You’ve likely heard renting to family is a bad idea. But it may be unavoidable in certain situations.  For example, let’s say you inherit a home that was already being rented by your family to other relatives. Now you’re put in an awkward position of becoming a landlord to your family member or possibly selling the property and having to kick them out of the house.  It may not be the ideal scenario, but that doesn’t mean it’s impossible to establish a landlord/tenant relationship with your relative. With some planning and initiative, you should be able to proceed with caution and even enjoy being able to help out your family member. Here’s what to do when you are renting inherited property to your family and how to manage this unique business transaction without causing tension.

Establish a Landlord/Tenant Relationship

There should be no question that you are the landlord and your relative is the tenant. As such, you should start off on the right foot with a rental agreement. This legal document creates a mutual understanding of the rules and boundaries between lessors and lessees.  A rental agreement lays out all the details of occupancy limits, security deposits, right of entry, potential disturbances, etc. It allows you to build a proper framework and foundation from the beginning to avoid possible conflict down the road.  Some terms to consider putting in your rental agreement include: 
  • Names of all family members who will occupy the home
  • Occupancy limits that state who is allowed to live in the home
  • Rental or lease term (month-to-month or long-term)
  • Amount of rent, due date, and acceptable forms of payment, as well as a grace period, late-payment fees, and returned check charges
  • Security deposits and non-refundable fees, such as pet and cleaning fees
  • Right of entry: when and why you may be allowed to access to the home
  • Rules for potential disturbances such as excessive noise, unwanted guests, pet issues, and illegal activities
  • Repair and maintenance rules and responsibilities to keep the home in good condition
If you feel uncomfortable asking your relative to sign a rental agreement, just remember that those few minutes of uneasiness will protect both you and your family member—and possibly save your relationship.

Fulfill Your Duties as a Landlord

Now that the rental agreement is in place, you must hold up your end of the bargain as the landlord. You should make any necessary repairs promptly if you are responsible for maintenance. Most leases require the property to be “safe and habitable,” so it’s important to make sure the home is structurally sound, sanitary, and meets the required safety codes. As the landlord, you need to ensure property taxes and insurance premiums are paid on time. If you have a mortgage, your lender will likely require you to have certain types of insurance in case of fire, flood, or accidents. You should also inform your tenant that your insurance does not cover their belongings and advise them to get renter’s insurance. Another responsibility as a landlord is to hold your tenant accountable for making payments on time and respecting your property. If you make allowances or let things slip, you are enabling them to expect special treatment because they’re a relative. Our Tip: If you want to avoid the hassle of renting to a family member altogether, and you’re in a position to sell the inherited property, consider working with a cash buyer. They can take the home off your hands, contents and all, so you don’t have to put a potential strain on a relationship with a family member. 

Treat Your Relative Like a Tenant 

What goes on in your relationship as a landlord and a tenant should stay private and only be discussed by you and your relative. You should not talk about the details of your rental agreement with other members of the family. You must not reveal your relative’s personal and financial information to anyone else.  You need to avoid taking any liberties with your relative that you wouldn’t take with any other tenant, such as not requiring a security deposit. If you think you may have difficulty enforcing aspects of your lease agreement, hiring a property manager as a mediator might be a good idea.

What to Do When You’re Renting Inherited Property to Family

Now you know what to do when you rent an inherited property to a family member including the best practices to make the situation work out for both parties. It all starts with a lease. If you don’t have one, you have no leverage in any conflict that may arise. If you establish a landlord/tenant relationship from the beginning, you’re less likely to run into misunderstandings and other issues in the future. Again, if you want to avoid the hassle of renting to a family member altogether, and you might consider selling the inherited property. Consider working with a cash buyer, such as New Again Houses®.