Renting to friends versus renting via letting agency to strangers

Mischa8

Writing this on behalf of a friend.

My friend currently lives in a one bedroom flat, mortgage. She is also in the process of buying and doing up a 3 bedroom house for her retired mother and autistic brother to live in, this should be completed May/June 2011. She currently has a modern new build flat (built in last 10 years) in SE London area, 2 bedrooms, private parking etc. Her mother and brother have been living there for past 10 years and will be moving out once their new house is completed. She's been told best not to sell for time being as most likely a loss and just rent it out.

She's been told she could get approx £1200 pcm exc bills for the flat but she is wary - even of using a letting agency.

The main reason for this being:-

a) her neighbour below had big problems when letting her flat. apparently the tenants left it in a right old state - the neighbour had to pay a lot of money to repair damage and bring it up to a rentable standard. Neighbour also had to get a solicitor involved as tenants were refusing to leave.

Now my friend wants to rent the flat out, she has a few single friends who she trusts and who may well rent the flat from her. She has even said she would let at quoted rental price or just under as long as she knows/trusts friends rather than try her luck with tenants she does not know and a letting agency, the same.

Anyway - my query - what would you do? Rent the flat through a letting agency and hope for the best or let the flat to trustworthy friends and accept maybe a slightly lower rental payment.

My friend did mention to me she was quite happy as long as the mortgage was paid, but I said to her, it's your property so if you wanted to rent it out for more then that's up to you.

By the way, I don't need this property! I already live in my own place.

Jenniefour

If your friend wants to let out her property to people she would prefer as tenants and trusts then she needs to make sure she has a tenancy agreement of the kind she would have anyway, does the inventory properly and so on. And to make sure she's not discounting the rent to an extent that would creat problems for her should interest rates rise, and that she's covering herself for future repairs and so on.

BitterAndTwisted

Being a landlord is a business and it's hard to be completely businesslike on either side should any problems arise with the tenancy. I certainly wouldn't do it. Not even if the friends were paying double the market rent

Mischa8

Jenniefour wrote: »

If your friend wants to let out her property to people she would prefer as tenants and trusts then she needs to make sure she has a tenancy agreement of the kind she would have anyway, does the inventory properly and so on. And to make sure she's not discounting the rent to an extent that would creat problems for her should interest rates rise, and that she's covering herself for future repairs and so on.

Yes she would cross the t's and dot the i's as it were with tenancy agreement etc.

I think she's on moreorless a fixed rate mortgage.

I think she really lives in fear of getting some dodgy tenants. The lady she is thinking of renting to is South Korean (with work and study permits in place) and maybe another friend who works as Occupational Health Therapist. We're all very good friends and no way would we take advantage.

BitterAndTwisted

The dodgy tenants could turn out to be the friends she may decide to rent to. At least with strangers you can take out references and do credit-checks. If they turn out to be dodgy you can go through the eviction process. Imagine doing that to people who you considered to be good friends....

Never mix business with friends or family. Never.

Mischa8

BitterAndTwisted wrote: »

The dodgy tenants could turn out to be the friends she may decide to rent to. At least with strangers you can take out references and do credit-checks. If they turn out to be dodgy you can go through the eviction process. Imagine doing that to people who you considered to be good friends....

Never mix business with friends or family. Never.

Actually - my friend knows her friends extremely well whom she is thinking of letting to, they're very good friends, and she would get references from them and do credit-checks anyway.

I still think my friend would prefer to trust friends whom she has known for a few years and who she would consider to be 100% trustworthy rather than someone who's random from off the street.

I have no idea what she will do either way - it's her flat - but I do know she wants as little fuss as possible.

I know through experience myself that letting agencies can be dire and not worth the money you pay them when you let a flat out. In most cases they're handy to use day-to-day though.

I've also had experience though of being a landlady and tenant and letting rooms or renting them privately. On the whole this works well provided, as you say, you have references, tenancy agreement etc.

I may have been lucky but didn't have any problems either renting myself or letting a flat out - no need to do credit checks. Maybe I was naive. and this was over 5 years ago so maybe things have moved on since then.

I totally understand not lending money, not trusting friends etc though - have had my hands burned there several times and now I just don't do this full stop. not even for extremely close friends. thanks for your input tho.

G_M

Never let to friends/family. However much you trust them.

You have to be prepared to evict a tenant, and with friends that is hard and can ruin a friendship.

It's not just about how reliable/trustworthy they are. Anyone can be made redundant. Anyone can have a relationship break-up. Anyone can fall sick. Anyone can fall on hard times for any number of unforseeable reasons.

If these things happen, and the rent stops, what happens to the mortgage? What do you do when the friend says "it's just for a week or two".....which becomes 3, 4 , 5 weeks? How do you evict a friend who is already in trouble and who needs a secure place to live?

Far better a stranger, and a simple business arrangement. Most tenants are fine, and if you take sensible precautions, take good advice, don't rely exclusively on a profit-motivated agent, you can minimise the risk.

Read up here.

pocketrocket1

I let to people I know/friends and family and also to strangers. When i get a property come empty i text all my tenants and friends and usually get somebody from that ( I have NEVER used an agent and been doing this nearly two decades)

I have been let down (occasionally) by friends/family and strangers.
But in the main have had no problems and most of my tenants are on slightly lower than norm rents for the area. I go for long term rather than highest buck

Make sure all the paperwork is completed properly, agreement, inventory, gas cert etc
I do tell people that i am their landlady not their friend and I am capable of 'changing hats'

If you are a good long term landlord your tenants should become friends anyway.

As said in an earlier post hard times can fall upon anyone but if you are friendly with your tenant you can talk and reach a payment plan.

I would go with your instinct you may have problems (usually from lack of communication or from the landlord not following the rules and accepting that they own the bricks but it is the tenants HOME) but you could have as many problems by taking on a stranger

Mischa8

pocketrocket1 wrote: »

I let to people I know/friends and family and also to strangers. When i get a property come empty i text all my tenants and friends and usually get somebody from that ( I have NEVER used an agent and been doing this nearly two decades)

I have been let down (occasionally) by friends/family and strangers.
But in the main have had no problems and most of my tenants are on slightly lower than norm rents for the area. I go for long term rather than highest buck

Make sure all the paperwork is completed properly, agreement, inventory, gas cert etc
I do tell people that i am their landlady not their friend and I am capable of 'changing hats'

If you are a good long term landlord your tenants should become friends anyway.

As said in an earlier post hard times can fall upon anyone but if you are friendly with your tenant you can talk and reach a payment plan.

I would go with your instinct you may have problems (usually from lack of communication or from the landlord not following the rules and accepting that they own the bricks but it is the tenants HOME) but you could have as many problems by taking on a stranger

This is what my friend is planning to do - pocketrocket - I really think she feels if she rents to fairly trustworthy friends or friends of friends who just want a reasonable rent and a nice property then that will suit her fine.

My friend is an accountant with a large building company and often travels all over the country doing audits - therefore she often wouldn't have the time to be around for proper landlady duties but would do what she could when away from home. ie maintenance, upkeep etc. The property AFAIK is modern, very well maintained etc. It would be let fully furnished apart from the fact the tenants would supply beds. I don't know yet whether landlady wants to include or exclude bills, council tax etc in rent or not.

The thing is, one of my friends is currently in a 2 bedroom house-share in Croydon and the other in North London - they both get on well and have talked about sharing together. This property could well suit them both as it's in SE London, near a main station and/or tube/DLR.

I almost 100% certain know that these 2 friends would not in the least want to cause problems when renting if they rented from our mutual friend.

Indeed, one of the friends has already had slight misbehaviour problems with her landlord - he has now moved out, which we all laugh about from time to time, but we are all very aware of landlord/tenant possible problems.

mlz1413

Only rent to friends you are prepared to fall out with and lose as friends forever.

No matter how much of a friend they are always have an AST signed, inventory signed and use a deposit scheme - your house is your biggest asset so it needs to be secured as yours.

If your friend is not often in the country I'd recommend taking the hit to sell now. Prices are going to keep falling and interest rates will go up, unless your friend is happy to rent to at least 5 years I'd get shot of the place.

Having re-read your last post, bills should be excluded from any rent, your friend should not use that address for mail or be registered there for council tax.

The other option could be that she rents rooms to her friends and goes and stays there once a month as a live in landlady. If she does this then she only needs to inform her insurance co that she has extra people living with her rather than taking out new insurance policies.

G_M

This gets worse and worse.

therefore she often wouldn't have the time to be around for proper landlady duties but would do what she could when away from home.

yet she's not using an agent. So what happens in an emergency (leaking pipe in attic? Central heating breakdown? Vandels break windows?.....) when she's away?

one of the friends has already had slight misbehaviour problems with her landlord - he has now moved out, which we all laugh about from time to time

You're all laughing now!

I almost 100% certain know that these 2 friends would not in the least want to cause problems when renting

The issue is not about what they want, it's about what they can't help.

You came here for advice for your friend. The advice is: persuade your friend not to rent to the friends, but to carefully select a reliable professional agent, and find carefully selected and vetted tenants.

And pursuade friend also to read ALL the links in post 7 above.