I don’t get strong, intuitive signals often, so when I do, I listen.
When a good friend of mine asked whether she could move into my rental property, I instinctively knew before I even had to ponder the thought that the answer had to be “no.” We had an awkward moment, sure. But that one uncomfortable afternoon was far better than losing a dear friend.
Michael Corleone’s line from “The Godfather: Part III” sums it up well: “Friends and money — oil and water.”
The Most Common Problem
The problem with renting to a friend is that resentment is bound to set in — from both sides.
Your friend might resent you making any sort of profit from him or her, and you might feel funny about that too. But if you don’t charge the going rate, you’ll probably feel cheated every month when the lower amount comes in.
Even worse, friends might feel as if they can pay their other bills first, possibly being late with rent because you, as a friend, will “understand.”
Friends tend to take advantage of the situation, not taking the landlord-tenant relationship as seriously as you do.
In my opinion, it’s best not to rent to friends if you care about keeping the friendship.
Related: Tip #21 – Don’t Rent to Friends
Renting to Existing Friends
If you’ve already rented to a friend or have let your landlord-tenant relationship morph into a friendship one, you can still salvage the situation.
Put Everything in Writing
Put your exact rules and expectations on the lease. For example, if rent is due on the first of the month, state that there will be a late fee of $X if the rent is paid after that. Many states also allow daily late fees, which help provide incentive for getting a late payment in sooner rather than later.
Document any rules that are important to you. Sit down with your friend to discuss the lease. Let him or her know that this is your business and that you need to enforce the lease, including a possible eviction if the lease is broken.
It’s better to discuss this upfront when friends are involved than to try to enforce your policy during an episode. That’s usually when friendships are lost.
Related: Always Get it in Writing
Use a Management Company
Although property managers are not cheap, it’s a small price to pay to keep the friendship – if you don’t get bitter about the extra expense.
Explain to your friend that he or she will deal with a property manager, not you, regarding everything to do with the unit. That way, when your friend can’t operate a pet rescue out of your property or pay the rent in installments, you can blame the rules on the property management company.
Making New Friends with Tenants
But what about becoming friends with a tenant? Is that okay?
It’s common for landlords to find they have some common interests with their tenants. It might be tempting to hang out or socialize with such a tenant, but avoid the urge.
Your tenant might make the perfect tennis partner, but what happens when the lease is up and you want to raise the rent?
It could get you into a emotionally laden situation that you’d rather avoid.
You are a landlord first, a friend second.
This Is Your Business
Being a landlord is a business, so don’t feel pressure to be the “cool” friend by letting your friends rent your property, or being the cool landlord by also being a friend. It usually works best if you treat your tenants in a professional and businesslike manner.
That means treating your tenants with respect.
I’ve heard some landlords say they treat their tenants as children who need to be managed. That’s the wrong mindset to have.
This isn’t a parent-child relationship. Unless you want your tenant to eventually rebel (children turn into teenagers), treat your tenant as a client you want to keep. After all, you need tenants to stay in business.
Related: How to Grow Amazing Tenants
The Ideal Situation
The best situations are ones where landlords and tenants respect each other and have good rapport.
If something needs fixing, you should handle it right away. If your tenant starts to pay the rent late, address that issue immediately.
Once you strike the right balance between being personable while still enforcing the rules, you’ll be good to go.