Should You Let Tenants Work on a House In Exchange for Rent Credit?

A few weeks ago, I was showing one of my units to a series of prospective tenants. One of the potential tenant applications asked, “Do you like the carpet?”

I looked at it. It was brand-new carpet, installed only a few weeks prior. It was a neutral color. It was, in short, the least-offensive, least-objectionable carpet that I could imagine.

“What do you mean?,” I asked.

“Well, I’ve done some contracting work,” he replied, “and I could install hardwoods in exchange for a rent credit … ”

Oh no. No, no, no.

I’ve never allowed a tenant to do any type of repair, maintenance or upgrade work in exchange for a rent credit. That’s not due to a lack of offers. That’s due to my assumption that allowing a tenant to work on the house is a potential recipe for disaster.

I’ve never heard any stories of that type of arrangement — working on a house in exchange for rental credit — going well. (In fact, I welcome those stories … if you’ve done this, and it’s worked out for you, please tell me about it in the comments below).

But I have heard plenty of stories about work-for-rental-credits going badly. Here are a few of the stories that stand out in my mind:

#1: The OverPriced Paint Job

I know a landlord in the Boston area who agreed to let his tenant re-paint the interior of their condo in exchange for one months’ rent. The landlord didn’t stop to crunch the numbers before agreeing to this arrangement. Later he realized that he’d effectively “paid” (in the form of lost income) more than $1200 to paint a very small space, only a few hundred square feet. The landlord, in other words, egregiously overpaid for the service.

And he got off lucky. Imagine what would have happened if the tenant did a terrible job — one that would need to be immediately re-done — AND THEN insisted on getting a rental credit for it?

#2: The Unstated Upsell

I know another landlord in the Denver-Boulder area who agreed to let his tenant do landscaping/gardening work in exchange for a rental credit. They negotiated an hourly rate for the labor, and the landlord agreed to compensate for the raw materials with a receipt.

You can imagine how this story went: the landlord ended up paying far more for raw materials, and for a far higher number of hours, than he had anticipated. The tenant did good work and created a fantastic-looking space, but the improvement went far beyond what the landlord had expected. The landlord, in other words, got “upsold” without knowing it.

And again, he got off lucky — the strong quality of the work mirrored the cost. Imagine what would have happened if the tenant over-inflated his hours, or did a terrible job?

Those are the two stories I’ve heard, but I’m betting there are more. If you’ve ever agreed to let a tenant do work in exchange for a rental credit, share your story below. I’m sure there are more horror stories, and (potentially) there might be some good examples, too.

But one thing is certain: I’m never going to allow this arrangement in any of my rentals. I’d rather keep the landlord-tenant relationship as simple and clean as possible.

Photo: cncphotos

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.