Renting to Relatives: What Every Landlord Needs To Know

Is it a good idea to rent to relatives? 

We don’t recommend it. However, we know that it often happens, and our advice to you when a family member becomes a tenant is this: hire a property manager. You’ll need that objective third-party to take care of all the uncomfortable situations that might arise. You also need a strong lease agreement. 

Here’s what every landlord needs to know when it comes to renting to your relatives. 

What to Consider When Renting to Family

Consider what you’ll charge in rent, how you’ll structure your lease agreement, and how you’ll enforce that lease. Real estate is best managed from the perspective of a business owner, not a family member. You don’t want emotions and familial obligations to get in the way of the rent you’re earning and the return on investment (ROI) you’re building. 

• Charging Market Rent is Important 

Rents have risen in Dallas-Fort Worth and across Texas. When you’re renting out a home in this market, you’re earning a comfortable rent. That’s good news, unless you feel the need to slash your rent to accommodate your tenant, who happens to be a family member. Keeping rents low will cost you.  

You are probably trying to help, but when you give your relatives too good of a deal, you’ll be left earning rents that are far below the market. You’ll never get your family member or friend out of your unit when they get comfortable paying your lower-than-market rents. Anywhere else they moved would require a much higher rental rate. 

Is rental income from a family member taxable? The answer is: yes. And, you can lose some of the valuable tax deductions that come with owning rental property if you charge a rent that’s too low. 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. 

• Signing an Enforceable Lease

A lot of landlords who rent their homes out to relatives or friends don’t bother putting together a lease agreement. 

This is a big mistake. 

You need to have a lease agreement in place, no matter who you’re renting to. Even if it’s someone you’ve known your whole life, a lease is necessary. It protects you and your tenant, and it also protects your property. 

Without a legally enforceable lease agreement, you can’t evict your tenants when you need to take the property back. You’ll have a hard time proving that they owe you anything at all if they stop paying rent.

Working with a Dallas-Fort Worth Property Manager 

Whether it’s your sister, your grandfather, or a long lost relative from out of town, your tenant may not like that they’re dealing with a property manager instead of you, personally. 

But, it’s essential. When you have property managers taking care of the leasing, the management, and the maintenance, you don’t have to worry about allowing your investment property to become a source of anxiety and frustration for you.

Property management allows you to set healthy boundaries. The only way to effectively rent to family members without emotions getting in the way is through a property manager. When your tenants complain that a maintenance request hasn’t been responded to fast enough, you’re not the one they’re angry with. They can follow up with your property manager, and all the coordination will rest there. You won’t be expected to solve any problems or engage in any disputes.

We can help you through the process of renting to family members if that’s what you ultimately decide to do. Please contact us at Trend Property & Management. We’re here to help with all your Fort Worth property management needs. We also serve Keller, Saginaw, Hurst, and the surrounding areas.