Renting to Relatives: What Every Landlord Needs To Know

As professional property managers, we don’t like the idea of renting to relatives. In our experience, it can get messy quickly. Feelings can get hurt and emotions can flare. This is not a great outcome in what’s supposed to be a rental property business. 

We don’t like it, but we’re also realists. We know it happens. 

If you’re going to allow a family member or a friend to move into your rental property, make sure you’re working with an experienced Southwest Washington property management company. Professional management is always a benefit to landlords, but in a situation where you’re the landlord and a family member is a tenant, that objective third party is absolutely essential. 

You’ll need a buffer between you and your tenant, and you’ll want to make sure you’re leaving behind any emotional baggage that may linger in your relationship. 

Here’s what you need to know when Uncle Bob or Cousin Jane is moving into your rental property. 

Charging Adequate Rent

Rents are pretty high right now. Are you comfortable charging your relatives what your property is worth? 

You need to be, because keeping your rental value artificially low will cost you a lot of money. You want to be kind, but if you give your relatives too good of a deal, you’ll be left earning rents that are far below the market. They’ll never move because your rents will be lower than what they could find anywhere else.

It’s not just about sacrificing what you earn. 

The other danger in charging below-market rents is that you can lose some of the valuable tax deductions that come with owning rental property. Consult your tax advisor because too much of a rental discount would classify your property as being used for personal reasons and not as an investment. This could have a dramatic effect on what you’re able to deduct at tax time. 

Screening Your Tenants and Accessing Personal Information 

Does your family member want you to have access to their credit score, employment information, and social security number? 

You’ll need all of that when you screen your tenants. 

You might not think there’s any need to screen your family members. But what if they’re bankrupt? What if they’ve been evicted from three rental homes in the last two years? 

These are things you need to know before you hand over the keys to your valuable investment. 

Make sure you’re comfortable collecting personal and financial information about your family members? If this feels too overwhelming, contact a property manager. 

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