Renting property to tenants can be challenging at the best of times. But what happens when your investment and your personal life overlap?
Running your investment property like a business can be even more complicated when friends or family are the one’s tenants. Can a tenant-landlord relationship with someone close ever work? And, if so, what is the best way to manage it?
The first mistake property investors often make when renting to family or friends is not using a property management agency. Managing a rental property personally is not uncommon, especially in New Zealand, but when it comes to our nearest and dearest having that separation between the two parties is a good way to reduce conflict right from the start. The agency won’t have a problem acting in a businesslike way with your tenant, because they don’t have that emotional connection. Renting without that buffer can make issues more personal than they need to be.
Assessing your friend or family member as you would any other tenant can also help reduce potential problems. There’s a reason you have certain requirements, and they don’t become null and void when you have a personal relationship. Don’t make it personal – “I know you’re bad with money” – use the same credit and reference requirements to accept or reject their application, to avoid hurt feelings.
It can be tempting to let missed or late rent slide, but at the end of the day, this is your business and your investment. Just because you know someone will try their best to get you the money or is going through a tough time doesn’t mean that your personal financial responsibilities go away. Be empathetic, but treating property like a business sometimes means making tough decisions.
Holding a loved one to their lease agreement is difficult enough, but renting without one is a recipe for disaster. Get the same contracts drawn up as you would for any other tenant.
Property inspections and following your instructions regarding things like pets, smoking and renovations do not become suggestions just because of a personal relationship, but expecting them to happen without the paperwork can leave you in a less than ideal situation.
These guidelines might seem harsh, but if you make your expectations clear from the outset it is easier on everyone involved. Don’t assume anything, don’t sugarcoat your expectations, and you are already off to a better start than many landlord ‘friend’s and family’ horror stories.
John Kenel, Assured