Rental Property Investor · Downey, CA · Member since 2017 · 347 posts · 25 votes
Hello,
I heard from different real estate investors is not smart to rent to family and friends because you never know what issues could arise which could hurt the family or friend's relationship forever. My question how or what can you tell a friend or family member that wants to rent from you but you dont want to avoid issues in the future but also you dont want the person to be upset or take it personal because you cant rent to them. In other words what can you tell friends or family thst unfortunately you cant rent to them because "___"?
Investor · Vancouver, WA · Member since 2013 · 3k+ posts · 4k+ votes
7y
We have no problem renting to family and friends. They abide by the same rental agreement and expectations as our other tenants because we establish that from the beginning.
We are also clear about the "hats" we wear. For example when I phone my brother (who is 15 years older than me) about something related to his tenancy, I tell him I'm calling with my landlord hat on. When he contacts me about something he needs as a tenant, he's clear about that as well. We are both able to keep the roles clear. Same with tenants of ours who were first coworkers or friends, as well as those who were tenants first and then became our friend.
Rental Property Investor · Salem, OR · Member since 2017 · 696 posts · 660 votes
7y
@Horacio Gutierrez This is a good question and will depend on the family dynamic. If they know you own the property and know you do not have any partners or investors, then you have to be direct with them. Just tell them that you never rent to friends and relatives and that is a rule and it is not personal. Blame it on your advisor or mentor or whatever.
If they do not know how you own it tell them your partnership agreement says you can't rent to friends and family. Good luck, be strong, if they NEED to rent from family, then you DO NOT want them as a renter!
Rental Property Investor · Jefferson, GA · Member since 2017 · 95 posts · 145 votes
7y
I wouldn't rule out renting to family or friends, so long as they meet the same criteria a typical applicant would...will they pay rent on time and take care of the property? If so, there shouldn't be a problem. It sounds like what you're asking, though, is how to break the news to a family member or friend that you don't want to rent your property to them, in which case I say honesty is the best policy. Be up front why they don't meet your requirements.
@Horacio Gutierrez
Yeah. Just say its already rented. I have done it before. No hard feelings. Now i dont even mention a vacancy to them in order to avoid the question.
Telling them you have a strict business policy of not renting to family or friends is the best and only reason your will ever need. There is no reason to make up excuses. You simply explain that the dynamics of the business are such that it is too risky and your relationship is more important. They will argue and you repeat the statement that it is your strict business policy, no exceptions.
This business is all about mitigating risks. It is a proven fact that renting to anyone places relationships at risk in some situations and therefor the only smart decision is to not do it. If you are a high risk investor and don't care about relationships then by all means take the risk. Otherwise it is not your business policy to rent to family or friends.
Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
7y
Horacio,
Here is a blog I wrote last year regarding your question;
We love our family and friends, but beware of them becoming your tenants. It’s always a good idea to treat your rental property like a business. Treating family or friends just like you would any other tenant regardless of your relationship is just good business. It's important to separate business and personal relationships, and sometimes I think this is what gets lost in translation when it comes to family or friends.
Here are some things that I’ve seen regarding this type of rental:
The owner never seems to want to run a background check
they never want them to pay a deposit
they want to give them “free rent” or a huge discount while they look for a job
Family or friends become or seem entitled to special requests and take advantage
Friends or family may hesitate to tell you about maintenance issues because you gave them a break
They make you feel guilty when you ask for a late fee
When the property gets damaged, you don't feel comfortable asking for money to make repairs
Lastly you may have to evict a friend or family member. This is when really go south.
Protecting yourself from a business standpoint is still number one, no matter who you rent to.
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
7y
@Horacio Gutierrez
We have a no family and friends policy. Period. They going to quit talking to you based on that policy? No. But they will quit talking to you when you do a background check on them, charge them late fees, charge them for damages, and evict them. Because if you aren’t going to do that, then you aren’t running a business, you’re renting your place to family and friends.
Portland, ME · Member since 2012 · 616 posts · 550 votes
7y
The reason they want to rent from you is usually because they have a problem with their credit/income/landlord references. I explain to them that by law I must have the same rental criteria for everybody so that I don't get in trouble with fair housing. I tell them that sometimes they do audits or send "secret shoppers" and that I could get in trouble if I make an exception for anybody. "You don't want me to go to jail, do you?"
Rental Property Investor · Harrisburg, PA · Member since 2018 · 369 posts · 406 votes
7y
Just tell them what a few have already said above..."I don't rent to family and friends" We have a vacation rental and we have no "F&F" policy or rates...you want it go on VRBO and book it. No dates held, no discounts, no extra touches, nothing. Same reason I won't sell a vehicle to family or friends. Because at 4pm on a Sunday I'll get that phone call about the radio knob on the 12 year old used car they bought from me as a beater no longer working...
Ya? Have you ever evicted friends or family? Charged them late fees? Posted notice? Told them no? Kept their damage deposit? How did it work out?
The problem isn’t renting to family and friends. The problem becomes a problem when it becomes a problem.
No... Never have had to evict a friend or family member. But then again, rarely do we need to evict anyone. In over 23 years of being in the residential rental property business, with 17 units, we've only needed to evict tenants 3 times. On those three occasions the tenants unlawfully detained until the sheriff came, but were out in less than 30 days. We try to save tenancies when we can and if it isn't working out, we negotiate a move-out plan with the tenant, which results in quicker results, less damage to the unit, less cost, and less stress for all parties involved.
Yes... We've charged late fees to friends and family members. They readily paid the late fee. When rent is late, we contact the tenant and also hand them (or mail) a Rent Past Due letter in which we charge a late fee of $50 and reiterate the terms of agreement that apply to this situation.
No... We've not had to post notice with a friend or family member. We wouldn't hesitate to do so if we needed to. However, we rarely need to post notices with any of our tenants. If a tenant goes astray with noncompliance of the rental agreement, upon first noticing this, we prefer to telephone the tenant with a friendly reminder about the matter. If they don't correct their behavior immediately, we follow up with a letter of clarification about the terms of the rental agreement that were breached and what we need them to do, as well as what we will do if they don't comply. It this doesn't get the results we need, or the tenant has violated the terms of the rental agreement often, we serve legal notice to comply. Each time we serve a legal notice we charge a $20 posting fee.
No... We've not had to keep the damage deposit of a friend or family member. We wouldn't hesitate to do so if it was warranted. We charge for damages during the course of the tenancy, as they occur or as we discover them. If we wait until the end of a tenancy to charge for damages, the security deposit would rarely be enough. As we state at the beginning of tenancy and again in the Move-Out Instructions we give our tenants when it is time for them to vacate the unit: "Our wish is to return all of your security deposit. We trust you will leave the premises in such condition that we are able to do so." About 70% of the time our tenants receive all of their security deposit back. About 20% of the time a small amount is held back for items like outstanding utility bills, missing items, or minor damages. About 10% of the time there is something major for which we keep most of the deposit or all of it.
How did it work out? So far it's been fine! Friends and family members are no more of a risk to us than tenants we have never met before. All applicants must qualify first. The key is open and honest communication from the beginning, clear expectations, and holding all tenants accountable to the terms of the rental agreement they sign.
Easier to say no and not take the risk. As Anthony points out "The problem becomes a problem when it becomes a problem." Doesn't matter how many times you rent to family or friends and don't have a problem. Never rent to family or friends and you never risk that problem.
“My investment partner/lender has very strict policies on renting to friends/family. They would only work with me if I agreed not to rent to friends/family. I do not want to jeopardize either relationship.”
For me it depends on the family member. I use discernment. Look at them as individuals.
Do I know them to be a person that pays their bills? Are they responsible? Do they pay their way or like a free ride? Do they take care of their places? Do they care and respect other people's possessions? Do they get along with others easily? Are they nice? Hardworking or lazy? Known for lying or stealing? Enjoy conflict or drama? Have good communication skills?
People don't change much. Some people will always pay first for the roof over their head no matter what and others will spend it on everything else.
For us usually when they find out the price and no discount problem is solved. They are just feeling it out and so I've never had to say anything more. I don't share that I have a place availabIe unless I want them as a tenant.
I require signed lease and rent amount and they have to make enough to afford unit but depending on person I might offer no last month's rent ( not them asking, me offering) Family members can be great tenants but other family members I wouldn't even consider.
Just like if I was a tenant there are some family members I would not rent from either and others I would rent from if given the opportunity.
I don't share that I have unit available with friends. If they ask I tell them the price. My friends that have inquired have been looking for older family members. In the end they can't afford the rent amount I mention and since I don't offer a discount that is it.
I heard from different real estate investors is not smart to rent to family and friends because you never know what issues could arise which could hurt the family or friend's relationship forever. My question how or what can you tell a friend or family member that wants to rent from you but you dont want to avoid issues in the future but also you dont want the person to be upset or take it personal because you cant rent to them. In other words what can you tell friends or family thst unfortunately you cant rent to them because "___"?
I just flat out tell people "Sorry but I do not rent to people whom I have a personal relationship with" & leave it at that. Most people don't press afterwards.
