Recipe for disaster?
Ive recently aquired a new investment property, that I will need to tenant asap. Its in a very good rental area, where there is even a waiting list for rentals. Obviously, Im not worried about getting a tenant in quickly.
I have a friend, who I happen to work with and virtually see 5 days a week. He desperately wants to move into the place.
My gut instinct was “Dont mix friends and business”, and Property Investing is a business. But there are some positives that could come out of this situation. Im really interested to get other landlords thoughts.
Positives:
1. We can cut out management fees – as it will be a sinch to manage.
2. I know the place will be looked after very well. (if he broke something, he would pay to have it fixed)
3. He is not a demanding/difficult character
4. Easy access to the place for repairs or maintenance
5. Trustworthy – I know that rent will not default
6. He is generally very amicableNegatives
1. Difficult to increase rent (lets face it – asking mates for more money?)
2. He will be sharing with a new girlfriend who I havnt metHe is keen as mustard, as he loves the place and the area. He sees no conflict of interest in terms of our friendship and cant wait to move in.
Im also wondering if the fact that he is paying off one of my investment properties will start to grate on him after a while??? Especially as he is older than me and does not own his own home?
What ya all think…????[smiling]
Break’n’Even
“I have a BMW. But only because BMW stands for Bob Marley and The Wailers, and not because I need an expensive car.”
BOB MARLEYHey there,
A friend of mine rented an investment property from me for over four years and it was a very positive experience. Your friend sounds reliable and honest. If you offer him the property say for $10-$20 per week under market value you will probably still be saving on agency fees and comission. Start out with the understanding that you will have to raise the rent slightly each year and in return for being a good tenant the rent will stay just below market value so he is saving also. Still do an inspection now and again and ask for bond. I think you worry too much! Good luck
Andy[chill]Nothing wrong with renting to friends. It’s just very difficult to ask friends for money when things go bad. Just realise you may have to face a moral dilemma one day. Sometimes it’s great to forgive a debt to get a friend back on two feet if they do fall into trouble.
So I think rent away – but make sure you fill out a proper condition report, lodge a rental bond form and do all the paperwork properly. Your friend may be a great guy but you don’t know the girlfriend at all, and she could be very difficult. She should also be named on the lease if she is going to live there.
As others said, you need to be clear about putting the rent up from time to time. You could agree to a 2-yearly rent review and agree to price $15 under the market rent, or something. That way he gets a bargain and you get more than you would with a manager. You said that he may resent paying off your place after a while. You may also resent the fact that he is no longer paying market value if you’re still getting the same rent in 3 years time while the market rents have moved up.
I’m sure lots of people rent to friends and family and on the whole it’s a positive experience. However problems occur when expectations aren’t met, so just make sure everyone’s expectations are laid on the table before the keys get handed over.
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‘if you do more of what you do, you’ll get more of what you’ve got’ -S.McKnightMATE nothing wrong with renting to friends, 2 out of 4 IP i have are rented to friend of mine, never have any problems with rent as they work with me,save money on agent fees no problems with access to property just make sure u lay YOUR CARDS ON TABLE FROM DAY ONE fill in appropriate paper work get bond, and in regards to INSPECTIONS just pop in for a coffee its just a nicer way of delling with your friend NOTHER ADVANTAGE u know what day they get payed on. good luck [thumbsupanim]
Okay I have to be honest I hate these cases whilst Yes it can work I’m working on one at the moment that didn’t work and believe me when I say it didn’t work.
I’d recommend using my Private Landlords plan http://www.barclaymis/products/pls.php
It will provide you with all the advice you need and help if things start to look like going pear shaped on you and all it takes is a change in someone’s circumstances and a once happy situation turns bad.
There are issues with working and renting to people who you see every day and have a social relationship with.
YOU HAVE TO BE ABLE TO DRAW LINES IN THE SAND remember you’re an investor not a friend with money happy to give them a place to live for cheap rent because it works out best for both parties the only party that counts in this is YOU. I speak to heaps of landlords who think it’s better to be nice to tenants and end up getting hurt in the hip pocket. THE SYSTEM IS stacked very much to one side and it’s not yours.
Whilst I accept there are people on this site who have had good results from this scenario I work in the area of residential tenancy collection and I see the side they may not.
Whether you rent privately or though and agent you should also protect your backside before you worry about friendships.Hi.
I’ve rented to both friends and family (Am I CRAZY!?!?!)…..
Experiences….
Family – Looked after the inside fairly well, but no better than any other tenant would… Didn’t look after the outside much at all, and we’d done the landscaping and irrigation etc nicely. Paid the rent for the most part on time, difficult (impossible) to raise the rent though.Friends – Started out well, did the whole discounted rent by savings of agents fees etc. Started to go south after a couple of years, ended up turning over to an agent, going to VCAT and all sorts. Disaster in the end. Left the place a pig sty (3 trailer loads of crap), flea infestation etc etc.
Sorry, but if you’re going into this, you need to know the flip side.
Funnily enough, they were both the for same house. That house now has an elderly couple in there and WOW! Talk about look after the place. He’s even fixing up the garden!
All the best
Simon.
Hi Guys, well here is the update…
Lesson Learnt: DONT rent to friends……………
Ive owned this place for over a month now, and after several requests to delay the occupancy date, he (my friend) is only moving in now. On top of this, he has told me that he will now only be there “2 months max” (but might want to stay on, not sure). [blink]
What a waste of time and money……
He has broken up with his girlfriend who was going to move in, and has told people at work that he “cant afford this place“, but has not informed me.
Ive been getting a constant barrarge of requests for additions to the place and he expects that I will pay for this. I explained that this his responsibility (if I agree to these additions), but he then requests we go halves….. WTF…? [grrr] [By additions, I mean additional power and phone lines, expandable clothes lines etc]
He talks about the place and the area non-stop (usually how good it is), and phones me when hes not at work to ask me for things, to do favors etc. He donst talk about anything else anymore.
I even got a phone call about changing a light bulb. [blink]
He even expected that I would get babysitting for my kids, to help him move house (he lives 2 hours away). I refused because I couldnt do it – simple. He is now preasuring a workmate who he dosnt know very well to take a few days off work to help him move… [angry2]
And thats not even the half of it……………………….
Its probably been a combination of a relationship breakup and a change in our personal dynamics, but his character has changed immensely.
Im lost for words
Ive done everything to accomodate him, yet it seems almost like he expects these things from me. The lines have been crossed.
I have an agent coming over today to give me an appraisal. This guy has 2 months to the day, then Im gonna boot him…..
BreakEven[cigar]
Break’n’Even
“I have a BMW. But only because BMW stands for Bob Marley and The Wailers, and not because I need an expensive car.”
BOB MARLEYBreakEven
You are 1 of many who have had this exprience. Should you have issues in two months time in getting him out drop me a line and I’ll handle the eviction for you.Dude, i really don’t see it as a case of renting to friends or no friends. From what i gather, your “friend” here changed completely after he ran into some issues that were minor, to say the least. Consider this an experience in human nature, maybe?[wacko]
Anyways, i think that it was really a matter of the character of your tenant. From your original post , you assumed that he’d be a great tenant coz you’ve known him for a while and he “seems” to be a good guy. If you had a friend that you’d known for a long time and are fairly sure about his character i certainly see no difficulty in renting to him, just like you shouldn’t rent to strangers you are unsure about.
Rent only on a business basis (full lease & bond) at market value and keep increasing it in line with the market at pre-arranged points in time.
Be professional, attend to repairs & maintenance at light speed, and ask yourself :
1. If this goes sour, how will it affect my workplace and job ?
2. Can my friend cope with my duality – friend & landlord – and understand they are separate ?
3. If this goes sour, is it worth losing this friend and could I cope with the loss ?
Hope it runs smooth for you both.
cheers
thecrestthecrest | Tony Neale - Statewide Motel Brokers
http://www.statewidemotelbrokers.com.au
Email Me | Phone Meselling motels in NSW
Glitch – edited due to duplicated posting
thecrest | Tony Neale - Statewide Motel Brokers
http://www.statewidemotelbrokers.com.au
Email Me | Phone Meselling motels in NSW
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