Renting to friends? Not necessarily recommended…

So, a friend’s sister wants to buy a duplex, and has friends lined up to live in the other half. A great idea? Probably not.

ON THE ONE HAND…. (pros)

  • They already have tenants lined up. They don’t have to put an expensive ad in the newspaper, or go through the trouble of re-posting their rental ad on craig’s list every other day (or every single day). They don’t have to do a gazillion showings, and field phone calls from dozens of unqualified apartement-seekers.
  • They’ll already know their neighbors In an owner-occupied situation, the lifestyle of your neighbors (i.e. tenants) comes much more into play than it would for a standard investment property with an off-site landlord. If you rent to friends, they likely have a similar lifestyle to you, and keep similar hours. You can have fun parties that involve both units, and don’t have to worry about bothering the tenants (because they’ll also be at the party).
  • They probably won’t have to do much screening And maybe they should, but they likely won’t feel like they can, their tenants being their friends and all. They probably would feel very invasive pulling credit reports and calling the employers of their close friends. So they’ll take their word for it, as they believe them to be trustworthy individuals.
  • An informal relationship when it comes to repairs I have some friends who started out renting to friends when they first bought their (also owner-occupied) duplex. They didn’t keep a very formal policy as far as notice to enter the apartment, and didn’t stress out about getting repairs done on the spot. Their friends were patient with them if they weren’t able to get things fixed right away, and sometimes helped out with the repairs.

So, renting to friends sounds (thus far) like all fun and games. Not necessarily, though. You know how people tell you never to borrow money to family? Getting into a landlord/tenant relationship with close friends can be a similar story. While my friends (who rented to their friends) had a good relationship with their tenants/neighbors/friends socially, financially it was a bit of a different story…


  • Informal relationships don’t mix well with money My friends were renting to a group of three people, one of whom paid her 1/3 of the security deposit before moving in. Another one was “a little short” and eventually paid half of his share of the security deposit several months into the lease. The third never paid at all. Because of this “informal relationship,” the landlord didn’t follow the standard protocol of collecting the security deposit at the time of the lease signing (actually, they probably didn’t even sign the lease before move-in day). They were friends, after all, they trusted them to pay it… and the tenants felt that they wouldn’t damage anything anyway, so what’s the point of the security deposit?…
  • Rent also becomes much more informal Rent was paid in a very leisurely fashion.. Again, because the landlord felt bad bugging their friends about money, and the tenant friends (who got the idea that their landlord friends were ridiculously rich, what with being landlords and all), figured that they could just pay them when they saw them. Or when they got to it. Or whatever. Not a big deal among friends, right?
  • It was hard to lay down the law about moving out, too When it came time to show the apartment, these tenants kept he same leisurely attitude, and didn’t worry much about cleaning or keeping the apartment neat. On the first of the month (move-in day for the new tenants), they still hadn’t moved everything out, so it was up to the landlord to move all of their extraneous belongings into the garage (rather than declaring them abaondoned, or putting them out to the curb), since it was their friends’ stuff.

All of this to say, if you want to rent to friends, and you have friends who you can trust to be responsible and financially sound, maybe it’s not a terrible idea, but definitely (definitely) keep to the same protocol you would with anyone else. Which is the hard part. But once you start letting things slide… who knows how far it’ll go. Keeping a formal relationship with friend-tenants is probably the best way to make sure that you’re all still friends by the time they move out…

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