Should an investor rent to family or friends,Why or why not?
I rent to both my kids. The agreement was that I would buy the house they want (down payment) and they would pay me $300 over the mortgage. Understand both are trustworthy and responsible or I wouldn't have considered it. Son and I are now up to three houses in his area which he manages for me. Family can be good because you know them as well as anyone, surely better than strangers. Proceed on that knowledge.
I have rented to friends in the past, and would advise against it. While you may know and trust them, they are typically the renters, that are most likely to push the envelope with you. After 1 experience I have a no friends and family rental policy unless they are dire need.
As a newbie here who has never owned, bought, or sold real estate I cannot speak from experience on your end. However, as one who has rented from friends I do have my 2 cents to add. It really depends on the integrity and depth of the friendship. You have to know someone extremely well to trust them with the mutual respect that this relationship requires.
In my case I am currently renting from one of my best friends. Not only do I rent from her but I am getting a below market rate on the property I am in. From me, in return for this discount, she gets a no-hassle tenant who keeps her place clean and always pays the rent on time. I pay for and do small repairs, such as a leaky faucet or busted evaporative cooler pump, myself because I know the value of what I am getting and don't want my rent raised. I get a discount, she gets peace of mind. I've been here 3 years and I had the same situation in the place I rented before, from a different friend, for 5 years.
I guess the answer is a grey area that is really dependent on the maturity and mutual respect of the friends involved. You may want full market value for your rental and, if you decide to provide a lower rate, you sure as hell want to know it will be worth it for you. You probably only need to get burned once to never want to do it again. And you certainly wouldn't want to lose an otherwise good friendship over it.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.