Don’t Mix Family, Friends and Money – Our Townhouse Rental

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.

Like What You See?

Join the other readers who have signed up for our email newsletter! No spam, just periodic updates to help improve your finances!

About Lance Cothern

Lance Cothern, a Certified Public Accountant (CPA) licensed in the Commonwealth of Virginia, is the founder of Money Manifesto. You can read more about him here or connect with him on Facebook, Twitter, Google+ or Pinterest.


  1. Unfortunately I have mixed money with family. Fortunately, we treated the money we “loaned” our family member as a gift without actually saying it. I think that mindset has saved that relationship as we don’t expect to ever receive the money back. If we do great, if not, then we still have our relationship. I would like to say it is easy to say no, but it isn’t. Even if you know you shouldn’t perform a financial transaction with friends and family, it is hard not to help if the situation arises.

  2. That’s tough but it sounds like it’s not going to have too much impact on you from the landlord perspective or from the friendship perspective. Sounds like they let you know in enough time that the effects on both aspects were minimal. Good reminder about keeping friendship and business separate.

  3. I think one of the important things is that the friendship was not harmed, which points back to your perspective that they’re doing what’s best for them. I’ve mixed money with friends…years ago and will likely never do it again. Now, if a friend has a genuine need I’d just rather give them the help they need and expect nothing in return.

  4. I’m glad you guys are able to handle this and not lose a friendship in the process. I think this is a great reminder about keeping business separate from family and friends, particularly when there’s a power dynamic involved, as in this case between landlord and tenant.

  5. Did you guys not sign a lease and get a deposit? I would think that this kind of situation could work out if you treat her like you would any other tenant. At least if she had money on the line she might have thought twice about leaving you guys in a lurch or if she knew her boyfriend was house-hunting she wouldn’t have signed.

    I don’t have any business so there’s no way for me to mix in family or friends!

  6. I think you hit the nail on the head. I’ve seen this happen with a few people who have rented to friends and family. It’s tough – on one hand you’re happy for them buying a home (or whatever the reason for changing plans is) and on the other you have your own budget to contend with.

    I have seen it work though. And, if it works, it can work well – but when it doesn’t work…

  7. Did you guys have a contract? I think that would have helped matters. When we borrowed money from Mr PoP’s parents , we had a formal contract and it’s been a great arrangement. We both treat it as a business arrangement.

    • We were going to get a lease signed before they moved in, but in retrospect we’re glad we didn’t get it signed. Then we would have had legal recourse and that could have made things worse.

  8. Consider yourself lucky she did not move in. I understand things could change, but where was the consideration for you?

  9. Kyle @ Debt Free Diaries says:

    I’ve mixed a little bit of finances/money with friends and family in the past. Usually if I’m loaning money to someone I only loan it as a “gift” since I don’t want to be the one pushing to get it paid back. There are also some things that I write a check to friends for every couple months, but we’ve already built up an accountable relationship with them so it’s not as big of a concern. We’ve never done anything too large with finances though.

  10. Stuff happens with non-friends and with friends. It’s just tougher to deal with it if it involves friends. You did well by just being gracious about. Lesson learned (relatively) cheaply. Thanks for sharing. 🙂

  11. I’m glad you were able to uphold the friendship and nothing went sour. It’s really hard to mix friends and business, but when it goes right, it’s great! Unfortunately it more often goes wrong.

  12. Phenomenal advice. This was one of the biggest mistakes I used to see people make (when I worked in a bank). Co-signing, borrowing, etc.

    The most difficult situation I could ever imagine would be to let a friend or family member live in your rental. If they are unable to pay, what do you do? Evict your friend? Do you suffer financially as a result? Horrible scenario.

  13. Oh wow, that stinks. I definitely don’t mix money and family/friends. There are just too many emotions that play into the equation. I’ve heard Dave Ramsey say that Thanksgiving dinner tastes different when you owe your family money, and I’d imagine that’s totally true. I give money to friends and family sometimes with no expectations for getting it back. If I get it back great, if not it was a gift. I wouldn’t give it if I couldn’t afford to do so and needed the money back (that’s the sticky part that ruins relationships I think).

Share Your Thoughts