Should I have a contractor move into property

[Hedman Maximus]

Hi Biggerpockets community!!! I have a question. I got a vacant apartment , and I recently found a handyman, that does work here and there. He is interested in renting it, and moving in with his mother and fiancée, however , the apartment needs work, like painting and throwing the old tenants furniture and trash out. I was wondering how do I structure the lease, should I give him a month free rent, with condition of emptying the trash, and cleaning the apartment ? or perhaps do the painting and trash throwing myself, and charging him deposit and rent? I have to disclose the properties are 3 hours away from me in Binghamton NY. It’s been difficult finding workers. So far I put him to the test and he seems solid. The contractor family lives in the neighborhood, they sort of patrol and see what’s going on..

[Nathan Gesner]

Quote from @Hedman Maximus:

Hi Biggerpockets community!!! I have a question. I got a vacant apartment , and I recently found a handyman, that does work here and there. He is interested in renting it, and moving in with his mother and fiancée, however , the apartment needs work, like painting and throwing the old tenants furniture and trash out. I was wondering how do I structure the lease, should I give him a month free rent, with condition of emptying the trash, and cleaning the apartment ? or perhaps do the painting and trash throwing myself, and charging him deposit and rent? I have to disclose the properties are 3 hours away from me in Binghamton NY. It’s been difficult finding workers. So far I put him to the test and he seems solid. The contractor family lives in the neighborhood, they sort of patrol and see what’s going on..

I advise against exchanging work for rent. What typically happens? The work is not completed (or completed improperly) and you haven't collected full rent, so you've lost twice. I have seen so many Landlords get burned by making verbal agreements with their tenants only to get burned.

Whether the tenant is a licensed contractor or just a handy Tenant, keep the rent and work separate. The tenant pays market rent to live there. You pay the Tenant for work when it's complete and to your satisfaction. I also recommend you have a written agreement for each job the Tenant is doing: what will be done, where it will be done, what materials will be used, who pays for materials, what you will pay for labor, a deadline for completion/inspection/approval/payment, what happens with the improvement when the tenant leaves, etc.

[Greg Scott]

This sounds like the start of a story with an ugly ending - red flags everywhere.  I would not do this.

If you feel you must do this, I would structure everything so that the work and the tenancy can be unwound separately.  I would pay him market rate for trash out and renovation work and specify the work in an independent contract. I would have him complete an application AND do a background check on all residents, then sign a market-rate lease.  Do not mix the lease and work.  Trying to fire him for lack of work or evict him (for whatever reason) becomes a disaster situation if you have intertwined your lease with the contracted work.

[Harry Carter]

Quote from @Hedman Maximus:

Hi Biggerpockets community!!! I have a question. I got a vacant apartment , and I recently found a handyman, that does work here and there. He is interested in renting it, and moving in with his mother and fiancée, however , the apartment needs work, like painting and throwing the old tenants furniture and trash out. I was wondering how do I structure the lease, should I give him a month free rent, with condition of emptying the trash, and cleaning the apartment ? or perhaps do the painting and trash throwing myself, and charging him deposit and rent? I have to disclose the properties are 3 hours away from me in Binghamton NY. It’s been difficult finding workers. So far I put him to the test and he seems solid. The contractor family lives in the neighborhood, they sort of patrol and see what’s going on..

 I'll tell you from personal experience not to do this.  I did this exact thing on my very first property and got burned by the tenant badly.  I'm not saying not to rent to the person, but you definitely want to keep the tenant/worker relationship separate.  Have them rent strictly as tenants and if you need work done, you can hire him or someone else to do the work.  

Hope it works out.  

[Stephanie Jacobson]

@Hedman Maximus I wouldn't do this, either. If you trust him you can take him on as a tenant, but definitely charge him rent and pay him for his work separately. Tell him it's for tax reasons or something. Evictions in Binghamton are still next to impossible, and you don't want to put either of you in a bad spot.

[Luka Milicevic]

@Hedman Maximus

Well.....

I've heard on podcasts and books that this is a great idea. My experience hasn't quite been that...

I did this a few years ago.

The thing is, contractors, handymen, trades folks seem to have a 2 year life span. They are GREAT for 2 years and then seem to disappear, go to prison, become alcoholics, or die. (Seriously, this happens everytime). The guy that I did this agreement with became an alcoholic. He stopped doing any work and stopped paying rent. (Started out great and was an excellent resource). 

As Nathan mentioned-Have him pay rent as normal, then pay him for any work done. That way you have grounds for eviction if he doesn't pay rent. If you have a "work agreement" how are you supposed to prove it's not done/not done right. He might say the place is cleaned out of all junk, you might disagree...then what? With a rent payment: It's either paid or it's not. 

[Hedman Maximus]

Quote from @Hedman Maximus:

Hi Biggerpockets community!!! I have a question. I got a vacant apartment , and I recently found a handyman, that does work here and there. He is interested in renting it, and moving in with his mother and fiancée, however , the apartment needs work, like painting and throwing the old tenants furniture and trash out. I was wondering how do I structure the lease, should I give him a month free rent, with condition of emptying the trash, and cleaning the apartment ? or perhaps do the painting and trash throwing myself, and charging him deposit and rent? I have to disclose the properties are 3 hours away from me in Binghamton NY. It’s been difficult finding workers. So far I put him to the test and he seems solid. The contractor family lives in the neighborhood, they sort of patrol and see what’s going on..

 Thank you everyone for your value input and suggestions . I found it very helpful.

[Hedman Maximus]

Quote from @Luka Milicevic:

@Hedman Maximus

Well.....

I've heard on podcasts and books that this is a great idea. My experience hasn't quite been that...

I did this a few years ago.

The thing is, contractors, handymen, trades folks seem to have a 2 year life span. They are GREAT for 2 years and then seem to disappear, go to prison, become alcoholics, or die. (Seriously, this happens everytime). The guy that I did this agreement with became an alcoholic. He stopped doing any work and stopped paying rent. (Started out great and was an excellent resource). 

As Nathan mentioned-Have him pay rent as normal, then pay him for any work done. That way you have grounds for eviction if he doesn't pay rent. If you have a "work agreement" how are you supposed to prove it's not done/not done right. He might say the place is cleaned out of all junk, you might disagree...then what? With a rent payment: It's either paid or it's not. 

Luka thank you for reply, very helpful.

[Hedman Maximus]

Quote from @Stephanie Jacobson:

@Hedman Maximus I wouldn't do this, either. If you trust him you can take him on as a tenant, but definitely charge him rent and pay him for his work separately. Tell him it's for tax reasons or something. Evictions in Binghamton are still next to impossible, and you don't want to put either of you in a bad spot.

Stephanie , thank you i appreciate your input.

[Hedman Maximus]

Quote from @Harry Carter:

Quote from @Hedman Maximus:

Hi Biggerpockets community!!! I have a question. I got a vacant apartment , and I recently found a handyman, that does work here and there. He is interested in renting it, and moving in with his mother and fiancée, however , the apartment needs work, like painting and throwing the old tenants furniture and trash out. I was wondering how do I structure the lease, should I give him a month free rent, with condition of emptying the trash, and cleaning the apartment ? or perhaps do the painting and trash throwing myself, and charging him deposit and rent? I have to disclose the properties are 3 hours away from me in Binghamton NY. It’s been difficult finding workers. So far I put him to the test and he seems solid. The contractor family lives in the neighborhood, they sort of patrol and see what’s going on..

 I'll tell you from personal experience not to do this.  I did this exact thing on my very first property and got burned by the tenant badly.  I'm not saying not to rent to the person, but you definitely want to keep the tenant/worker relationship separate.  Have them rent strictly as tenants and if you need work done, you can hire him or someone else to do the work.  

Hope it works out.  

Harry, thank you for sharing your experience, it’s very helpful. 

[Hedman Maximus]

Quote from @Greg Scott:

This sounds like the start of a story with an ugly ending - red flags everywhere.  I would not do this.

If you feel you must do this, I would structure everything so that the work and the tenancy can be unwound separately.  I would pay him market rate for trash out and renovation work and specify the work in an independent contract. I would have him complete an application AND do a background check on all residents, then sign a market-rate lease.  Do not mix the lease and work.  Trying to fire him for lack of work or evict him (for whatever reason) becomes a disaster situation if you have intertwined your lease with the contracted work.

[Eliott Elias]

Have him sign a lease 

[Basit Siddiqi]

I wouldn't do it.

Try to keep as many transaction as possible without them being contingent on another.

Rent out the place to the contractor if he is a candidate.
If there is work required to be done to a property that you own, have a separate agreement for how much you will pay him for the services that he will provide.

This makes it very clear as to each person's responsibility.

[Sergey A. Petrov]

How big is the complex (you said you have one apartment vacant)? Generally, agree with what everyone else said. If you have 20-30+ units in that apartment, it is called a resident / on-site manager. Either salary or reduced rent or the combination of the two. Check with your CPA and your labor attorney. Reduced (or free) rent is taxable income to the resident manager and reporting and related taxation can get tricky…

[Eliott Elias]

Put them on a lease and charge them rent to stay there. Continue to pay them. Don’t exchange work for rent