Do you currently own a rental property and the lease is coming up for a renewal? More than likely there’s a month-to-month provision which helps you more easily mitigate potential vacancies but Real Estate Investingit is an additional task that landlords face. But have you been approached by a relative to rent that property from you instead of renting it out to some total stranger? It sounds like a good idea to know the person intimately who will be your tenant but there are some things to first consider.

 

Let’s say your niece wants to rent the apartment you own. The temptation might be to give the niece a little break on the rent. After all, she’s family, right? Did your sister call and ask about the apartment thinking that since she’s your sister’s daughter you’ll ask for a little lower for rent each month? It happens and while it might a bit forward to ask such a favor you’re really not in the real estate investment business as a non-profit, are you? When considering leasing to a family member you need to stay firm on your rent. You certainly can charge any amount you want to and maybe you do want to give your niece a little break on the rent, it’s just that you wouldn’t do that with someone you didn’t know.

You may also be tempted to forego the screening process and not pull a credit report nor verify employment and reviewing recent pay check stubs. Surely you wouldn’t need to call your niece’s landlord to see how she paid her rent over the last 21 months. What’s more, what happens if your niece falls behind on her rent and, since you’re her uncle, you’ll cut her some slack? What are you going to do, evict your sister’s daughter from your apartment? We don’t think so.

The point is that while renting out to a relative means you’re renting to someone you’ve known forever and there’s a comfort in that. But there is another side you should consider and that’s how you would react if things go sour.