When thinking about placing a good tenant in your rental property, you might think, "I want to rent to someone I know." It's easy to believe that if we rent to a person close to us, like a friend or family member, they will do everything a perfect renter would do, like take care of the property and pay the rent on time.
On the other hand, what if they become a nightmare tenant? Sure, your friends and their friends and family members are great people to watch a football game with, but do you really want to rent to them? There are several factors to consider when faced with this dilemma. One of the best Jacksonville, FL property management companies suggests a few things to consider when renting to friends or family.
Common Pitfalls of Renting to Friends and Family
Residential property owners need to find a great tenant who can provide a consistent source of income from your rental property. Instead of going through the time and expense of finding a tenant you don't know, you could end your property's vacancy by renting to friends or a family member. It might seem like an ideal solution. However, that might not always be the case.
There are times when renting to a friend or family member could cause create costly problems for your rental property business and personal relationships. Let's take a look at a few of those instances.
What If Friends Fall Behind On the Rent?
Enforcing on-time rental payments is hard enough with tenants. Your friend may take liberties with "flexible rental payments" because of your relationship, even though it's a violation of the lease agreement. If you're not careful, your friend might disrupt your cash flow and put you behind on covering your expenses.
What If Your Family Member Makes Unauthorized Changes to the Property?
Your rental property is your investment. Since it's an asset for your business, you want to maintain the look and feel of it to attract new tenants or sell it one day down the road. In most cases, rental agreements prohibit tenants from making changes to the property without permission.
However, your family member might not have the same perspective of your priorities for the property. They could make changes to the rental property without your permission, creating an additional expense to either change back or replace or repair an item in the home. Unauthorized changes could also affect the property's value.
Other Tenants Might Want to Take Advantage
As your real estate portfolio grows, you'll deal with more tenants. Keeping things equal for all of your tenants is important for success as a rental property owner.
If other residents see that you are lenient about the rules with friends and family, they may feel they are missing out on some special treatment. They might also become flexible with their rental payments or damage your property with an unauthorized change. In some cases, tenants who feel they aren't treated equally can sue their landlord.
Eviction May Cause Some Uncomfortable Conversations
When friends or family behave badly as your renters, letting them stay isn't an option. If they refuse to pay the rent or fix something they changed in your property, your only option is to start the eviction process.
Evicting a tenant is expensive enough when it's not a family member. With attorney fees, court costs, lost rent, and the expenses of finding a new tenant, evictions become costly. With a family member, you also risk ruining a close relationship if it's necessary to remove them from your home.
Draw a Clear Line Between Business and Family
We know you want to be a good friend or family member and help out when needed, but there are better ways to help a friend than giving them free rent in a place that is supposed to be part of your investment portfolio.
While property management companies advise caution when considering a friend or family member as your next tenant, it's important to treat them as any other renter if you allow them to move in. All renters (even your cousin) must sign a lease, pay the rent on time, follow the lease rules, and pay the consequences for lease violations. Whether you rent to family or friends or not, professional property managers have experience dealing with difficult tenants and can help you manage your rental properties!
Hire a Professional Jacksonville, FL Property Manager as a Go-Between
Property managers are a rental owner's representatives to their tenants. One of the best features of professional property management services is the distance added between owners and tenants so that relationships stay out of the business side of things.
Spectrum Realty Services has the experience real estate investors need to manage any tenant, whether their part of your family or not. If you're looking for new tenants, reach out to learn more about how our full-service property management can help!
For more insights into finding great tenants, download a free copy of our Tenant Screening Checklist.