I'm thinking of renting to a family member... it'll be OK, right?

“I’ve had a cousin express an interest in renting my property – do you think it is a good idea, or too many complications?”

Complications is understating it!

I'm yet to hear a good 'renting to friends and family' story from someone who isn't a professional property manager, and my story below is the closest I’ve ever heard to a good outcome.  Perhaps because there is nothing to say about good news stories, but more likely because 'happy ever after' stories don't happen often with the ‘too close to home’ group of people family members and friends are.  I have an encyclopaedia's worth of stories of bad situations.  Like the time the family members had the place for cheap rent but left it a mess, never did the lawns, let weeds take over the gardens, didn’t fix things they said they would, didn’t report broken things, didn’t help the rest of the family return the property to lettable condition after the tenancy ended, caused a long vacancy due to their lack of care, guilted the landlord into allowing a pet (or just got one without permission), sublet the property for a profit, and on and on.  Sometimes this all happens to one person, but I have heard variations of this story again, and again, and again from many different people.

So, if you don't like your family much and are not concerned about awkward family Christmases forever after, and are pretty sure you’ll never need to ask for a kidney, then sure, rent to someone you are related to and presumably like.  But if you value family harmony, renting to strangers is the way to go.

If you think this won’t happen to you, ask yourself if you'd not want to put up the rent because you know their personal circumstances and what will the family think of you if you do an increase at a bad time - and let’s face it, there is never a good time for a price increase on anything.  Maybe you think 'this will just be a temporary thing', and you won’t need to increase the rent during their short tenancy.  Well, I don’t know anyone who willingly moves on from a good wicket.  If the rent is low, the place is comfortable, they will stay.  And stay.  And stay.  Until your rent moves, they won’t.

Visiting your tenant/friend/family member socially would be a no-no, in case you see something that you'd rather not see in your rental, but wouldn't care about so much, or even notice, if it wasn't your property it was happening in.  Don’t assume that just because you are related you both keep house to the same standards - so far no gene has been identified for cleanliness.  It’s likely you’ll be more offended by anything they do or don’t do because of your relationship and expectation that they should treat you fair because you are kin.    Visiting socially also makes it tricky to define as to whether your visit is a social one, or actually an inspection or maintenance visit.  If the relationship goes south, do you think your tenant/friend/family member won’t be resentful of your lack of appropriate notice for those landlord visits?  This is a serious offence, so don’t get it wrong.

I once had a friend enquire about renting a property I manage for a client.

I rang the owner to tell them my friend was interested, and they said ‘great, do it, any friend of yours has to be a good tenant’.  While I was flattered at their faith in my and my circle, I was actually ringing to first try to get them to say no, and let me avoid the whole awkward situation without me needing to be the bad guy.  There is a lot that can go wrong, and as good friends are hard to cultivate, I didn’t want to risk losing mine over a tenancy issue.  As the property owners were delighted with the prospect instead (damnit!), we let them know what safety nets we were putting in place, should they want us to proceed. 

What were our safety nets?

Firstly, we did full background checks, and she wasn’t allowed to use me as a reference.

This proved awkward, as her current landlord gave her a mediocre reference.  My first test as her potential landlord, and I already had a stumbling block.  Well, that made a short story, it would end there.  I screwed my courage to its sticking place and told my friend that unfortunately her references didn’t check out, so I couldn’t proceed.  It just didn’t match my picture of her as a person, but hey, that was that, over and done.  My friend was highly surprised, and quickly surmised what the problem was.  She rang her flatmate, who rang their landlord, and asked ‘what the hell, we’ve been your tenants for years, why did you give us a below-average reference?’. 

I soon received a call from the remorseful and embarrassed landlord who admitted they were the best tenants she’d ever had there, and she was hoping if they couldn’t get another flat they would stay.  That was a new one for me, and it made me wonder just how many other below-average references I’d had in my career were also for self-serving landlords sabotaging their tenants.  I’d like to think she’s the only one, but bet she's not.  A lesson to landlords everywhere – when your tenants want to go, be gracious about it, and tell the truth about their tenancy.  And if you get a poor reference, ask if the landlord are telling you the truth, or do they really want their tenants to stay?

So, the ‘bad reference’ sorted out, we proceeded.  I insisted on having a few more people to call, because I didn’t want to worry that they’d just bullied their landlord into calling me back to say nice, but untrue, things.  While a poor reference and bullying would be completely out of character for my friend, I had to be sure to prevent any worries by me or my client.  The rest, of course, were sterling.  Of course they were.  I now had no excuses, and had to sign her up.

We put in place a couple of rules to keep things clear between us.

We had a rule that I would never visit her home for social purposes, because for me, it was work.  I would be doing property inspections there, but never going around for a cuppa (or even accepting one when there for an inspection, it blurs the lines), let alone an evening event.  I just didn’t want to witness, or be involved in, something that was a problem for my client, the owner of the property.  I have a vivid imagination, and my mind went to the worst possible scenarios, even though my friend could best be described as a librarian type.  I like to think that makes me an amazing property manager, because I can prevent problems before they even happen.  Could you imagine going to a party at your friend/tenants place, getting ‘a tummy bug from something you drank’, and throwing up on the carpet?  I could, and worried ‘who exactly is responsible for that?’  The tenant, as they are responsible for their guests, or you, because you should have never been there acting like an idiot in the first place if you had any brains?  The only person who isn’t responsible for this is the landlord… which is also you, who did the throwing up.  Dang.  Much easier and simpler to just never visit socially.  So we met at public places or at my house, never hers during her entire tenancy.  It must have been a pain in the neck for my friend, but I liked that she mostly came to see me.

As it turned out, my friend broke a window at the property, a big plate glass one.  Very expensive, very hard to replace due to the access.  She was very embarrassed.  Her flat were having a BBQ on the deck beside the window, and the heat from the BBQ cracked the glass (I told my active imagination to believe this, and not try to think of alternative scenarios.  It partially worked).  I never asked how many people were at the BBQ, but I knew why I wasn’t.  Bummer about the glass.  What to do?

Fortunately, we had another rule to cover such things.  We agreed that if ever anything went wrong with the tenancy, my team at Rental Results would deal with it according to the rules we had for everyone else, I was not to be involved.  So, the window got fixed, and she paid for it.  Even with this rule clearly stated for everyone’s benefit, my team kept asking me if it was OK to do XYZ in regards to her tenancy.  Because they knew we were friends, they thought surely I didn’t mean it for every situation. I had to keep telling my team to do what they would do for anyone else, and bite my tongue as to my opinion (very hard for me to do, so I doubt I always did this, which no doubt reinforced them asking me what they should do).  Were the rent increases as much as they otherwise would have been?  I wouldn't know, as I stayed out of it as much as I could, but I suspect there may have been a bit of a bias – everyone tends to go easy on people they like, it’s a culturally ingrained thing, and over a three year tenancy, they all came to like my friend.  Apart from the BBQ broken window thing, she was a great tenant.

In the last few weeks of my friends tenancy she was having trouble with flatmates letting her down as they began new lives in new flats.  She rang me for advice.  Because we’d always been clear on the boundaries between us, she prefaced the call with ‘can I ask you as an expert in these things what I should do?’.  This wasn’t a social chat.  We had a long call discussing the options, and sometimes I would say things along the lines of ‘as a property manager, I’d recommend…’ (note, not as her property manager), or ‘the law says…’ or ‘in my experience this is likely to happen’.  I left it to my friend to decide her course of action once she had all the points of view I could supply.  Only after her tenancy ended and she was no longer my tenant did I find out what she’d chosen to do about the situation.  I didn’t want to know before her final inspection as I didn’t want to be biased about her flighty flatmates and if they had done their share or not.  I loved my friends integrity all the more after I found out.  We then organised a date to have a brunch and gossip, and to go to her housewarming at the new place!

While this tenancy went well and ended well, and we are still friends (great friends in fact), it was only achieved with clear rules in place right from the beginning, stated very clearly.  I don't recommend it: not everyone can have as up-front and frank discussions about such things and mean it by both parties, and then, most importantly, stick to the agreed rules.  My friend is an absolute exception to the norm on this, so much so that an organisation I headed also employed her because she is kick-ass amazing (I was pushing for the other candidate, on principle).  And yes, that job also tested our ability to set boundaries, and when it came to an end for her, I graciously let her go (after a bit of begging to the contrary).  Truth be told, we were both glad when both job and tenancy were over.

Would my friend and I want to do this again?  No, because after her tenancy and job ended, we realised what we were missing in our friendship during her 3 year tenancy, and wouldn't give that up again.  I think we became closer due to the enforced separation.  I have an intimate understanding of how she lives in a place, and how she works (like a machine!), and would highly recommend her, but I’d never want a professional relationship with her again because I’d miss her (although if the opportunity came up, I'd really say 'yes', because why wouldn't I want to with such an amazing person?).  She’s overseas right now having a fantastic OE, and I miss her terribly, but not as much as I did when she was so close, but also at arms’ length. 

My good news story does not mean it will happen to you.  Few people are amazing like my friend, and few people are as analytical as me (I confess I talked my board down on the amount of a pay-rise for her job, as that was best for the organisation, but clearly, not best for her).  I know that even though I’m sending my friend a link to this blog as part of my ongoing love-letter to our friendship (I figure we’ll be in a nursing home together), she’ll forgive my stinginess and value my honesty, because she also did what was best for the organisation she worked for.  

If you can identify with our characteristics, and are not shocked by our actions and choices, then maybe, just maybe, this could work for you too.

For everyone else, don’t rent to friends or family!