Friends, family and business
I was talking to a landlord recently who had been put through the wringer by her tenants. You see, she had bought a freshly remodeled, four bedroom, 2 1/2 bath, 2,000-square-foot home and paid retail price for it.
Now, this landlord was not a hedge fund, and she was not a high roller looking to put lazy money to work. She was just a very kind lady trying to help some friends who she felt were like family.
The tenants were on the mend from making some poor life decisions, and this landlord was trying to give them a fresh start. She had befriended them, and before long, she was babysitting and totally fell in love with the children. And with that love in her heart, she decided to buy a place for them to call home.
Her intent was not to allow the tenants to just rent the house. She wanted them to be able to buy it from her in the future. She even told me she would have been willing to owner finance it to them.
She purchased the home at the beginning of this year, and when I was talking to her this week, she was in the middle of filing for dispossessory … and her heart was broken.
You see, the “friends” had decided to spend their money on things like taking trips to the mountains rather than paying their rent. They had also done damage to the home and were incapable of fixing it themselves and were not willing to be present when contractors showed up. This added such stress to the landlord’s life that she finally had enough and started the eviction process.
She told me the money was not what bothered her. It was the fact that people she counted as family were willing to take such advantage of her that stung so much.
I hate it that she had to go through this. But she is not alone. I know lots of people who have put themselves out to help friends and family only to get left holding the bag.
Personally, I have not had great success doing business with friends. One time, Ashley and I let a friend’s fiancé move into our house. It was only a few months, but it was a disaster that hurt our friendship.
I did have success renting to a friend one time after that. But I set it up very carefully. First, I did not treat my friend any differently than I would another applicant. We put him through the entire application process — including the in-home interview.
During that interview, I introduced the four jobs of a tenant. And just to remind you, the four jobs are: 1. Take care of the house. 2. Pay on time. 3. Be comfortable to work with by staying in good communication and being respectful. 4. Be a good neighbor.
But I took it one step further. I told him that when he and I signed a lease, we were going to agree to somethings. Basically, he was going to agree to do the four jobs of the tenant, and I was going to take good care of him and maintain the house. But we were also agreeing that if he did not perform those jobs, that I would have to ask him to leave and that would include getting the courts involved if necessary.
At this point, I looked him in the eyes and said, “I very much value our relationship. Now, I’m going to do everything I promised … everything! But if this goes sideways, and our friendship gets hurt, it will not be from me not doing something I promised. You have to do the four jobs — just like all my other tenants.” He understood and agreed, and we rented him the house. And he lived there for four years and left on good terms.
I guess my takeaway from that experience is that if you’re going to do business with friends and family, you have to set things up like you’re doing business from the beginning and not just being friendly. Things have to be set in stone to make sure you manage and meet expectations. And if you do that, you will have a better success rate.
Joe and Ashley English buy houses and mobile homes in Northwest Georgia. For more information or to ask a question, go to www.cashflowwithjoe.com or call Joe at 678-986-6813.