Thursday, September 29, 2011

Real Estate Investor Mistake # 1 - Renting to a Relative

You want to be the good person that you are and help out your brother, or your cousin by renting them your place.  At first, you think it's a win-win....but....there's a strong possibility that because they're your family, they will take some advantage of you or your property.  They will "push the envelope".  You will also tend to let your rules slide in this case.

Now, think about trying to raise the rent.  You may have a hard time doing this with a good friend, but what about your relative?  You will either feel bad for doing so, but even if you're not, if you do raise their rent, the news will go around your family like lightning.  Do you really want to deal with that?

What will happen if your relative short changes you on rent, or doesn't pay at all?  What do you do now?  Do you throw them out?  Just try doing that and see how your name gets dragged through the mud.

If you have a property manager running your property, this is not a good situation, because your manager should be treating everyone equally, but just imagine if you were the property manager.  Now, it's even worse because you're face to face with a potential problem.

You may get extremely lucky and get paid on time if you rent to a relative, who doesn't take advantage of you, but much more likely, you're going to have a problem that may be amplified and will continue for a long, long time.  Why would you want that hassle?  Forget about renting to a relative....there are plenty of qualified tenants out there.  All you have to do if they ask is tell them that you don't rent to relatives.  You will avoid a potential long term problem by this simple act.  Of course, if you are thinking about being charitable, then by all means, go right ahead and rent to your relative. :)

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