Owning rental property is an ideal way to take advantage of property appreciation while having your tenants make the payments for you. Okay, there’s a little more to it than that but at the end of the story that’s what happens. Providing rental rent to friends and familyproperty is both a money-maker as well as helping someone find a temporary place to live. As the end of the lease period makes its approach, it’s time to find a new tenant, that is if you can’t convince your current renters to stay.

But you get a phone call one day from your sister. She tells you that your niece is moving to town and will need a place to stay for a year, what kind of deal could you give her? Or maybe your old college buddy lets you know his son needs temporary living quarters for a few months, can you help out?

What do you say?  How do you respond when a friend or relative wants to rent one of your properties? Let’s look at some of the possible scenarios.

1: Your niece moves in, doesn’t pay a deposit because she’s, well, your niece and pays her rent on time each and every month and keeps the apartment clean as a whistle.

2: Your niece moves in, doesn’t pay a deposit because she’s, well, your niece and is late on her rent and currently three month’s past due.

3:  Your buddy’s son moves in, pays his rent on time and you never hear from him until it’s time for him to move out.

4:  Your buddy’s son moves in, pays his rent sort of on time but last month he had a wild party and there’s cigarette burns in the carpet (there’s a non-smoking agreement) and two holes in the wall that need fixing.

Choices number 1 and 3 are what you hope for. But numbers 2 and 4 are just as likely. Perhaps even more so because you don’t scrutinize your niece or your buddy’s son like you would a stranger. When you rent to friends and family it’s possible you’ll be put into a very uncomfortable position that you wouldn’t be in had you screened your niece the way you would anyone else.

It’s completely up to you because it’s your property but now you see why some landlords have a strict policy not renting to family or friends. If they ever call, the property is already tied up, right? If you can avoid it, don’t put yourself in such a position to have to evict your best friend’s son.