Should I Rent to Friends? What to Know as a Property Manager
Many property owners are drawn to the idea of renting to someone they know. After all, you’ll have a tenant you trust — so what could go wrong? The reality is that mixing business and friendship has both ups and downs.
In this guide, we explore the pros, cons, and essential dos and don’ts of renting to friends. Our goal is to provide you with all the knowledge you need to make the choice that’s right for your property — and your friendship.
What to Consider Before Renting to Friends
Renting to friends is all about striking the perfect landlord-friendship balance. You’re handing over the keys to a significant investment, so make sure your arrangement works for both of you. To determine if this is something to do, here’s what you need to think about before handing over the keys:
- Lifestyle: Is your friend someone who keeps their space tidy? Do they love hosting late-night karaoke sessions? Their living habits can make all the difference for your peace of mind as a landlord.
- Motives for renting: Are you renting to them because they’re dependable or because they’ve found themselves in a tight spot? Helping out a friend is great, but chasing them for rent each month can stress you out — and make casual get-togethers awkward.
- Financial situation: This one’s huge. Can your friend pay the rent without you having to nudge them every month? You can’t lower rent without showing bias — and that’s a landlord no-no.
- Professionalism first: In this scenario, you’re the landlord first and the friend second. You have to be willing to be fair.
The Pros of Renting to a Friend
You’ve considered the big questions, like who your friend is and your role as a landlord. So, now, let’s discuss the upsides of renting to a friend.
- Maintenance flexibility: Coordinating an inspection or repair appointment with a friend can be easier, since they’re often more accommodating about scheduling.
- Property care: Since they have a personal connection, your friends might take extra care to keep things in shape for you. Think fewer mysterious carpet stains and more timely reports of issues.
- Vacancies filled quickly: If a friend is interested in renting your property, you can save time on the screening process since you only have one applicant to review.
- Easier communication: Discussing rent increases or new house rules tends to be easier with a friend. You already have the trust and familiarity to pave the way for open conversations.
- Reduced ad costs: You can skip the promotion and advertising part of property management when you rent to a friend. With someone you already have a relationship with ready to move in, you not only save yourself time but also keep some extra cash in your wallet.
Here’s the kicker, though: all of these benefits depend on who your friend is. If your friend treats your personal property with care, the odds are high that they’ll do the same for your rental property.
The Potential Cons of Renting to a Friend
Here are some of the trickier factors to think about if you’re considering renting to a friend:
- Unreasonable expectations: Friends might think they’re entitled to perks like late rent payments or bending of the rules. The idea of a “friendship discount” can lead to awkward conversations.
- Lease violation potential: Friends might think lease slip-ups won’t ruffle your feathers. From late-night music sessions to a “surprise” pet adoption, these things can test your patience.
- Hesitation in reporting issues: Oddly enough, your friends might not want to bother you with minor issues in the rental property. But even a small problem like a leaky faucet can lead to bigger problems down the line.
- Friendship issues: Mixing business with friendship can make even the strongest bonds go sour. Disagreements over property issues can turn your next hangout into a very uncomfortable one.
It’s important to keep intentions and rules clear to keep from stepping on each other’s toes. The question is whether you and your friend can gracefully make your way through any challenges that pop up.
The Do’s and Don’ts of Renting to a Friend
Renting to a friend is about blending being a good friend and a stellar landlord in a way that’s both fair and legal.
Must-Do’s
Here are the key moves for balancing your dual role as a landlord and friend:
- Establish clear boundaries: Lay out the ground rules right away so that your friend knows this isn’t a casual arrangement. Make sure they understand your expectations regarding pet ownership, communicating maintenance issues, and renovating the property. You can do this by requiring them to sign an online lease agreement that includes locally required attachments, clauses, and disclosures.
- Use consistent treatment: Use consistent treatment when screening tenants, approving or denying applications, and collecting rent payments to keep everything streamlined.
- Ensure Fair Housing Act compliance: Keep the Fair Housing Act in the back of your mind when you’re choosing tenants. Stay up-to-date on landlord-tenant laws to ensure you’re always abiding by local regulations, even when renting to friends.
- Leverage tools for rental property management: As a landlord, you’ll be responsible for collecting rent payments and handling maintenance issues. To save you time and money and ease the process for both you and your tenants, you can use a platform like Avail. You can easily onboard new tenants so that they have one location to submit payments, questions, requests, and more. They can also easily access any signed lease agreements to easily refer to during the lease term.
These do’s will help you maintain a professional relationship while also preserving your friendship.
Crucial Don’ts
Here are the pitfalls you want to sidestep to keep both your property and your friendships intact:
- Don’t cross boundaries: If you’re at your friend’s place for a casual visit, don’t slip into landlord mode. Avoid making comments about general upkeep or renovations that need to be done. And remember, even though you’re friends, don’t just walk in unexpectedly. It’s your friend’s space now — plus, it’s illegal for a landlord to enter without proper notice.
- Don’t give your friend special treatment: It can be tempting to bend the rules for a buddy. Maybe they want to erase a late-payment penalty or bring in a pet when you’ve already told them no pets are allowed. Giving favors can set a precedent that’s hard to reverse — and it can also make your other tenants cry foul play.
- Don’t change the eviction protocol: Nobody wants to think about eviction, but there’s a reason lease agreements (and states) have legal processes in place. Skipping the required steps or giving your friend a “quiet exit” can lead to legal headaches and a less-than-ideal precedent.
Remember, balancing the landlord-friend equation is key. Use these tips to make fair and legal decisions.
Best Practices of Renting to a Friend
So, you’re all set to rent to your friend. But before you hand over the keys, there are a few best practices to keep things professional, fair, and above board:
Screening
Don’t skip the screening step. Sure, it might feel a bit formal for a friend, but it’s better to double-check than be caught off guard by an issue later.
Here’s what to include in your screening process:
- Credit check: A credit check is a sneak peek into your friend’s financial habits. A high score is a good sign that they’ll keep up with rent.
- Reference check: Call your friend’s references. Past landlords can give you insights into what your friend is like as a tenant.
Screening your friend doesn’t mean you’re second-guessing taking them on as a tenant. It’s about making sure they are the right fit for your property before they move in. And it helps both of you understand that this is a business arrangement — even if you’re also doing it as a favor.
Complete Lease Documents
Your lease is your rulebook for all your tenants, and your friend shouldn’t be signing an alternate version.
If your friend is your first or only tenant, remember that a complete lease is more than just a piece of paper — it’s a key blueprint for your future business relationships. The lease provides:
- In-depth details: Details include how rent is paid (by check, Zelle, or an online system), schedules for payments, late fee policies, communication methods, and maintenance procedures. It’s about making the expectations and lease terms clear so there aren’t any “but I thought…” moments.
- A legal guardrail: Beyond setting expectations, the lease is your legal lifesaver. It points you in the right direction if any disagreements come up and ensures you’re both legally covered.
Ultimately, your lease is a guide to keep you and your friend (or any tenant) from crossing wires and playing guessing games. It keeps everything fair and friendly no matter what comes up.
Insurance
Landlord insurance is a must-have. It’s specifically designed for rental properties, covering property damage, liability claims, and even loss of rental income in some cases.
But for an even higher level of protection, it’s smart to require your tenants (even your friends) to have renter’s insurance, too. It covers your friend’s personal belongings and liability. If their laptop gets stolen from the apartment or if their microwave burns the popcorn and itself, their renter’s insurance kicks in.
With both types of insurance in place, you create a safety bubble around your property. And both you and your friend sleep a little easier.
Handling Difficult Conversations
Tackling tough talks about late rent or property damage is tough. Here’s some advice: treat these chats like you would with any tenant, but with a dash of empathy. You want to be understanding yet firm.
Here are some tips to help:
- Follow your rules: Stick to your policies, using the same steps you’d take with any other tenant. It’s all about fairness and consistency.
- Add some empathy: Be understanding. Your tenant is your friend, after all. But be clear and firm about what needs to be done next.
- Consider a property manager: If the thought of these discussions makes you squirm, think about bringing on a property manager to take the reins. They can handle these kinds of conversations and provide a professional buffer for your friendship.
Remember that renting to a friend doesn’t have to be complicated. These best practices are your toolkit for balancing being a great landlord with being a great friend. It’s all about providing a positive experience for both of you.