Should you rent your property to family and friends?
The worldwide property market has certainly picked up over the last couple of years and many people are now looking to get back into the rental market, renting their properties to gain some extra income. While there are many opportunities to find tenants one of the more difficult questions new entrants to the rental market ask is should I rent my property to family and friends?
On the surface the simple answer is why not, but if you begin to delve a little deeper and think about the potential consequences if there are issues further down the line, is it really worth the grief?
Keep business as business
Even though it is not always possible to separate your personal life from your business life, where you can you should look to do this. If you’re renting a property to an unknown third party then if there were issues further down the line there would be no emotional involved in potentially evicting the tenants or taking some kind of action. Indeed, in many ways it can make it easier to increase the rent if the party involved is unconnected.
Quote from PropertyForum.com : “There are options there, there are services available but how many of us are brave enough to sell our property without the input of an estate agent? There are obvious fees associated with estate agents but the fact is that on many occasions they can create a situation where competing buyers push the price higher which means more cash in your pocket.”
The simple fact is that when acquiring a property to rent out you should ensure where possible that business is business and emotion does not become involved. It can make it very difficult if you have a personal knowledge of your tenant’s life, friends, family and many people have experienced difficulties because of this.
Using a third party
Perhaps an alternative where you are looking to rent out a property to friends and family is to use a third-party to manage the property on your behalf. To be honest this would probably be a last resort, only if you are unable to secure any other tenants, because there is a cost to using a third-party and if you’re doing this purely because you know the tenants then you are losing out financially.
If you have a number of properties and have neither the time nor the inclination to manager tenants then that would be different but if you have one property and you are looking to rent out to family and friends then this is a cost you don’t need and you certainly don’t want.
Get it all down on paper
If you know your potential tenant there might be a temptation in the early days to agree everything verbally without written confirmation. However, not only would this be illegal but it would be foolish because in the event of discrepancies or issues further down the line what would you fall back on?
Indeed, your tenant should always ask for written agreements because this would protect their back and it will ensure that they know where they stand. It is very easy to integrate rental reviews, charges to the tenant and charges to the landlord in a written document then everybody knows where they stand. There is no confusion, there are no favours expected and this keeps everything above board and on a business level.
Conclusion
There will be occasions when a friend or family member requires a property to rent and you may well have the perfect property for them. However, before you commit think again, think whether you would be uncomfortable if issues did arise and indeed whether they would look to take advantage of your relationship. In the vast majority of circumstances everything should be fine but you should treat family and friends as you would any unconnected third-party and keep everything business-like with written contracts and clear obligations and liabilities for all parties involved.