Leasing apartments to family members

Filling vacancies in your apartment units quickly can be the difference between success and failure with real estate investments. Looking for tenants anywhere you can find them increases your odds of success, but never forget that not all situations are equal. One area to be especially careful of is when working with renting to family members. I am not talking about renting a unit to a member of your own family, although that can be an issue as well. I am referring to the situation where you have a vacancy in your upstairs unit and the downstairs tenant refers their cousin Billy as a potential renter.  Should you run across this situation I just have one simple thing to tell you: “Be careful.”

The first thing to ask yourself is whether the tenant doing the referring has been a good tenant. If they haven’t, a referral from them should be avoided. If they have been exemplary, it might be worth giving the person a shot, but make sure you run your normal background checks and that the person truly qualifies.

Even if they do, just use good judgment on how you handle things. I have been witness to a few horror stories where two or more units in a building were rented by family members, who seemed to think that since they knew each other that they could do anything they wanted. Keeping discipline in an apartment building can be a challenge in an situation, but things like these can make things even more murky.

You also can face problems if the referrer or referee family member defaults on their lease and you have to evict them. Some tenants might not blame you at all if you evict their relative and they deserve it, but others might walk out on their lease along with their departing kin.

The morale of the story is simply to be aware that things can be too to be true in the world of property management. Should you encounter a situation such as this, just make sure you consider the baggage that comes along with taking on related tenants.