Dear Dave,
I’m 29, and I’m about to buy my first home. My plan is to buy a duplex and rent out the other side to help pay down the mortgage quickly. A good friend, who is like a brother to me, wants to be my renter. But I’m worried this might jeopardize our friendship at some point in the future. What do you think?
Justin
Dear Justin,
Congratulations! Believe it or not, I can still remember how exciting it is when you’re finally able to buy your very first home. I hope the process moves quickly and smoothly for you.
Now, let’s get to the real question, and how your friend plays into things. The kind of arrangement you’re talking about can work. But to be honest, I’m afraid the odds aren’t in your favor. No matter how long you’ve known each other, or how well you get along, you always face the risk of running into a situation that can damage the relationship when you do business with friends.
Listen to this next part very carefully. Does what I just said mean you can never do business with friends? Nope. I do lots of business with friends. But before anything happens, I always make sure the specific requirements and expectations of our relationship are laid out very clearly. In writing. And in your case, I’d start making sure the ground rules are completely understood now. Ensure that he understands he absolutely must come talk to you ahead of time if there’s even a chance, he might be late with the rent. Most problems between a renter and landlord can be worked out if both parties are mature and reasonable. But you’re not running a charity here. This needs to be emphasized in a very firm, but very kind, manner.
The truth is friends sometimes have unrealistic expectations of each other. The friend who is renting may think he’ll get some slack on the payments. The friend who’s the landlord may assume the renter will be a perfect tenant. These are both dangerous assumptions that need to be addressed before anything is signed.
You can make this work, Justin. Just be straightforward and fair. Make sure the rules are completely understood by everyone involved. Then, if you ever have to enforce the rules, do it gently—but firmly.
— Dave
