Reduced rent in exchange for labor?
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?
Suggest you sign a standard lease. You can hire and pay them separately for the improvement if they complete it. Chances that they want a discount rent but unwilling to complete the renovation satisfactorily.
Not for nothing what contractor would take that deal? They only save $150/mo to do how many hours of work monthly? If you figured out how many hours they spent for that $150 it's probably less than minimum wage. Maybe you'd find some drunk who'd do it for beer or reduced rent.
I feel like this would also be opening a can of worms legally. What happens if this Tennant gets hurt painting the ceiling of a staircase?
You'd probably get better results and less liability just paying someone to fix it right.
Never! Even assuming they are licensed in that trade, they do not have your best interest in doing this.
@Jases Brown, I’ve never done this but the wife and I talked about this. I’ve considered reducing rent for someone who maintains the yard of a MF. However, there may be legal implications, so you’d want to talk to an attorney on this. Also, another way to look at it is have them complete the work first and then compensate them. Probably wouldn’t work, but reduces your risk.
@Jases Brown
Believe me, this will not end well.
A lot of us have learned it the hard way. Even the best of the intent will result in dissatisfaction on both sides. The tenant usually feels entitled to more than what he got in return and feels he got short changed.
@Jases Brown
Sounds tempting but don’t do it. Speak to your insurance agent because this prospective tenant will be doing the work on your property thus you would be liable if they fall off the ladder or get hurt while performing these cosmetic repairs.
Another thing to consider..... what one person considers livable another person might not. What if they move in and do no rehab or updating. You lost $150 per month. After they move out you’ll have to spend that money to update and rehab anyways. Why not do it now so Neighbors and tenant’s in the area don’t label this house as a slumlord owner thus causing you to get only the bottom feeders as future tenants.
I would never accept such an arrangement if I were you. I would only do it if they completed all of the renovations before moving in. You approve the work, then they get the benefit of living there for a reduced rent. That way they will work quickly and get the job done right before you hand them the keys. You can also protect yourself against sub quality work because you have to approve it instead of them doing it a little bit at a time. If the work is bad, the deal is off. I would also consider a reduced rent arrangement for maintenance work like snow removal, landscaping, perhaps some small tasks around the place, but not cosmetic renovations. You need to spell out the terms in writing ahead of time and make sure everyone understands it.
They will never reach my standards ,most on here that have done it report bad out comes .
@Jases Brown pay for the work performed and they pay their rent. Keep both separate. I made that mistake early on. Not something I’d ever do or recommend.
@Jases Brown Don't do it, Jases.
Your idea of finished cosmetic work may mean luxury finishes to them.
There are just too many error points and potential for disagreements.
Your plan was to do the cosmetic work, continue with that plan you are on the right track.
If anything, you don't want tenants who are suggesting labour for reduced rent arrangements, in the first place. That's a red flag in my opinion.
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#5 General Landlording & Rental Properties Contributor
- Rental Property Investor
- Erie, pa
how many negative responses do you need about this crazy idea to know it’s a bad one ? I tried it . It sounded good to me too until I learned the terrible truth : 99.9999% of tenants don’t have the time ,skill ,or resources to pick their own nose much less to repairs or rehab work .
@Jases Brown
No. No. No and No. It never works out. Trust me. Do the work up front and charge market rents. You will come out a lot better than having a tenant complete the repairs.
Just adding on to the "no's". But if you do decide to go this route with some of the cautions people have advised, I would STRONGLY advise you to pick your own paint colors and flooring! You just have no idea the bad taste or different taste than yours that some people have.
When I bought my personal home, the master bedroom had a linoleum floor that looked like "green marble". Just when I thought that has to be the most hideous flooring I had ever seen, I bought a rental that had linoleum flooring in the living room that was a busy pattern of burnt orange and brown. Like something out of the '70s. Except it was less than 10 years old. I can only guess the previous owner had chosen it because it was the absolute cheapest floor, probably on clearance, that they could find. Tenants who are paying for the materials might not care what the look is either.
Originally posted by @Jennifer T.:Just adding on to the "no's". But if you do decide to go this route with some of the cautions people have advised, I would STRONGLY advise you to pick your own paint colors and flooring! You just have no idea the bad taste or different taste than yours that some people have.
When I bought my personal home, the master bedroom had a linoleum floor that looked like "green marble". Just when I thought that has to be the most hideous flooring I had ever seen, I bought a rental that had linoleum flooring in the living room that was a busy pattern of burnt orange and brown. Like something out of the '70s. Except it was less than 10 years old. I can only guess the previous owner had chosen it because it was the absolute cheapest floor, probably on clearance, that they could find. Tenants who are paying for the materials might not care what the look is either.
Oh for sure. It would have to be a labor only deal. You couldn't expect the tenant to pick out and pay for all the materials. I wouldn't even let them pick out construction materials let alone finish materials or fixtures.
@Mike Franco had the same issue. I can't find the picture but its one for the record books. Tenant asked if they could paint, and said no need to reimburse because they knew I just painted before they moved in. They did BLOOD red on the walls AND ceiling, and partially painted all the woodwork BLACK lol. Only took about 700 coats of primer to cover up.
Good news though they did put down proper covering and somehow kept the floors immaculate.