My fiancee and I are on our way to becoming first time landlords. We’re a bit intimidated, but once things are set up we figure we’ll get in the swing of things and renting out our old townhouse will be a slam dunk financial decision.
Renting the Townhouse to Friends
We were going to rent it out to someone we didn’t know, but my fiancee mentioned that one of her friends wants to move soon and loves our townhouse so we decided we could rent it out to her instead. It’ll make things easier for the first year as we learn to become landlords, or so we thought.
Our prospective tenant has pets, which we didn’t want to allow initially. We have pets and we love them, but they’re an additional headache as a landlord. We decided we could allow the pets for her friend only and just not replace the well worn carpet that is in the second floor of the townhouse before she moves in. Our future tenant even said we could wait to replace the 24 year old ancient refrigerator and she’d provide her own washer and dryer! All of our up front costs would disappear and it almost sounded too good to be true.
What was even better was that the new tenant didn’t want to move in for a couple of months so we’d have plenty of time to fix up the few things we wanted to get done before they moved in. We could work on our new home, then turn our attention to the townhouse right before the tenants moved in.
The warning sirens were blaring inside my head. “Don’t do it! Something will go wrong and you’ll regret it,” I thought to myself. Something was telling me that this time it would be different. This time it’ll work out and no one will get their feelings hurt. Against my better judgment, I didn’t listen and it came back to bite me in the butt.
When Things Go Wrong – Friends, Family and Money Don’t Mix
A week or so ago, my fiancee gets a phone call from her friend, the prospective tenant, with some great news! Her boyfriend is going to buy a house! YAY! Wait… what’s that? When is he buying a house… Are you moving in with him? When is the closing? June, like June this year? What about the townhouse? You aren’t going to rent it? CRAP!
This is why you shouldn’t mix money (or business) with family and friends. Something will happen and someone will get their feelings hurt and it may very well ruin your relationship with that person forever. We were relying on them moving into the townhouse and providing us with rent as of July.
We weren’t planning on replacing the carpet or updating the refrigerator within the first year. We weren’t going to have to do any of the work until June AND we weren’t going to have to try to find a tenant, run credit and background checks OR stress about other similar issues. Now we do. On top of that, my fiancee is bummed that her friend is going to be living further out of town.
Things Will Be OK… Just Not as Planned
Luckily, we have a bit of time on our side AND we can handle the financial impact. It isn’t the end of the world for us and we might actually end up making a bit more money in rent, once we get the place rented out. The problem for us is time. We’re realizing we should have fixed up the townhouse immediately and gotten it in tip top shape as soon as we moved out.
Before, we could have fixed the place up on June 29th and had renters in on July 1st. Now we have to have the place fixed up before we can show it. Our schedule is a bit busier so we’re going to be losing out on potential rent payments and possibly delaying our rental start date. This will mean more mortgage payments with no rental income. It isn’t going to ruin us financially, but the student loan debt payoff won’t happen as quickly as we’d like.
No Friendships Were Hurt
We were grown up about the whole situation as we realize our friends are doing what is best for them. It isn’t like they moved in for a month then are leaving us high and dry. We have time to fix everything and get back on track and we aren’t letting it affect our friendship.
Not everyone will be so lucky though. Take this as a personal warning from experience. Don’t mix family, friends and money (or business) unless you’re willing to take a hit financially or take a hit in the relationship.
Have you ever mixed family, friends and money (or business)? Did it burn your or were you one of the lucky ones? If you haven’t, would you ever? I think if you do decide to mix them, don’t expect to get any of the financial benefit… just in case.