Don’t Ruin Personal Relationships When You’re a Landlord
Many rookie landlords think renting to friends is an easy solution to tracking down top-class tenants for consistent rental income. You don’t have to pay for vetting – because you know them. You don’t have the expense of advertising your property. You can trust them to pay rent on time and look after your property. The perfect tenants.
Unfortunately, this rarely proves to be the case. I’ve heard many landlords say that they will be renting to friends. I’ve heard almost as many says, “I wish I had never rented to friends”. Here are the major reasons you should rule out renting to friends.
1. Friends Can Take Advantage of You
They may not mean to, but friends have a knack of taking advantage of you when you are their landlord. They may be a little slower to pay their rent, or they may expect every little issue with the property to be taken care of immediately.
The chances are that you won’t have vetted them. You won’t have run those background checks that are designed to uncover potential problem tenants before you sign them up.
Also, because it’s your friend who is renting from you, you are less likely to treat the tenancy agreement seriously. You’ll do a lot of trust and a handshake. If only it were that easy. Remember, if it is not in writing, you don’t have a leg to stand on.
2. Friends Might Not Tell You When You Need to Make Repair
While some friends will take advantage of you and your kind nature, others might feel uncomfortable when making a complaint or reporting a repair. Because of your close personal relationship, they may know that you don’t currently have the finances to make a repair or undertake maintenance work.
To spare you your blushes, they don’t tell you – or they try to make a temporary repair themselves. The result is an unfixed issue that gets worse – and more expensive – or a poor repair that costs more to put right. Either way, renting to friends is going to cost you money.
3. Your Friendship Will Become Strained
I can’t remember who it was that said you can’t mix business with pleasure. Whoever it was, they are right. When you rent to friends, the power in your relationship becomes balanced in your favour.
If they are late paying their rent, they probably won’t join you on a night out. You might question how it is they can afford a meal, a little wine, and a couple of cocktails and yet they can’t pay the rent that is overdue.
On the other hand, because you are the landlord, you may feel that you should be buying them their drinks – to say thanks for being a good tenant. You’ll end up spending more, while your friends (your tenants) enjoy yet another cheap night at your expense.
You’ll feel guilty asking for late rent, especially if you know your friend has had a tough month. So, you’ll take the financial strain for them – and that is going to put a strain on your friendship, too. You’ll be out of pocket, and you’ll keep quiet. Until you can’t keep quiet any longer. Then the emotions that have been simmering away will boil over – and that great friendship will never be the same again.
4. You Will Probably Ignore Damages
If you rent to friends, you should take a tenancy deposit. More fool you if you don’t.
When it comes to a tenant moving on, the tenancy deposit is there to pay for any unpaid rent or damages to the property. It becomes extremely difficult to do this when the tenancy deposit is your friend’s money.
There is usually some discussion about the tenancy deposit at the end of a tenancy. You’ll argue your case, and the tenant will argue theirs. You will come to an amicable amount that covers damages. If not, it may go to arbitration. When it is a friend’s tenancy deposit, the conversations and process can get messy. Other friends may get dragged into the argument, and asked to pick sides. Before you know it, a whole group of your friends aren’t talking to you – because you’re not a friend, you’re a ‘greedy, money-grabbing landlord’.
5. It’s Almost Impossible to Evict a Friend
So, your friend has missed a couple of rent payments. They have promised to pay you. They’ve had noisy, late-night parties. They have promised to calm down. They haven’t been looking after your property. They have promised to do better in the future. If this was a just tenant and not a friend, you would have started eviction proceedings a long time ago. Not so easy to do with friends. How do you make a friend homeless, and not be seen to be the evil one by your other friends?
6. You Won’t Maximise Your Rental Income When Renting to Friends
Let’s be honest, when renting to friends you are going to cut them a good deal. You’ll offer mates’ rates. Let’s say you charge £50 less per month. That’s £600 in the first year.
You probably won’t increase the rent by as much as you would if the tenant were not your friend. Let’s say you forego a rental increase of, say, £25 per month in year two. That’s another £900 shortfall in potential rental income. Over three years, you are out by, perhaps, nearly £3,000 in rental income. That’s how much renting to friends has cost you in lost rental income.
Renting to Friends Is a Mistake
Renting to friends is a mistake. Don’t do it. You’ll be out of pocket, and your friendship will never be the same again. Even if not done purposely, a friend may take advantage of your good nature. Repairs and damage may go unreported, and this will cost you more in the long run.
My advice is to always rent your buy-to-let property out to bona fide tenants. Never to your friends. If your friends are homeless, offer them your couch for a few nights.
The easy way to avoid the embarrassment of saying no to friends who want to rent your property is to say, “You’ll have to speak to my property manager. They handle all of that for me. Here’s their number.” Then give them our number. Now that is effortless property management. To learn more, contact Ezytrac today at +44 0 1522 503 717.
Live with Passion,