Letting handyman live rent free if he maintaines multi properties

Investor · Albany, GA · Member since 2015 · 39 posts · 8 votes

I had a guy that I have been using to fix my properties here and there offer to take care of all of them (which is 4 properties as of now but will be adding 2 more soon) if I let him live in one of them for free? I would still buy supplies but labor would be in exchange for him living in my rental which if i did it would be the least income producing one it rents for $500. Anybody every did this and how did it work out for you? If I don't receive rent from this property I will still be in the green across the board but barley. If one of the other properties became vacant then I would be in the red. I could easily find enough work for him to do to justify the lost of rent but is this smart?

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CK Hwang

Capistrano Beach, CA · Member since 2013 · 283 posts · 169 votes

10y

Honestly, it won't be the amount of rent that i am worried about. It would be more like what if he stops working and you need to evict him as a result? How are the courts going to price the value of his work...it's a messy situation if all goes south. Personally, I'd just charge him rent as per normal, then have him invoice for the work that he does, and keep all transactions clean and clear.

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CK Hwang
Capistrano Beach, CA · Member since 2013 · 283 posts · 169 votes
10y
Honestly, it won't be the amount of rent that i am worried about. It would be more like what if he stops working and you need to evict him as a result? How are the courts going to price the value of his work...it's a messy situation if all goes south. Personally, I'd just charge him rent as per normal, then have him invoice for the work that he does, and keep all transactions clean and clear.
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Al Williamson
Rental Property Investor · Sacramento, CA · Member since 2011 · 2k+ posts · 1k+ votes
10y
@Marquis W. Yep, I agree with @ck hwang, keep the records separate. Keep them very clean as well.
Next question, why are you running so skinny? You have a multifamily, why aren't you operating it more innovatively to drive up your NOI?
If you're tight net income, then STOP operating in the traditional manner. Classic landlording is the least profitable way to run a rental. Innovate my friend.
Best to you.
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Matthew Paul
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
10y
So you want to set up an employee/ employer relationship . Thats what you would be doing , you know need workmans comp taxes etc . Not a good idea .
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Barbara G.
Hartsdale, NY · Member since 2015 · 874 posts · 218 votes
10y
I don't think it is a good idea for many of the above reasons mentioned here.
As someone said keep the 2 things seperate. I would use this handy man when I thought he could do the job expertley/ paying him a competive amount of money per job
When the job seems too complex for his level of experience I would go elsewhere for that help. I would always consider using him first. He would also be very convient because he would be living at the property. It would speed up tenant repairs and he would be close enough when you thought he should improve the repair. I would also want to keep him as a permanent tenant. I would use him when it was good for me to use him at a rate negotiated with him.
Your rent for this apartment is $500. Do you have $500 worth of labor for repairs a month? That seems rather high for only the labor. What is your total rent roll?
This could be a win win situation for both of you. You would steer most of your work and repairs to him and that should make him happy and you would have a handy man on site and that would make you happy and give fast attention to your tenants You would also have a permanent tenant that would not move because he had a job by remaining as a tenant. Be good to him and hopefully he will work out well for you
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Douglas Snook
Attorney · Attleboro, MA · Member since 2015 · 412 posts · 165 votes
10y
I would be careful and keep it separate.
Charge him the rent, have a lease etc. But then have him invoice you for any work he does and then take it off the next months rent
As others have pointed out, how do you know you will have $500 a month worth of work for him?
Can he otherwise pay the rent? what does he do for work if not for you?
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Joel OwensBusiness Member
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Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
10y
You want to show the rental income for the unit so you count it when you sell. Then you show what you pay him as a contractor as an expense.
That agreement that they do work for you is very messy in exchange for rent. Leave that one alone. You both will try to wheel and deal each other. The handyman will argue he works to many tasks for the free rent and you likely will counter he doesn't do enough. A disagreement will ensue after awhile and it will be a mess in court.
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Jerry W.Pro Member
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Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
10y
I would not do a trade deal. Like the others have said there is too much to go wrong. You are better off if you lease for money and have him invoice you for the work he does. Try to get him as an independent contractor.
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