Q. I have an investment property which is currently tenanted and the lease will be ending in a few months. My brother and his partner are looking for a place to rent and I am thinking of renting my property to them. Are there any restrictions with renting to family? Do I still need the formal paperwork?
A. Renting your investment property to family and friends may seem like a great idea, but it can often end badly if you don’t take the agreement seriously.
You can offer a discounted rental fee if you wish, but remember that if you need to raise the rent down the track, you will have to follow the proper process which includes giving enough notice. The formal tenancy agreement is put in place to not only protect the tenant, but you as well. As you know each other, you may turn a blind eye if they miss a rental payment or they may even take advantage of the situation and become unreliable with repayments and not care for the property either. This rental agreement is a safety net for both of you in case things go south.
You may find that a property manager will be extremely useful in this situation as they are an outside third party who can handle landlord responsibilities such as conducting inspections, chasing rental repayments and dealing with any conflicts that may arise.
Even though you may know the tenant, you should still treat this agreement the same as you would with any other tenant.