Reduced rent in exchange for labor?

40 Replies

We just purchased a house that needs renovation. Mostly cosmetic. While showing another house of ours, one of the couples expressed interest in seeing this one that we are about to start working on. Once they saw it the idea came up of them living there and doing the cosmetic work in exchange for paying less rent. We paid 60,000 for the house and we’re going to ask 850 a month after renovations. This deal would put the rent at 700 a month with them completing any cosmetic work they wanted to. Essentially we would be renting the house to them as is. Any painting or flooring work they chose to do would be on their dime at their discretion. Have any of you had an arrangement like this and if so what advice would you have before entering into an agreement like this?

Not a good idea . What if they don’t get to any of the work because something came up , or whatever. Then you’re renting to them  at a lower rent . 

Or , if you have a deadline by which they need to do the work and it’s not complete , what will you do - evict them?

I've never done it though based on the BP forum and remembering the posters who did reduce rent for work, it often didn't go well. One story that comes to mind is a renter who was supposedly a contractor put in a counter(s) and he botched the job. 

And so I wouldn't recommend it but if you're unswayed I would suggest asking to see some of their work they've done in the past. I would also get in writing what they plan on doing so they're not simply doing the bare minimum. 

@Jases Brown   If the people are handy, it can be good; BUT keep the rent and work separate.  Who gets to pick the paint colours, when will the work be done?  What if they decide they don't want to do any work, will the get the lower rent for the rest of the lease?  Have them pay the $850 in rent and at the end of the month, see what work they've done and pay them.  I would also supply the paint that way you have control over the type of paint and the colour (you can give them a few pre-selected options for colour).

@Jases Brown Unless they are experienced contractors there is 0% chance I would do this...and even if they are probably not doing it anyways.  Just get the work done by a professional.  It is not worth the probably misunderstandings and hassle not to mention inferior work quality to mess around with this.

I guess the idea is that if we did not touch the house ourselves, we were going to get $700 for it anyway. Maybe I shouldn’t be framing the question as reduced rent but I am not fully appreciating the increased rent because we are not doing the work.

@Jases Brown the main problem I see is how much will it cost for you to redo what they do? Have you seen how people paint? Very little prep means that you’ll have to not only repaint, but fix the drywall patching - which is harder once it’s painted. Plus drips on the floor, drips down the wall, etc.

New faucet in the kitchen is great, until it starts leaking in the cabinet, the wood starts molding and needs to be replaced. Etc etc etc.

it’s one of those things that might work out well, but has a good chance of not.

Best to have clear boundaries. 

If they do the work , then you’ll keep it at $700 , and for how long ,? 

Do the work yourself - be their landlord , not their employer . 

Get  more money for rent - it will pay off in the long run , with fewer complications. 

Nope.  I don’t allow any tenants to work on my property.  

    I don’t got to Walmart thinking I’m going to offer up some work to get a discount off my purchases.  

On top of that it’s a huge liability allowing that.  

@Jases Brown it is good in theory that you don't have to pay the costs for improving to the point of getting market rate but what is missing is that they'll probably hack the crap out of whatever work they do themselves, costing more to fix in the future. They also might not report major issues that will get exponentially worse because they'll be afraid they'll be responsible for fixing it. Lastly, the kind of people willing to live in a place that needs a makeover to only save $150/month are normally not the best/cleanest/financially stable tenants

We have a house that needs a lot of interior work to make it nice. We weren't in a position to fix it up at the time and rented it to a family that was trying to position themselves to buy a house. We rented the property "as is" and made it clear that we would do no cosmetic repairs, just fix required things like heat/plumbing/electrical. They've been in there for a few years now and the property cash flows fine. I don't know what repairs or improvements they've made on the inside and it doesn't really matter to us.

All that said, I generally try to keep rent and work by tenants separate. ie, I pay them for stuff if they help solve a problem.

@Jases Brown I would get anything you agree on in writing just in case the deal goes bad and you end up in court. That way you will have ammunition to present your arguments.

I have seen many agreements like this not working out I hope yours do!

@Jases Brown

No way no how..

never allow tenants to do any work. Ok, paint a room, but not rehabbing a house.

What happens if they cause something bad to happen and you ok’d them doing work? It all falls on you. Accidents happen..

Dont freaking do it . No , nada  PERIOD .  Stop .  If I couls scream it at the top of my lungs in your righr ear , I would .  NO  

@Jases Brown I’m with most of the other people here. I’ve gone down the path of letting tenants do work on their unit (paint, planting, toilet fixes) and giving me receipts for the costs of the materials. It’s never been a good idea.

You likely won’t be satisfied with the work. They’ll probably do a pretty poor job, or won’t maintain anything they “improve” and you’ll have to change it when they leave anyways.

painting is THE one thing you should never let a tenant do.

you spend 5x the cost to fix it later.

Years ago, a tenant of mine painted a bedroom and bathroom beige, didn't mask anything, and did a sloppy job.

The only reason they decided not to paint even more areas is that they got lazy and quit halfway through the job.

They get all excited and motivated at first, then realize painting is a bich.

Was a big pain for me to prime and paint everything back to white.

@Jases Brown I don’t see a lot of difference between allowing them to paint and buying a fixer with the previous owners paint job, except newer paint. Once you have someone living there your holding costs are gone. The problem I see is if willingness to move into a fixer might indicate low financial resources. But I have seen mLS photos of some dirty places for rent so it could be that in their rent price range they would get a pretty shabby place anyway, so why not paint instead of clean. (I have friends who have been planning to paint their kitchen for a decade, so you may not get it done.). I have tenants that just got a rent reduction in a hot market because I would need to repaint and want to redo one bathroom once vacant, but not this year. Worth it to me.

This sounds like a nightmare waiting to unfold and not because of how you phrased the question. If the work is sub-standard, not done to code or within your timeline, etc., do you really want that dynamic with your tenant and still need to re-do the rehab with them in the space? What about exit strategy? If you don’t renew the lease, will they feel entitled or retaliatory because of their sense of sweat equity put into the deal? I question the judgement of these would-be tenants and think they should look for an apartment better-priced within their budget. 

@Jases Brown   Ask yourself how much it would cost for you to do the work.  Then how long it would take (sounds like simple and quick jobs).  At $150/month, you're looking at $1800 a year.  If the house is currently vacant, you're losing money, so add another $700 a month onto that number.  Another option is to give them 6 months to do it, and once it is done, give them a free months' rent (costs you $700), but the job must be completed and done properly.

No. Anyone worth anything in the trades wouldn't work for less than 25 per hour. Even if you supply the materials, 6 hours of labor per month won't get you anywhere fast. They pay full rent, you pay a fair wage. Keep the 2 separate. It could still be a win/win. Just be sure to inspect progress.

Ive tried this. It has to be rent and pay for improvements separately.

Also never let them pick paint colors. I allowed this once. Colors were good but bad location. 

What i thought was wall color was ceiling and lets just say it took several coats over my new brown ceiling and beige walls.

@Jases Brown

Without reading the comments I would say; no way. I’d almost rather go $700 a month as is, with no work to be done. Who the heck knows what type of work they will do?! They could turn “cosmetic work” into a $15,000 rehab by next year.

Now, if you bought the materials, had an exact list of what needed to be done, and somehow knew their abilities, maybe that’s ok. But probably not even then.