you’ve been friends since you both were in Grade 4.

That’s because the only likely outcome will be a ruined relationship and potentially a ruined property investment, too.

2. Paper trail

One of the biggest mistakes that investors make when renting to family and friends is to do so under “handshake” provisions.

What that means is that they verbally agree to the conditions, including how and when the rent should be paid, as well as the timing of property inspections — if any are conducted at all.

Landlord Tenant Problems

What usually happens next is that their tenant is always late paying the rent and because they have a personal connection with them, they let it slide… until they can’t meet the mortgage repayments anymore.

The conversation they’ll need to have with them then is unlikely to improve their relationship and could in fact turn sour very quickly because of the emotional connection they share.

Regardless of whether your tenant is a stranger, your friend Jess from uni or your Great Uncle Bob, you should always have a tenancy agreement that outlines what is expected from both parties.

That way, your tenant knows they are expected to pay on time and that they can’t call you at midnight because they’ve left their house keys at the pub.

Tenant3. More flexibility

Another advantage of renting to family or friends is that it can provide more flexibility for both parties.

Say, your best friend is recently separated from their partner and needs somewhere to stay for a few months and your investment property happens to be vacant.

That is a win-win for both parties as it ensures some rental income is coming in and your friend has a roof over their head.

Likewise, perhaps the reason the property was vacant was that that it needed a little bit of TLC, which you hadn’t got around to undertaking.

Your friend is more likely to be happy for you to complete some simple cosmetic renovations so it’s a nicer place for them — and ultimately for your future tenants — to live in.

Happy Family With Two Kids Moving Into Their New Home SittingFriends or family will also probably be more conscientious with the property by being careful not to damage fittings and fixtures.

At the end of the day, every investor wants a tenant who is going to look after their property as well as pay their rent on time.

If that tenant happens to be a friend or a family member then it could be a worthwhile situation for all concerned.

However, the added emotional connection can make things trickier than needed, especially, if the rules of engagement are not set out — and understood by both parties — at the outset.

  • Tweet

About Michael Yardney

Michael is a director of Metropole Property Strategists who creates wealth for their clients through independent, unbiased property advice and advocacy. He's been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au

What you can read next

Andlord Rights
What are your landlord rights when your tenant stops paying rent?
Property Manager
Is engaging a Property Manager Worth it?
135745
4 property management mistakes to avoid

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Recent Posts

  • Sell Property

    Selling your property with the tenant in place

    Whether you have one or two investment properti...
  • Pets

    It’s now much easier for tenants to have pets

    There’s been a huge change in the Residen...
  • Evict3

    6 Ways to tell if it’s time to evict your tenants

    Evicting your tenants is usually a last resort ...
  • Tenancy Law

    Do you know the new tenancy laws that are coming into effect this year

    2020 is looking to be the year for renters, wit...
  • Tenant Modern

    Who will be the tenant of tomorrow?

    If there’s one thing we love, it’s making predi...

Categories

  • First time investor
  • Renovating your rental property
  • Sophisticated investor
  • Switching property management agents

Quick links

  • Blank
  • Blank 2
  • Property Owners
  • Tenants
  • Knowledge centre
  • Common Property Management Quesitons
  • Common Tenant Questions
  • Understanding Capital Gains Tax
  • Investing In The Perfect Property Manager

Our locations

Melbourne: Level 2, 181 Bay St. - Brighton, VIC, 3186
Sydney: Level 4, Edgecliff Centre 203 - 233 New South Head Rd. - Edgecliff, NSW, 2027
Brisbane: Suite 4, 742 Sandgate Road Clayfield QLD 4011

Get in touch with us:

1300 20 30 30
[email protected]

© 2023 Metropole Property Management | Privacy & Terms | Content Marketing by Grid Concepts

TOP