The following is a guest post By Tali Wee of Zillow.com
Most people avoid entering into business deals with close friends to avoid any uncomfortable stressors on the relationships or burned bridges. Unfortunately, while partnerships with close acquaintances are much easier to come by, they can turn sour. Renting is a business like any other and should be approached with the same precautions.
5 Reasons Renting to Friends Can Be Tricky
Here are five reasons to look outside of an inner circle for future tenants.
1. Friends Might Take Advantage- Renters who are too close with their landlords may be more likely to take advantage of the situation, even if it’s unintentional. Sending a rent check a few days late doesn’t seem like a big deal when you’re the landlord’s friend.
Also, a tenant might feel more comfortable negotiating the rental contract in a casual way. Regardless of the relationship with an applicant, a landlord should always preform a background check and a credit check. Learning your friend’s history regarding the law is important. It’s possible a landlord could discover personal information about a friend who wouldn’t otherwise disclose it.
There’s a boundary friends try to avoid crossing, but entering into business could force such exchanges.
>>>Opt in to Email Updates <<<
2. Hesitation- Renters feel less comfortable telling their landlord about property issues when they already have a close rapport. Perhaps a tenant wants to avoid “calling out” structural issues or a pest infestation.
A tenant would be quick to file a complaint based on unsanitary or unsafe structures in an outsider’s building. However, a close relationship complicates the line between constructive complaints and insulting critiques. Just as a visitor wouldn’t point out problems at a friend’s house while spending the night, a renter may be tentative about making complaints while living on their friend’s rental property.
3. Assertion- Financial situations often put strains on close relationships. It’s awkward to ask friends for late rent. Imagine contacting them every month for a large sum of cash in order to pay the investment mortgage. Landlords may feel guilty putting pressure on their friends to get rent checks in on time.
The landlord relies on rent income to pay fees associated with the investment property. Additionally, favoritism is unfair to the other tenants in the building who can’t pay rents late without penalties. From a legal standpoint, all tenants should have to follow the same rules if the leases are the same.
4. Damages- If the property is damaged for any reason, it is going to be difficult to withhold the security deposit from a close friend. When a property manager doesn’t return a damage deposit check, there is usually some back and forth communication about what was damaged after the tenant vacated.
With a friendship, the landlord may hear about the deposit withholding for months after the friend moves out, including arguments of liability. They could potentially involve other close friends to pick sides, further complicating personal and business life.
5. Eviction- After a few missed rent payments, noise complaints or property violations, it may be time to send an eviction notice to a renter. This is a difficult situation when the tenant is a close friend. Caring about their wellbeing and upholding management rules are almost contradictory.
>>>Opt in to Email Updates <<<
It’s an unfortunate part of the job, whether renting to friends or strangers, but eviction is sometimes necessary. Landlords should be firm with their tenants – regardless of their previous relationships.
Make sure a prospective tenant is qualified to pay rent and responsible enough to respect property rules. The landlord-tenant relationship can turn south with non-acquaintances just as it can with close friends, so it’s best not to risk losing a friend over an avoidable business disagreement.
Question: Have you ever rented a property to a friend or family member? How did it work out for you?
Want To Learn How to Quit Living Paycheck to Paycheck For Good?
My Celebrating Financial Freedom course may be just what you’re looking for.
It’s now available in in a new online video format. You can check out the course home page here and watch the introductory video to learn more.