More proof that I'm a sucker...
I've been investing in real estate since I was 22. I'm 41 now and I still make the same dumb mistakes. Of all the potential tenants you could rent to, your friends are the ones who are most likely to screw you over.
At 22, I bought a four bedroom house in a college town in NH. I don't even know if the term house hacking had been coined yet, but that's what I was doing. I lived in one room, and rented the other three out to college students. Two of the rooms were rented to students who worked part-time jobs to pay their rent. On the first of the month, both of their rent checks were in my hand without issue. The fourth room was rented by someone who lived in the dorm with me the prior year, so we were friends. He was from New York City, and his father owned warehouses in NY for Estee Lauder. In addition to their house in NYC, they had a beach house in Miami. This family was stinkin' rich. Sounds like an easy decision for a tenant, right. Nope. It took over three months to collect the first month's rent ($400) from them. It was like this for the entire time he lived in my house. Lesson learned, right?
Nineteen years later, I own a six-unit apartment building in a funky town in Upstate, NY. I'm gutting and renovating the apartments to appeal to the surprising number of wealthy NYC transplants that are coming to the area. I mean everything is new. Hardwood flooring, sheetrock, crown moulding, tile, cabinets, coutertops, etc. A friend of mine knows I would soon have an apartment for rent, and asked if I'd consider renting to her mother for six months while the mother was house shopping, locally. The mother is in her 60s, wealthy, and is very capable of making the payments, so we strike up an agreement. Here we are at the end of her six months, and she's preparing to move. At this point, she's been nothing but an ideal tenant. She pays her rent early, is very neat, and seems unfazed by the construction noise going on in the apartment adjacent to hers. Yesterday, I go to her apartment to inspect it before I list it for rent to find out that she had picked back up an old habit while she was living there. She had started smoking again, and decided it would be fine if she did so in my brand new apartment. The whole place reeks. I'm hoping it will mostly air out, but I have a feeling I'm going to be repainting the apartment for the second time in less than a year. I'm sure she and I will come to a reasonable settlement for this, but what the hell was she thinking?
tl;dr
Sorry for the rant, don't rent to friends.