For most investors, managing tenants is one of the most stressful things about owning a rental property. Finding ones who won’t cause trouble, will look after the home as if it were their own, and always pay the rent on time is the ultimate goal - and surely close friends or family would make the best tenants, right? Unfortunately it isn’t so straight-forward.
So here is our list of ‘do’s and don’ts’ to remember if you are going to let your property to friends or family.
Do a detailed property inspection while taking them through the house - don’t skip this step just because you know them. This will make sure you’re both aware of how the property looked before they moved in - beneficial for everyone involved.
Don’t give them special treatment. They will probably expect it, but it is important to realise that this is your investment property and you still need to treat it like one no matter who is living in there.
Do complete a tenancy agreement. Again this is for the benefit of both parties and just keeps everything in order in case something did go wrong.
Don’t lower the rate for them. You have an investment property for a reason - and whether it is to have a nest egg for retirement, or something else, reducing the weekly rate will lower the income you get from it, which could cause all sorts of financial issues further down the track.
Read more: Who looks after the property? Landlord's responsibility vs. tenants
Do set boundaries when it comes to communication. You have a life outside of your investment property - which probably involves them because they are your friends or family members.
So it is a good idea to be clear about when they can get in touch with regards to property issues - is it appropriate to talk about a leaking pipe at the next birthday get-together? Not really. But you need to make sure you are available at certain times so they can let you know if there are any issues.
Don’t assume that just because they are friends or family members that they will necessarily treat your home and property with more respect than a tenant who you don’t know. Unfortunately it just doesn’t always work out that way, and plenty of relationships have ended due to people thinking that just by knowing someone, that they are the best choice.
Do work out which bills you are happy to pay, and which ones they need to take care of. Of course there are some laws surrounding these types of things - for example in Auckland, the landlord is responsible for any fixed charges relating to water and wastewater, and the tenant is obliged to pay for the volumetric usage. Be aware of these extra costs, and who will be paying for them.
Don’t let your feelings get in the way. Just because you ‘feel’ good about giving someone you know a roof over their head, it doesn’t mean they owe you anything extra. You can’t get hurt if they don’t keep the property looking the same way you would if you lived there - you need to know where your boundaries are as a landlord.
Do have a chat about property maintenance. Will they take care of the garden or will you? Again, you can’t have assumptions here as it will just cause problems if you think they will mow the lawns, and your tenants think you will be hiring a lawn mower person once a fortnight.
Don’t forget - you could always hire a property manager who could look after all of the above so you can keep your relationship separate (and more likely intact). They deal with all the awkward stuff so you don’t have to.
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If a friend or family member aren't the right tenants for you, use our guide to make sure you keep any potential risky ones from stepping through the front door.
