Would you rent to your family?

Our large family home is about to go on the rental market later this week when we complete the reno. Our kids have been helping us paint and they both want to live in it themselves. They cant afford to rent it but they have been searching for a friend to share. They haven't found anyone yet.

Are we crazy for entertaining the thought, or would you give it a go.

Logistically, they already have one friend to share with - if they get a fourth, it will cost $120 a week each. Talk about Affordable housing! The three of them intend renting a three bedroom house together which they can access for around $350 a week. That would be in a goodish location but not as good as our IP, which is within walking distance to everything their hearts desire and easy drive to ACU.

 

I hate one word responses so:

Nope. Nope. Nope.

 

As long as a lease, such as that done up for other tenants, is created. Especially given that there will be a mix of family and non-family members living in the property.

Imagine if damage etc is done - I can't imagine the friends would be too happy if they are to be held accountable, but your children aren't. Make sure all names etc are on the lease agreement, and all tenants are treated equally (also, helps your kids learn the 'legal' meaning of responsibility - ie. being chased for unpaid rent, being held accountable at inspections etc).

Good luck

 

The boys have been house sitting since Feb 2016 and their house is in better condition than it was when they moved in.

 

I've never done it but people I've spoken to who're doing it are subsidising the family member (extremely small sample group though). Nothing wrong with giving a leg up but it may defeat your financial purpose in having an IP. I can see why you'd want to do it for your boys. You'd have to be strict with them, and yourself. Be clear from the get go that it's a business you're running.

 

Yes I don't see a problem with renting to family. Just tell them they must enter into a written lease and do it just below market rent.

 

I would never do this. Like to keep business and personal life separate. What happens when it comes time to increase rent and they think you are being unfair? When unessential repairs are declined because the condition existed when they entered into the lease? What happens if they stop paying rent because they can't afford it and you know they are living beyond their means? Do you begin eviction proceedings against your family?

Please note I know a few friends that have rented to family for a very long time without these what if scenarios occurring. Still something to consider or discuss before entering into this.

 

In 1990, we bought an IP and rented to some close friends. Then they started doing it tough as one of their daughters came down with serious health issues.

Putting up rent became an issue.

After 8 years, our close friends decided they had paid enough rent and stop paying. WTF.

That is what we had to do, turf them out and accept a payment plan to pay back the overdue rent.

End result:- no longer close friends; in fact, no longer friends and we have nothing to do with each other.

This taught us a lesson:- NEVER, ever rent to family and/or friends.

 

If you do involve family members just make sure that it is at market value and the rest know it is at market value. I would encourage a managing agent.

And it is ok to do it below market value if you want to help (ignoring tax implications). If you want to give a kid a hand up just make sure you communicate it clearly to the rest of the family and the reasons why.

I think that a family helps out family. But the help needs to be openly discussed and in line with your long term values and vision you want to achieve.

 

@kierank , did they also stop paying electricity, phone and internet?

 

Nope to electricity and phone .

 

What I did in this situation when my mother asked to rent my apartment when it was vacant: I helped her research a good apartment for her to rent, helped her transfer the utilities to the new property and move in. I provide a small amount of money each month to help with the bills as she is on the pension. This way when she complains to me about the rent going up or a repair not being completed in a reasonable time I don't risk damaging the relationship if I was the landlord.

 

I did a similar thing with my kids when they moved out.

I let another landlord look after them .

 

I couldn't say no to my kids if it was just them, but throwing a friend into the mix I wouldn't do it. I also wouldn't rent to any other relatives. Not worth risking the relationships. I would talk them into another property, highlighting the fact that if things go bad it won't be nice, and that you could all avoid that by renting elsewhere. I think them renting through someone else will also make them more responsible than if they rent from mum and dad.

 

$470 to $480 a week is market rent and yes it would be a real lease with inspections etc.

Turns out their trusted friend is not available, so open market it goes. Now we will have to pay advertising, management fees and vacancy The comparables took two to three weeks to rent. You should have seen my reaction last week to the CMA when I read the "average number of days on market is 55" before I more carefully reread the actual dates on the comparable houses page.

 

@Angel those average days on markets indicators are always high. I surmise it's because there are always a few ads that have been up for a VERY long time, the metrics should really exclude outliers.

Have you chosen an agent? It's too far for me, but i know an excellent agent who does a lot of work up there.

 

Never mix business and family in my opinion; that being said, kids are different. If they don't pay you, you can take it out of the will.

 

I think you dodged a bullet Angel and so do your kids.
Many many years ago in my first year out of uni I rented a two-bedroom flat with a friend, it was her parents' investment property.
After six months I had enough of the excessive cleaning and left.

Looking back I think she felt under pressure not to disappointment her parents so she wants it to be inspection-ready 24-7. Whereas I felt like I was living under someone else's roof, it wasn't a good experience for either of us.

It was also an expensive lesson, it cost me a good friend from uni.

 

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