How to rent to family or friends and not start a food fight
Renting to family members can often cause the biggest family disputes. Family barbeques can turn into World War 3 with just a snide comment or overheard word. Somehow the ‘tenant’ is made to feel less of a person than the ‘landlord’ in the relationship which can cause conflict. More often than not, siblings renting to each other seems to be the main relationship that can cause the most tension.
Understanding both sides of the transaction can help maintain the relationship and meet the financial goals of everyone involved. After successfully renting to family myself, I would like to pass on a few of my best tips on maintaining a good family relationship with a business one.
Treat the property like a business
The landlord’s property is a business. It is designed to create wealth through property growth and rental yield, giving them a secure financial future. Making sure that everyone is aware of this at the start makes it a little easier in the long term. Using terms like ‘nest egg property’ and ‘superannuation house’ might help the tenants understand that this is a business and not a favour.
Depending on your relationship, setting clear boundaries can help maintain a separate relationship. Boundaries could include:
– All queries regarding the property, rent, maintenance and lease should be in email form only
– No talking about the rental at family or social gatherings.
Keep inspections separate
You may wish to negotiate inspections with the tenants as you may be visiting the property more than a standard landlord. I recommend not commenting on the property condition while at the property socially as this can really upset a tenant and you might not be invited back.
Know the rules
There can be tax implications and insurance implications when renting to family members. Insurance policies can state that three-monthly inspections must be carried out and if you fail to do these, you may not be able to claim any insurance. Check your policies thoroughly.
Make the tenants feel important
Why? Because they are. You as the landlord are receiving rent from them, but you also have the peace of mind that they are looking after the property like it’s their own. If you don’t have that peace of mind, you shouldn’t rent to them. If you feel obliged to rent to a family member (e.g. your mother-in-law wants you to) but you are not entirely happy about it – engage a property manager to manage the property for you.
Engage an experienced property manager
You may be thinking that renting to family or friends might save you money in agent fees. Yes, it will, but if things go wrong it could cost you your relationship with the tenant. Are you prepared for that to be an outcome?
If tensions are rising and you are not seeing eye-to-eye, contact an agent immediately, don’t let it get out of hand. Hiring an agent will allow each party to air their grievances and have an expert guide them in what can be done to rectify any problems.
Even if you do engage a property manager, maintain the rule at the family barbeque of not talking about the rental property to ensure that a food fight doesn’t break out.