There is an ongoing debate about the efficacy of renting to friends or even renting property to individuals who are known personally by the landlord or property owner. In some cases, the tenant’s basic character will already be known; but what about their legal and credit history? Ultimately, how a close family member is handled as a potential tenant will differ from a friend or acquaintance.
Renting to Family Members
There’s no doubt that renting to a family member will remove many of the variables from the situation, especially if it is a close family member. In these cases, their entire life history will be known, or it can be gleaned from other relatives.
The downside of this type of rental agreement is that they may be tempted to take advantage of the situation through paying the rent late or breaking the property rules set forth by the landlord. One way to avert this is to have them sign a lease just like any other renter. It should also be made crystal-clear from the outset that they will not be receiving any special treatment.
In fact, renting the property to a family member for a cost that is below current market rental rates could have expensive tax implications for the property owner. When in doubt, an accountant should be consulted.
Renting to Friends As Tenants?
Renting to friends involves more unknowns. Unless the person has been an ongoing friend since early childhood, there will probably be gaps in terms of what the landlord knows about their past. Friends may also be tempted to push boundaries when it comes to rental payment and treating the landlord’s rules and property with respect.
If a landlord is currently renting to friends, it is crucial to keep the arrangements businesslike. It’s also advisable to use a professional tenant screening service to ensure there isn’t anything troublesome in their past, such as credit problems or a criminal history. If they are taken on as a renter, they should also be required to sign the same lease as every other tenant.
Renting to Acquaintances
Renting to acquaintances involves even more unknowns than renting to friends. Considering acquaintances or “friends of friends” as tenants involves the most variables, but it will be easier to keep these relationships businesslike. These applicants should be professionally screened just as a stranger unknown to the landlord should be, as there will be much that is not known about them.
Whenever there are doubts or gaps in knowledge about a person’s history, tenant screening can help bring clarity about how to proceed. Applicants should be informed and give their consent to these criminal record searches and credit checks even when renting to friends; however, once performed, some of the guesswork will be removed from the rental screening process. Landlords can then make sound business decisions that result in more success and better landlord-tenant relations.