Are you thinking to renting to friends? Finding high-caliber tenants is one of the most difficult aspects of being a property manager. Financial information and credit checks can be useful, but only a person’s presence in the unit will allow you to really assess their character and capacity to make payments on time. To avoid any bad apples who pass a credit check but still refuse to pay, it may be tempting to rent to a friend or a family member if you own an investment property. However, there are a few factors you should take into account before renting a space to a member of your inner circle.
Is Renting to Friends Beneficial?
Renting to individuals you know, such as friends and family, can seem dangerous, but there might also be benefits. The most crucial thing is to rent to someone who has demonstrated their reliability, dependability, and respect. Some advantages of renting to friends or family if they satisfy those criteria include:
Having your friend as a tenant could give you a bit more leeway when arranging inspections or repairs, depending on how well you know your friend. They could feel more at ease if you perform routine maintenance in the rental house or flat after hours or on the weekend.
You will likely have a better insight of their character than you would if they were a total stranger if you rent to someone you know intimately. It may be advantageous to renting to friends or family. If you’re convinced that they are dependable and will make payments on time. There’s only so much you can discover about a person based on their financial credentials and credit history.
Observant of the Law
Another advantage of renting to a responsible friend is that you know they will adhere to the property’s rules and regulations. To avoid disputes or harming their connection with you, they could be less inclined to violate the terms of the lease.
Quickly Fill a Position
Renting to a friend can be a method to recoup some of the money you would have lost if you had an empty rental property that you did not want to leave unoccupied until you found a more permanent tenant. You will be able to bridge that revenue gap even if you temporarily rent out your home to a friend.
Please keep in mind that receiving any of these advantages is contingent upon your friends being respectable tenants. It would certainly be preferable to completely avoid renting to them if you have any concerns about their dependability or integrity.
What Drawbacks Exist in Renting to Friends?
If things do not work out as expected, renting to friends may place you in a difficult situation. You might not be maximizing your return on our rental property investment. The following disadvantages may arise if you choose to rent to someone you know.
Lost rental revenue
You can lose out on important rental money if you rent to friends, which is a significant potential drawback. It is more likely that you will offer a friend or acquaintance a lower rent cost or extra benefits that you wouldn’t extend to a stranger. In the end, even a tiny discount can add up over the course of several months or years, which corresponds to the length of the leases, to be rather significant.
They might also try to use the rental property more flexibly by inviting a visitor who is not listed on the lease to live there or making unauthorized changes to the unit’s interior or exterior, all in the hopes that you’ll make an exception and let them get away with it because you know them personally.
The potential for late rent payments is another reason to avoid renting to friends. Again, some people may feel like they are exempt from the law because they are acquainted with the owner or landlord, and this attitude might eventually result in missed rent payment dates. In an effort to avoid paying late penalties, they could also try to push back deadlines.
All the disadvantages of renting to friends or family, could be detrimental and long-lasting to your friendship. It’s a difficult and stressful scenario to have to decide between your business and your friendship with that person. The friendship may eventually fail if your friend feels that you were unjust to them or if you were insulted or betrayed by someone you trusted.
While renting your home to a friend may not always be a horrible idea, there are often clear drawbacks. If you decide to rent to someone you know, you should do so only if you don’t have a better eligible applicant waiting in line.