We rented a home many years ago to a friend. Turned into a nightmare. Rented my mother's house across country to a family of strangers, they were dream tenants. You never know.

The first house that my husband and I owned together was in Lake Forest (south Orange County), California. We loved that house. When hubs first went to work for the State, we had to move, so we leased out the house.

Suffice it to say that we will never, ever, lease/rent a home that holds any emotional value to us, or that we ever plan on living in after tenants move out. Ever.

Yes, we have two corner houses on one lot but they don't look like they belong together. We lived in one and rented out the other for about seven years. Then we moved 1 1/2 hours away. I hate being a landlord. The new tenant has to be constantly reminded about the rent (and she was really screened well). You are on the hook if anything breaks so need to charge enough to build a cash reserve from the rental income. You will also pay taxes on the income. The only reason we didn't sell was that property prices were down in the area (kind of oil country). As soon as the prices rebound, the for sale sign is going up! I console myself that at least the equity is (hopefully) increasing on someone else's dime.

DH does some HVAC work for a man who owns about 45 rent houses.

Some of the stories he comes home and tells me are absolutely unbelievable. We used to think we wanted to invest in rental income after we retired. We changed our minds.

Been there done that. Never again.

Are you a handy person? Somebody has to fix things that are broken; if you can't, you'll have to hire someone. It's a neverending PITA. You might get lucky and have a good tenant, but you might not.

We have had rental property for 30 years. I have always handled the interviews and have been very fortunate to have had great tenants. We live next door to these 3 properties. It has been a good source of extra income and investment is maintaining value or increasing. We tell renters to report little problems so they do not get of of hand. We do upgrades to improve the value and let tenant know we appreciate a good tenant . It is not a one way romance. If you feel you need to take every penny out and not spend unless necessary. Probably will be a big headache. I think being far away would be very difficut to have it be a good experience. I have always discussed how many people in their family. They are named in the lease. I tell them no one else may stay there more then one night without approval. I know I really can't enforce that. But it lets them know it is not acceptable. If that was going to be an issue, they don't bother considering my rental.

Lot of pros some cons.

My parents rented for years. Suffice it to say, I'd never get involved in a rental property. You only make money if the rental market is extremely tight so you can more than cover your costs by a lot, or if house prices are rising. Also that you use your own sweat equity and do your own repairs. Any profit can easily be eaten up by maintenance costs. But those repairs can be a real pain. People can be real pigs (scraping tomato seeds off the walls...a tenant whose idea of cleaning up after her cat poohed on the floor was simply covering it with a sheet of paper towel!)

A good tenant is worth their weight in gold. A bad tenant can be a nightmare. My brother rented to a fellow and unbeknownst to him, he moved in his girlfriend. He later moved out breaking the lease, but she wouldn't leave. She went to court and all she had to do to establish residency there was show the court a piece of mail with her name and that address on it. It took him months to evict her, even though she never was on the lease.

There are some basic things you need to understand too, like make sure you take pictures of the property before they move in and after they move out so you can prove in court why you need to keep their security deposit.

Make sure you screen your tenants with references from other landlords and income proof.

Understand that you can say what you want with the tenant, but the only enforceable terms are those that are written in the lease, signed by both parties, and that cannot be modified orally.

Also make sure you put in your contract a minimum amount of costs for repairs that the tenant is responsible for...so you don't get calls like my Dad did. One was from a tenant who complained the light in the refrigerator wouldn't come on. So he had to go there and tighten up the bulb! Another tenant complained that the oven was smoking, so he went over there and informed her that she had to clean it if she didn't want it to smoke!

Frankly, I think it's a lot easier to take that same money and invest it in the market where it requires no more care than to glance at a statement every so often. And depending on the area you're in, potentially a lot more profitable.

Renting to friends is a good way to spoil a friendship. It's not a good idea to become friends with existing tenants either.

The costs are not just mortgage,taxes and fees. There are insurance costs including an good umbrella coverage for liability. There are maintenance costs and whatever breaks or needs replacing is on your dime. Landlord/tenant laws are more and more favoring the tenants these days. Not only do you have a very short window to fix or replace things that are reported broken you also have to respect the tenants privacy so checking on your own property to be sure things are being kept up is not as easy as it once was.

The eviction process can also be a nightmare. Watch the movie Pacific Heights. It may be billed as fiction but many a landlord will tell you it is quite close to reality.

If you rent below market value the IRS will consider it a personal residence and you will lose your ability to take available deductions on rental property.

We own condo rentals occupied by senior citizens who are dream tenants. It's all about the quality of the tenant.

It's a great, profitable retirement plan for us.

Keep your rental business separate from your personal life by setting up a property management small business, LLC, etc.

I don't think this is a good plan. I know you want to be generous, but this is *business*. In my experience, people are not only not grateful for such help, but will resent you for having the ability to bestow favor.

My late mother, a real estate broker, bought two properties that she rented. One was an old farmhouse that she bought for the land value. One, she sold on a buy-to-rent contract. She only wanted to cover her expenses on the farmhouse andhe tenant was responsible for all 'fixes'. (The place was barely habitable.) I have tales of the nutcases that rented that house -- including one woman who tried to commit suicide in it rather than be evicted. It did turn a handsome profit when it sold to a developer.

DH and I own a 1BR 2Bath condo on Maui. A vacation rental agency manages it, although we book most guests and use it ourselves in winter. I'd never do this without the agency. Rents help carry it, and we have 'a sure thing' to enjoy ourselves in winter. The money invested would have made more in a stock fund, but this works for us. The complex is upscale and doesn't attract the Party Hearty people; we've had minimal damage.

A friend of mine did the rental thing in the 80s, when house prices were rising nicely...he figured it out and he'd have made a lot more money had he kept the cash in the stock of the firm he was working for...even then. Now with housing as soft as it is in so many areas, it'd be a real stretch.

My sister in law rents houses for a living! Her father does too as well as her 2 brothers and 1 sister. They have their share of headaches but it's a job and one they do very well.

I think this is a bad idea. Owning and renting property is a business. You need to do your homework and understand what it costs to properly maintain property. Is your whole rational for investing because your friend would be a tenant? Not good, you could lose your friend and a lot of money. Friends are friends and investments are investments.

If you want to invest in rental property, do your homework. Read a few books and join and online landlord community like bigger pockets. https://www.biggerpockets.com/

Learn how to compute CAP rates, understand vacancies, and property managers. This is not something you should causally get into. Condos are usually not priced right for investors. The individual owner market usually keeps the prices up far above above what an investor would be willing to pay. Tri[plexs and quads start to get into the realm of investment grade numbers.

I use Frank Gallinelli's software and recommend all of his books.

https://www.realdata.com/

His books are linked under one of those dropdowns. Be warned, lots of math.

I agree with what everyone said...in your case...don't do it...for all the above reasons mentioned.

We own a LLC, rental & flip.

Agree with what everyone has said so far. Don't be a landlord just because it is for a friend. And don't skimp on the rental payments just because it is for a friend. There is a lot more involved in owning rental property than just paying the mortgage, taxes, etc.

You need to ensure you have a deposit (first and last months rent are usual in many markets) to cover any damages. You need to specify the deposits will be non-refundable if there is any damage to the property upon departure of tenant or upon early termination of lease. This will also cover any professional cleaning, painting, etc that WILL need to be done when the tenant moves out.

Know your market. Is the condo re-saleable at the current market value? Are property values stable, on the increase/decline? If so, you may not be getting such a deal, even figuring out the depreciation you can claim, which is now much more spread out over the years than it was many years ago.

Who pays the association fees? Are you passing that on to the tenant?

You also need a very good lease. You should specify what dollar amount you (the lessor) is willing to pay for. In other words, do you want your tenant to call you to change a burned out light bulb? Minor repairs (up to say $25) should be their responsibility. Pick an amount you are comfortable with that would fall in the category of routine maintenance.

My husband and I have owned rental properties in the past and they were a source of more income and a way to increase our assets which were then sold as we got older. Yes, it's a gamble to some degree so you need a contract signed for each person. I will tell you there are out of pocket costs that could set back the value of the place but, being a condo, it should be up to date. I would have no hesitancy doing it. I'd advise you to charge more than just what you have to pay as there are always times when something breaks and it comes out of your pocket. The negative side is that the rent receipts have to be included in your income tax return so it could put you in a different tax bracket but then you also can deduct any costs from that. I've had good tenants and two horrible ones, one that relet the place to a rock group who painted all the walls black and they were sending the rent to my tenant who had moved to Greece. Had to get the law in on that one. I have rented to friends and never once had a problem with them. We're still friends. Just be smart and get a good air tight contract and you're fine.

I see Outside was typing the same time as me, her advise is stellar.

It's the "renting to a friend" part that would worry me.

Before going on to my thoughts about real estate as an investment, my view is that your idea isn't a good one. Keep friends by staying just friends, business and investments are better done with strangers.

As for real estate investments:

-I tried it once, it became a second job (admittedly one with limited hours) but at a time when I already had an engrossing job and didn't need another time commitment.

-If you're a warm-hearted person who thinks there's good in everyone, become a landlord, it will change your mind.

-In my area, rental rates are sky high but purchase prices are worse and getting worse. You can't buy property and cover costs with rents, unless you're willing to buy run down properties in bad neighborhoods and charge unconscionable rents. Assume you will lose money on both a cash flow basis and on an accounting basis.

-Tax deductions, which aren't allowed for many people, don't cover losses unless you're in a 100% tax bracket (which nobody is). Losses are losses.

-Value increases aren't a sure thing. Ask people who bought properties before the 2008 meltdown how their real estate investments did. Some still haven't recovered their equity and many lost it. Same is true for those who bought before the meltdown before that.

Been there, done that, got the t-shirt and the financial scars to prove it. No way would I ever again rent out any property I own. I'd walk away and let it go into foreclosure and ruin my credit before I'd rent to anyone - even and *especially* a friend.

This thread started me thinking...I used to work with a guy who slept on the couch in his 1 bedroom condo, so his room mate, whose rent paid the mortgage, had his own bedroom. Essentially this guy had a free place to live. In certain instances it could work...just that....I'd NEVER do it.

So......ask yourself...."Would you rent a room in your own home to this "friend?" If the answer is no....then there's your answer.

We're going over to our rentals with sprinkler systems 2-nite to blow them out. Forecast is for freezing. The renter whose a nurse married to a pilot has an aunt who stages model homes. She staged mine.....it's drop dead GORGEOUS! Then there's the radiologist who needs to live near the hospital he works at and nothing "exceptional" was available except MY rental....:0) There's more, I'll bore you another time...

Yeah....I like my renters.....a lot. They're good people. Ask me in a few years and I may answer differently as the market changes....

I recently sold all my rental property, and then more recently bought more. I believe that the success or failure of income property is determined by the owner.

First, and most importantly, despite what the IRS says, being a landlord is not passive income. Owning rental property is about turning your extra time or your skills into income. These skills can be something as simple as persistent attention to detail, or hard skills like being a licensed contractor, or they can be a lot of extra time.

Second, it is tempting to look at income properties as cash flows, that is not a good idea. Rental property should not be an effort to collect money in excess of payments + taxes + insurance + maintenance. You should always keep an eye on your net position, if it helps you can think of this as the excess rental payments plus equity increases.

My general attitude on tenants is to be the best landlord possible and good renters will find their way to you. On a couple of occasions I have rented to friends for one reason or another. I will not collect money from friends ever, so I contracted out to a property management company on those occasions.

While I too am generally against mixing friends and money, if you end up going through with this idea, protect your friendship and your investment by considering all the ways it can go bad and counter as many of them as possible in the beginning. Every ambiguity is a potential problem so eliminate them all before you start.

Asking for enough rent to only cover mortgage, taxes and fees will get you in trouble. You need to have enough coming your way that you can stockpile for repairs. (Appliances break, houses need upkeep.)

Wow. Thank you so much for all of the honest responses and thoughtful feedback. They were all very insightful and several really, really gave me pause for thought. I have reconsidered and will try to help my friend in other ways that are less likely to ruin a friendship. I am always glad for a movie recommendation--will be watching Pacific Heights this weekend and will be happy to know I am not a landlord!

It would have to be word of mouth.

Glad to hear you reconsidered. What I haven't seen mentioned but is an important consideration is every state is different on landlord/tenant interaction. Friends quickly become enemies in a rental situation. I'll never rent again. I might buy rental property if I can afford a management company to handle everything but that's not too likely either. There's times it can take up to a year (or more) to evict someone. There's a lot of red tape if you're not prepared. A friend manages rental complexes (and she handled Cabrini-Green in Chicago for a while) and to hear the stories she tells it's nearly unbelievable. She instituted a drug clause in her contracts so whenever there was an arrest on the premises they were automatically evicted. That solved a lot of problems for her. Other friends with rental property alway use the first and last months rent and security deposit was 1-2 times the monthly rent. Detailed background checks but that doesn't always keep the riff-raff out either.

We own a rental property that is on the other side of the country in a highly sought after market. It has gone well the last 16 years. The tenants have done many unsavory things such as, move out and leave their unwanted items on the curb, repaint, somehow our fence was taken down, had custom shelving built into the closets, and one couple sublet the home without telling us. All of these things were BIG surprises. Overall though it has been a good investment. I would NEVER rent to a relative or friend, as this property is business to our family. I wouldn't have embarked on this adventure if the market we are renting in wasn't so sought after. The last time we listed the house we had 11 applicants in 24 hours all with good credit. We choose a wealthy couple that wanted the house as their crash pad when visiting family they have in the area. They signed the lease in June and have yet to move in, but they pay on time every month. I would LOVE to sell the house, but I don't want to pay capital gains tax. You definitely need a cushion as A LOT of repairs will come up. Good luck!

bry911.....I get what your saying. I've always said I charge too much for my rentals and they're worth it! I do whole house remodels and up scale the properties so the tenant is getting a LOT for their money. Last April, I had 100 responses to an available property. The market is hot here, but THAT was ridiculous! :0) I also respond immediately to renters requests. Last night DH & I blew out sprinkler systems and took a screen door home to rescreen. 2-nite we'll return the screen. It was damaged by their chocolate lab, the $500 each pet deposit more than covers that. :0) ($250 ea is non-refundable, this tenant has 3 pets). I think I charge enough to be able to cover rescreening for free while the tenant lives there.....:0) I consider myself a good landlord and genuinely like the tenants. The property they live in is very well cared for. Very clean, lawn is perfectly green....

I don't consider myself a landlord, I'm a property manager. The rentals are there to generate a profit, which is taxable. Who cares? I love paying taxes. It means I'm making money!

I sincerely appreciate the tenants, respect them and they respect me. They never complain about high rent. If you live in this town, this county, you share the high cost of living like every one else.

If you're looking for a write-offs, you're better off with a newspaper route.

We have 4 old small 1 bedroom houses and our last home as rentals. You have to deal with non payment of rent to major repairs at times, but we are used to dealing with various issues. It is not for everybody.

I would never buy a home to rent to a friend! What do you do when they decide they can't pay their rent this month or the next...you are her friend, you'll understand...right? HA! What do you do when she decides to move out? Let her find her own place to rent, it's simple enough to rent an apartment!