Guide to Renting to Relatives - article banner

When you have an Orlando rental property that’s vacant or about to be vacated, you might have some family members hinting around that they’d like to live there. Perhaps a cousin is getting divorced and needs a home or a niece or nephew has just graduated from college and needs a place to rent while looking for a job. It’s a natural instinct to want to help your family members.

However, renting to relatives can come with a lot of problems and more than a little risk.

Here are some of the things to consider before you let a family member move into your rental home.

Renting to Relatives Brings Emotions into a Business

You should be treating your rental property like a business. Every decision should be based on facts, desired outcomes, and available data. You don’t want to follow your intuition or make a decision just to make someone happy.

Relatives comes with emotions, however, no matter how distant your relationship. Allowing a family member to rent your property mixes money with personal relationships. Drama is likely to be stirred up at some point, no matter how hard you try to avoid it.

Will you be able to follow up with your family members who are late paying rent? Will you be able to evict them if they don’t pay?

What if they damage your house? Are you willing and able to hold your tenants accountable?

Charging Fair Market Rents

You have to charge what the Orlando rental market demands, otherwise your property may lose its classification as a rental home, and you’ll lose some of the tax benefits that come with renting out property. If your family members aren’t paying you any rent, you may have to file a gift tax return.

If you are going to rent your property to a family member, make sure you protect yourself and your property. Charge a rental amount that fits into the fair market value. You can give them a small break without compromising your own ROI and tax status. For example, a home that would normally rent for $1,800 can be rented to a relative for $1,600. However, that $1,800 rental home should not be rented out for $1,000.

Sign a Strong Lease Agreement

A lot of Orlando landlords who rent their homes out to a family member don’t bother putting together a lease agreement. This is a big mistake. You need to have a lease even if you’re renting to relatives. This will protect your property and hold your tenants accountable to the requirements of the lease. Without a legally enforceable lease agreement, you can’t evict your tenants when you need to take the property back. You’ll have a hard time proving that they owe you anything at all if they stop paying rent.

Work with an Orlando Property Management Company

If you find yourself in the position that you want to rent your property to family members, make sure you’re working with professional property managers. This will create a buffer between you and your loved ones. You won’t be the party who is collecting rent, resolving disputes, and managing maintenance and repairs. It’s the only way to enjoy an effective and profitable rental experience when family members are in your property.

Rental home transactionWe can help you make some good decisions. Contact our team at Park Avenue Property Management.