Your cousin Joe has fallen on hard times and needs a place to move his family. You have a vacant rental property investment and need a tenant to ensure you’re not coming out of pocket to pay the mortgage. It’s a win-win! Or is it?
They are not the best tenants.
Like Joe, many family members in need of renting YOUR rental have fallen on hard times and can’t secure a rental elsewhere. Whether it’s because of financial issues, getting out of jail, the loss of a job, or getting evicted from another place, their plight has put them in the typical “do not rent to” box. In fact, you just denied a guy last week who didn’t meet your screening criteria and was in the same situation, and history reminds you that your last eviction was because you didn’t stick to your guidelines. But Joe’s family, so what could go wrong – besides EVERYTHING?
2. Business is NOT just business.
You have good processes in place for your rental and are certain Joe will play by the rules with no issues. You give Joe the lease to sign, request a security deposit as normal, and specifically state that he shouldn’t smoke in the house and that his dog has to go live with a friend. He agrees to everything but is in a mad rush to move in so promises that he’ll get the lease and security deposit to you next week. Next week comes and goes, and Joe is radio silent on his promise to get you the signed lease and deposit. A few weeks go by, and you show up at the property to see how things are going, only to be greeted at the front door by Fido, Joe’s not-so-friendly Pit Bull, and the smell of cigarette smoke billowing out the open window. Joe gives you a warm hug, tells you to take a chill pill, and calmly reminds you that he’s not every other tenant. He’s family.
3. They will likely take advantage of you.
Aside from the fresh nicotine covered walls and Fido, everything goes great for a few months. That is until Joe’s hard times catch up with him again, and now his hard times become your hard times. He can’t afford the gas bill; the kids have soccer camp, the cell phone is about to get shut off, the car has hit the repo list… there are so many excuses month after month as to why the rent is late. And then suddenly, the rent stops. Joe knows that because you’re family, you’ll work with him until he can get things sorted out. Months go by and now you’re struggling to keep the mortgage paid while Joe figures things out. But hey, what is family for…right?
4. You become the family pariah at every family gathering – there will be tension between the whole family, even if they aren’t a party to the lease.
You’ve finally hit the wall and know that if you don’t start generating some income on the property, you’re going to be in financial strain. You do what any reasonable landlord would do and begin telling Joe that you actually need him to pay, or that he’ll have to find other living arrangements. Suddenly at Thanksgiving dinner, your family members look at you with disgust, their fingers pointed, appalled at your lack of sympathy for poor Joe. Certainly, you have enough money to allow Joe the flexibility to pay when or if he has the funds. After all, you do own a rental investment.
5. You now have a new definition of taking out the trash.
After many unprofitable months, Joe finally moves out and you recover possession of your investment property. Only now it looks a lot less like a profitable investment and a lot more like a cigarette plant blew up. And it seems as if Joe is still living there?? Surely he didn’t just move out, leaving behind all of his furniture and bags of trash, right? Welcome to your first trash out. You spend hours upon hours removing truckloads of Joe’s stuff, only to discover that Fido tried to cover the smell of smoke by hiking his leg on every wall of the house. Adding insult to injury, you not only had your most unprofitable tenancy, but you now get to spend thousands of dollars remediating the smoke, the dog’s mess, and the rest of the damage caused to your property.
I wish I could say this type of story has never been told, but we hear it all too often. Landlord rescues, as we call them, are more often than not the result of a family member or close friend who was allowed to move into an investment property and took advantage of the situation. Our best advice is to run your property like the investment that it is and just say NO to renting to family members.
If this scenario sounds familiar, or you’re considering renting to family members, contact us at [email protected]. We’d love the opportunity to assist with your decision and hopefully save your heart some ache, and your wallet some money.