Do you have an investment property that you are thinking about renting out to a member of your family?
If you are a property investor, renting your property to a family member may be the perfect solution for both parties.
Not only does allow you to avoid paying for a property manager and fill your place with people you know, but your family member will also be able to rent the property at a discounted rate.
Of course, like anything, it pays to do due diligence and make sure the situation is right for you and your needs before you dive in with both feet.
1. It pays to consider your financial obligations. You may not realise it, but if you significantly reduce the rent for your family member, this could potentially limit your allowable tax deductions. Know what your expenses are upfront and then work out how much you will need in rent.
2. It might be worth Considering a binding agreement: When you rent out your property to a family member, you may find you relax your general standards or make concessions you wouldn't otherwise make. For example, you may not implement a binding lease or ask for a security deposit to be paid. If you don't make things clear and set out a formal arrangement at the beginning, the situation can end up being incredibly bad if the relationship sours.
3. You should take the time to discuss each party's responsibilities. Generally speaking, landlords are in charge of the property's repair and maintenance. If you do not want this responsibility, it is good to indicate that to your family member.
4. It is important your payment structure is clear and defined. If you want to ensure you receive a constant stream of rental income, outline how much rent you will be charging, how often you expect that rent to be paid and where you would like the rent paid to.
5. It is important to discuss how bills will be split. Will all the utility bills be paid by you as the landlord or will you get your family member to pay these bills? Perhaps you will pay for the water and get your family member to pay for electricity. Having this discussion upfront and deciding who will pay what will help the relationship to run smoothly.