Is Renting to Family Members a Good Idea?
It can be difficult to have a rental property on the market without it. When a home remains vacant for a long time, property owners begin to look at alternative options for income. One of the most common ideas is to look at renting a home to family members. It seems like a good idea because family is generally trustworthy and reliable. They will pay their rent on time and take care of the property, right? Unfortunately many property owners find out that renting to family members is not actually a good idea. Here are some common encounters that this type of situation will bring to the business arrangement.
1. I Need To Have A Favor...
Because the property owner's family, the tenant is not afraid to ask for favors in regards how the rent is paid. They might need to skip a month or two of rent or they might want to pay you in a different currency instead of cash – like making repairs to a home without asking you. This puts property owners in a bind. If they accept trade instead of cash as a rental payment, this still needs to be reported as income earned. If they allow a month or two of rent to slide by, the need to evict a tenant becomes nearly impossible. Don't grant favors to tenants that are family because it will just hurt you in the end.
2. There Is A Lack of Care For the Property
People tend to treat things differently when families involved. Although many family members will take greater care property, there are family members who will take less care of a family-owned property. As a property owner, if you are renting to family members, you will need to constantly check up on the property to make sure that it is being maintained.
3. Some Arrangements Don't Even Have A Lease
Depending on the landlord/tenant law, not having a lease could be a very bad thing. Some jurisdictions have lease-free rental arrangements listed as a month-to-month equivalent. Others consider it a verbal contract that can still be enforced. The worst environment is where a property owner has virtually no rights because there is not a valid contract to enforce. Look at local laws first before agreeing to let family stay on the property.
4. You Have To Be Willing To Evict A Family Member
Helping out someone in the family when they need a home is the right thing to do. The only problem is that you must be willing to evict that person if they aren't fulfilling their obligations. Let's face it: evicting a family member will cause a family divide. Even if you are in the right as a property owner, not all family members may see it that way.
5. There May Not Be As Much Profit
Because renting to a family member is typically seen as a favor, the full amount of grant that you could rightfully charge is generally not considered part of the equation. Don't just settle because of the philosophy that says a little rent is better than no rent. That's not true. Either get the full amount of rent or don't rent out the property for family. There are many property owners that successfully rent to family members every month and wouldn't change a thing. By following this advice, that could be you as well.
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