Renting to Family Members: Good Idea or Bad Idea?

You tried do do a good thing, and I think the results speak for themselves. I would get out of the business of renting to family, unless it’s someone you know is responsible and reliable. But to keep things simple just keep family and business separate.

If you have to ask, then you already know the answer.

I think you have to begin eviction proceedings and just admit that this was a bad idea. Just tell them over and over, this was a bad idea, I want you out. Sounds like you’ll probably have to get a bailiff to evict them, I’ll bet. But do it now. This is never going to get any better and will be a financial drain.

Just know the entire time that you’ll be better with this trash out of your life and if any other family members try to make you feel bad about it, tell them they’re welcome to take these people in. But get rid of them. Now.

[quote]You begin to suspect you're being taken advantage of and wonder [bold]two[/bold] things:

I listed 3 things. I'm too stupid to live.

r3 Evictions are very costly. We're trying to avoid that for that very reason. Obviously, we risk losing money either way, but I would like for it not to get to that point. I don't even want to go into details of the breaks this person has been giving. It's mildly embarrassing when actually written in list format so that I can read it back to myself.

Family businesses tend to run fine when they employ family members who have a good work ethic. Perhaps it's not the fact that they're family but just have poor character? Not every family-to-family business dealing is disastrous. I don't even think it's the majority. At least I hope it's not.

We're never leaving, you sucker.

Oh and fix the damn water heater.

It's the way they are. And yeah, generally it's not a good idea to mix personal and business for a reason.

You will have to begin the eviction process, because they will NOT leave just because you want them to.

Now of course when you do, your family will pile on you, because they want the good-for-nothing relatives to be your problem and not theirs. Meet every such criticism with the same response, which is: "If you like them so much, YOU pay their rent! YOU take them in!". They will have no valid response, because that's exactly what they're trying to avoid.

You have to lie. Tell them that you promised the property to a business associate starting on the first of January, 2024 and you've already signed a lease with that person that you can't get out of. Tell them you understood when they moved in that this arrangement was temporary. Tell them you'll try to assist them to find another place before then, but that you can't cosign a lease or anything like that. Help them sign up with a Section 8 housing agency in your area so that they won't have to pay market rate.

In a somewhat similar vein, a first cousin (once removed) moved to my town. I helped him to move to an apartment. He found out that the landlord wanted to be paid by check, and he had no checking account. He also didn't quite understand the concept of a paying a month in advance and a damage deposit. Long story short, he asked me to loan him the money. Mind you, I didn't have a personal relationship with this guy. Of all my cousins, his father was my least favorite, and a ne'er-do-well and I didn't see this kid growing up at all. The amount was relatively substantial (maybe on the order of $1500 or $2000. So I wrote up a contract with terms. No interest, but included the dates by which I expected payments to commence etc. It was a bit of a slog at first, but eventually he got in line and did finally pay off the loan. Honestly, if I hadn't made him sign the contract, I don't think he would have paid me back, or at least the full amount. I think there's an old adage about lending money to friends and family - the gist is that strangers will pay you back, but family and friends will screw you over time and again.

R9, telling people to lie is terrible advice. What a neurotic mess you must be.

R5 / OP, of course you don’t want to begin eviction proceedings but do you really think these people are just going to leave? Believe me, these people know their rights.

You should start the proceeding and serve notice, and be unyielding in your position, and chances are it won’t have to go to court. It’s on you to do it with conviction. And your business is NONE of their business. You don’t owe them any explanation other than their own behaviour and treatment of your property. Stop giving them breaks on rent payment - delinquency is grounds for removal. You don’t have to make up stories for them nor do you have to offer any further assistance with finding them housing. I’m sure some of your other relatives will respect you for this.

Do tell us: did you collect a deposit? Because I’d be worried about the state they’ll leave the place in and what they’ll do to it in the interim.

That sounds pretty extreme. It would be one thing if they were having some trouble paying on time or a bit messy but they clearly have no respect for what you're doing for them or any good intentions at all. If the kids act rotten it's because they're learning to mirror the trashy selfish personality of the parents. You're not dealing with a simple fuck up who means well, you're the new host of the parasite.

I lived at one of my sisters rental properties and I paid rent for 4 months and then stopped. I got 19 free months. It was a really nice place too. Loved it.

Very complicated situation OP but you need to get the relative out of your rental.

So they’ve been in there for two months and are now almost two weeks late with the rent? Did they pay July and August and a security deposit?

What were the $2000 of repairs? Why did you have to pay a locksmith twice? If they lock themselves out, isn’t that on them? I’m not sure how that works. How did you discover the cut screen? Did they tell you about it and demand a repair? Did they lock themselves out a third time and then get nervous because a locksmith had to be called two other times? Why was a locksmith necessary? Don’t you have keys? Were the kids throwing garbage around or did they simply not know the rules of when it goes to the curb or something?

Does your existing real estate business involve being a residential landlord? I’m wondering if it’s possible that you were already plagued by second thoughts so you are over reacting to issues that are cropping up because it’s a newly rehabbed house that had previously been lived in by an elderly person. Not that they aren’t bad tenants - being late with the rent alone makes them bad tenants. But the locksmith thing is odd. I could see myself getting locked out three times if kids are involved and the door locks behind you automatically and your prior home was different. But I don’t understand why they should necessitate a locksmith. Seems like there should be an alternative plan after the first incident.

It think the big mistake was the below market rent. Hindsight is 20-20, but I would have done something to make it not below market, to make the property less desirable. Like tell them the garage or a room in the house is yours for storage and fill it with boxes. But that might not have been plausible in your situation.

I like the idea of lying, if that’s possible. It lets everyone save face. This situation is going to drive you nuts. I may not sound sympathetic, but I am.

You need to sit them down and say it’s not working.

You were doing them a favor by making your place available at a great rate but they haven’t been able to uphold their part of the bargain.

It’s now in the best interest of your relationship for them to find someplace end by the end of the month.

OP: how much below market was the rent you charged your relative?

If it was a substantial amount, it may be best to be rid of them. The IRS will consider a property personal rather than business property if the rent charged to a family member is substantially less than market rate. This means you'd lose all rental deductions including depreciation.

Check with your tax advisor.

I can’t tell if R17 is joking or not. How would they get out by the end of the month?

In past years, I owned and managed my own vacation rentals. I realized that this is not the same situation, but I experienced some similar issues. Friends wanted discounts. and big ones. Relatives wanted free or close to free vacations. They knew I was well off and thought nothing of taking advantage of that fact. To their minds I didn't need the money. They did not respect that this was a business. In return I got nothing. They never sent me business or talked up my places. Never. I finally had enough. I explained to them this fact: This was a business. My BUSINESS, and not a HOBBY. If I allowed them to have the place for free or a major discount it was exactly the same as opening my wallet and telling them to help themselves. And more importantly, I told them I would never come to THEIR business and ask for free stuff, I wouldn't ask them to work for me for free, or expect any discount, because I understand it is their BUSINESS, it is how they support their families and pay their bills, and I RESPECT that fact.

You must tell them this is a business, times are tough, and they must leave so you can rent at the going rate. It is NOT your responsibility to give them freebies, and this is exactly what you are doing. Tell them they must be out by a specific dates because you have found new renters that can pay you full price because it's your business and you NOW need to get the true value. You do not need to tell them why, just that you now need to have it, period.

Having them in your home is a losing proposition. I've seen this happen to so many others. NOW is the time to get them out. Do not hesitate, do everything you can to get them out ASAP.

Yes, start the eviction process NOW because it can take a long time in some places and you may regret not starting it sooner.

You simply have to be firm and explain how they are losing you money and that you need good tenants.

What kind of family member OP? Close family or distant family?

It sounds like you are going to have to give them a written warning or warning eviction notice (if you can do that where you are located). Otherwise - a very cold and businesslike conversation about your requirements for your family members to live in your property. Have your lawyer with you. I'm sorry but I have a bad feeling this will turn nasty if you are not very precise and careful. Always keeping your emotions in check and never taking bait. Making the proper, documented legal moves. If your family members are doing the sorts of things you've described then you're already in trouble. This won't be the first time something like this has happened with them and housing. I'm sorry. Be safe and deal with it ASAP.

What R22 said. Act now. Ignore what other family members may say to you in this family's defense. You are being taken advantage of. Treat them as any other non-family landlord would.

Since you have other rental properties you should start with a certfied letter to the tenant. Explain that since this is a business, not a one off family home rental, you must treat them like all your other tenants or it will set a bad precedent. The benefit they received was below market rate. That does not expempt from the rest of their responsibilities. If family gets annoyed blame an attorney who informed you of the potential consequences.

R19, I’m not joking. OP may end up having to give on this but they are not abiding by the terms and and if you give her three months, they will take a year.

You can’t start the eviction process, which others have agreed needs to be started now, until you’ve talked with them and asked them to vacate.

Any financial transaction that requires a family member to pay or pay back money is a horrible, horrible idea.

R18 is right. You are running afoul of IRS rules if you rent at less than market rate, especially to a relative. Now, they likely won't notice, but still ....

Agree that the below-market rate was a big mistake. You are not HUD. You are not the Department of Human Services. Sounds like OP wants to be the good guy until the end.

I would stop dealing face-to-face w/the tenant. I would do everything in writing. As stated, evictions take a long time. So, start now w/the eviction process.

Agree with R20. Family members / friends don't respect your time and assets. It's a *business*. Have some respect for yourself and your business.

Tell them you have very serious business "crisis" and you've made a decision to "do something" with this property, and the options you're looking at is possibly demolishing it, and they will have to vacate because the house will not be available for habitation. Can't live without electricity and water. (If they fail to leave you can always turn off the utilities by a certain date.) Make sure you back up your request with a friendly letter that simply says, based on the time table you will need to shut off the utilities and they have to be out by a given date. Give them 60- 90 days. You may want to check to see if your local laws require a specific time when giving notice. I don't think they signed a lease did they? What I mean is make up an excuse to require them to vacate without "blaming them" because these people sound like trouble. And of you go at this head on you will make things more complicated. So just "ease" them out. You can even "loan" them $$ for a deposit. They seem like losers. Oryou can simply tell them they have to leave because they have been a disaster. then fight them in court if necessary.

I did something worse. I gave my brother a substantial loan to help him out of a bad situation. He was supposed to pay it back with interest. He made regular monthly payments for 5 years - and then he declared bankruptcy. He swears he’ll find a way to pay me back someday, but I don’t believe it. I knew it was a risk, of course, so I just accept it.

No loans to family members. If you want to help, give them the money.

Best-case scenario, they will eventually pay you back and it will be a pleasant surprise.

OP, check the law. Renters have rights. Then change the locks and put all their shit on the curb. Don't respond to their calls. If you know some big, bruiser type, you can have him answer their calls. But get them out. And be prepared for people to be pissed off with you. There will be people who were relieved you took on the burden of these jerks so they didn't have to. Now you have decided to evict them, they will go to others for a hand out and criticize you and falsely accuse you. Hope you took pictures and documented everything. Save receipts from repairs, etc.

You need to weigh if it will cost more to evict (including lost rent for a protracted process and whatever additional damage they do in that time) against buying them out. Offer 5k-7k to leave within a week /by the end of the month. don't give them money until they're headed out the door.

Bad idea. Very bad.

If this is how they've treated the property in 2.5 months, it's not going to get better. They have no respect for you or your property and think they deserve whatever is given them.

Give them what they deserve - an eviction notice. If they didn't pay rent for 2 months, they should have money to move out if they aren't paying rent at your property.

Buying them out is a good idea. As stated, give them the money only after they've vacated the property. Most people are short-sighted and will grab that cash. Better than dealing with squatting and sheriffs.

This might be easier and cheaper than doing a legal eviction.

Good idea, folks. Truly.

These people will jump at the money.

Yes, OP is being screwed but otherwise this will likely be a long process and he will get soaked for much, much more.

Never.

Never ever.

My mom rented to a distant relative. They left the place a mess and told her to keep the deposit. After that, my mom hired a property manager.

My sister rented to her husband's high school friend. I helped my sister paint the rental (before the move-in) and saw some of the furniture that the HS friend had already moved into the house. The furniture looked like trash (particle board) and I had a bad feeling about things.

HS friend moved in more people (adult children) and more animals than he originally said. Also, the police ended up coming to the house for domestic violence reports. This was a very quiet neighborhood - all owner-occupants - except for my sister's house.

OP, I hope you signed a lease with your family member.

I don't understand what the appeal of being a landlord is unless you're a professional handling many properties. I would much rather sell the house and put the capital in the stock market (an index fund, bonds). Much less stress and safer returns.

R40, depends what market you're in. My sister made a ton of money selling her rental property. But you're right in that real property does seem like a headache unless you're doing it in bulk.

Is their being late a financial drain on you or your business? If not I would make every effort to work with them before you evict them.

[quote]My sister made a ton of money selling her rental property.

that doesn't refute what I said - she made good money selling it but not from renting it out? Unless you're referring to property prices going up by a lot more but I think that's riskier.

Sorry, R43, I misread your post. Yes, you're right.

But, unless you buy a fixer-upper to flip right away, or the market is going crazy, you'd need to hold on to the property for at least a year or two (for it to appreciate). In those couple of years, you would need to rent it.

Op, I’m going through the same thing, but with a long term renter. She has turned on me, but it’s my own fault. I got lax with the rules and now she’s $3k behind.

I’m in the Bay Area, California and that makes it even harder to enforce rules. I’m thinking of hiring an attorney to manage the situation.

[quote] you'd need to hold on to the property for at least a year or two (for it to appreciate).

No guarantee of that though.

There are some good ideas for you here. I'm the person with the vacation rentals R20 that also spoke up. Something to consider is this... if you believe this has the potential to turn even the slightest bit ugly or overly time consuming, you could offer to give them enough 1st & last to find a new place and get them out FAST. You need to weigh the financial consequences of having them remain through an eviction. The eviction process can be expensive and also take a long time. Is it worth it? Maybe not. With that in mind you could simply 'buy them out' with the cash to get a new place, which could be cheaper. Just don't let them use you as a referral.

Friends and relatives are the worst. Buy a beach house and you'll find this out real fast. I finally turned my properties over to a professional manager. The last person I had to set straight was on his 4th free trip. He'd normally ask for the place in off season but this time he wanted the middle of July. NO fucking way dude. I told him to see my manager. He paid full price. I bet that turns out to be his final trip.

I just want to thank everyone who chimed in with some good ole common sense advice, here. To sort of explain the complexities of this situation as succinctly as possible, I'll just list the key issues:

1. When we inherited the house we initially were torn on whether or not to keep it as personal property, sell it, or transfer it to the real estate investment business as an asset. There were a few repairs and renovations that first needed to be done before we decided on what to do, and we were in the process of fixing it up.

2. The family member/tenant is acting as legal guardian of their sibling's kids after that sibling lost custody due to being an addict. Cocaine was found in the youngest child's system and it all went downhill from there. There are 4 minor children in total (all under age 10).

3. The family member/tenant did have a place earlier this year with their godparent. At the beginning of June, the godparent then asked them to leave their home and gave them 30 days to do so.

4. Somewhere in the midst of all of this turmoil when they were staying at the godparent's home, my tenant lost their job. They have been unemployed and collecting government assistance since.

5. My other family member and I discussed renting to them. We were concerned about the lack of employment, however, the tenant showed proof of the monetary assistance they were receiving and multiple job applications. We let them know that it was a concern, but as long as they can pay the rent on time, they can stay. They said they could pay the rent amount proposed with no issue.

CONT'D...

6. We told them the house needed repairs on one of the rooms and was actively being worked by my father before he died (this was his house). He remodeled the master bedroom, the living room, and the upstairs bedroom. The home also had the following replaced in 2021-2022: roof, pipes, water heater, and electrical wiring. The house also needed to be cleaned from sawdust and sitting for months. I told them that due to this the home wouldn't be ready until mid-July.

7. Family member/tenant literally cried and begged to move in sooner and even offered to help with repairs and cleaning. In exchange for their offer, we agreed to let them move in on July 1st and not charge them the full rent price since they stated they would be helping with repairs and cleanup. So, we took a deposit for the first month and heavily discounted the first month's rent (one week free). This arrangement was predicated on them helping to get the house ready.

8. They paid the deposit on the day promised in July and moved in on July 1st. For the entire month of July, not only did they not help with repairs, renovations, or cleanup, but they broke the hydraulic pump on the front door within the first week and partially locked themselves out of the house (the kitchen door that leads to the side door and basement had a bolt lock on it. The key to it was left in the hole and they exited from the front door). The family member/tenant then called yet another family member (a shared cousin) asking to pay for a locksmith. They did. I then had to reimburse that cousin. I was told about this by my aunt several hours after the incident. The tenant never notified us directly. I called the tenant and told them that if it happened again, call me immediately.

9. Not even 5 days later, it happened again, with the same damn door. Except this time, not only was the key left in the hole, but it was broken inside the lock. The door was then unopenable even with a key. I then called my other family member (with whom I co-own the home) and the second locksmith had to be called and paid for. This locksmith had to break the lock. At this point, I completely just removed the ability to lock this door.

10. While inspecting the property, I noticed that the bathroom window screen was damaged. Immediately, I deduced that it had been intentionally cut when they were locked out because...obviously. The tenant then blatantly lied to my face and said that one of the shovels outside "fell into the screen and damaged it." I knew this was bullshit, but I went along with their explanation. Sometime later, when I was randomly examining the damaged window screen, one of the very honest kids casually disclosed to me that the tenant cut the screen with a knife when they got locked out. I feigned ignorance.

11. They thankfully paid August on time, however, while moving in more of their items, the tenant significantly, damaged the blinds, the kids have been leaving trash on the grounds and/or throwing trash directly into the outside bin instead of using trash bags creating a serious fly and bee problem, and the tenant has barely cleaned anything.

12. The washing machine and laundry tub were also broken 3 weeks ago. We had to call and pay for a plumber.

13. All in all, repairs, renovations, and general upkeep have been getting paid for directly out of our pockets and not the business. Money that we intended to spend to fix the place up to use as a business asset was spent to make this place comfortable for this specific tenant/family member as quickly as humanly possible. The money we've invested thus far has yet to be returned. In other words, we've made a negative profit off of a property that could be an asset to the business.

We've given them until the 20th to pay in full. If not paid by then, they will have to go. I have been looking around for alternative (and more cost-effective) methods to remove this tenant. This method was also mentioned by a few above, and we may just move forward with it. I'm not unopposed to literally paying this person to leave if necessary.

^ r48 and r49 are me/OP, obviously.

Yikes, it sounds like the tenant took kids in kids they can't manage, and with no job things are going the way of all good intentions.

That doesn't mean it's your responsibility to throw your money away to help them, OP. Like I said above, when other family members pressure you to keep losing money on her behalf, ask them how much they're willing to contribute to help this person, or what part of their own housing they're willing to give over to the brats. Because remember, the family's goal is now to pressure you into being this person's chief support, so they won't have to do anything themselves.

OP from the sound of things your tenant seems overwhelmed and inept. It's almost as if they need to be trained on how to manage a home and deal with four kids under 10 yrs old. Almost like some kind of rehab or counseling situation. The tenant needs a minder.

R49 (OP) That is pretty much what I said... offer to pay them to get out. It's cheaper and quicker in the long run, and the guy in the video is correct about them not purposely damaging your property. These people sound very unstable and dimwitted. Let us know how this turns out. Good luck.