Should I Rent to Friends and Relatives? What to Know as a Landlord

What would you do if your best friend asked to rent your property? Would you say yes, or worry it might ruin your friendship?

Renting out a property can be a profitable and rewarding venture, but it also comes with tough decisions. One of the most common dilemmas landlords face is whether to rent to friends and relatives. On the surface, it may seem convenient, you already know and trust them. But in practice, this arrangement can quickly become complicated, both financially and personally.

With over 15 years of experience in property management across Oklahoma City and nearby metro areas, I’ve seen both sides of this situation play out. Some landlords enjoy smooth, stress-free arrangements when renting to relatives. Others face unpaid rent, strained relationships, or even lawsuits.

In this article, I’ll break down the pros, cons, legal implications, and best practices of renting to friends and family members. By the end, you’ll have a clear picture of whether it’s the right move for your rental property.

Why This Question Matters for Landlords

According to the U.S. Census Bureau, nearly 36% of households are renters, and many landlords are independent property owners rather than large corporations. With so much at stake, mortgage payments, property maintenance, and tenant relations, choosing the right tenant is critical.

When a landlord decides to rent to someone they already know, the stakes get higher. A positive outcome could mean a stress-free rental experience. A negative outcome could damage not just your finances, but also personal relationships you’ve built over the years.

The Potential Advantages of Renting to Friends and Relatives

There are valid reasons why many landlords consider this option:

1. Built-in Trust

You already know your friend or family member’s character. If they have a history of responsibility, paying bills on time, and treating property with care, you may feel more confident renting to them than to a stranger.

2. Faster Tenant Placement

Finding the right tenant can take weeks or months. Renting to someone you know eliminates advertising costs, background checks (though skipping this can be risky), and long vacancy periods.

3. Open Communication

People close to you may feel more comfortable bringing up small repair issues early, which prevents costly damage later. You may also feel more at ease discussing rent increases or lease terms.

4. Lower Risk of Property Damage (in Some Cases)

If your friend or relative cares about your relationship, they might treat your rental better than an unrelated tenant.

The Risks of Renting to Friends and Relatives

Despite the advantages, this arrangement carries unique challenges that landlords need to weigh carefully. The risks of renting to friends or leasing to relatives often outweigh the convenience.

1. Blurred Boundaries

When you mix business with personal relationships, expectations can become unclear. Your tenant may expect special treatment, like late rent forgiveness, no security deposit, or extra leniency on lease violations. These are common issues for a landlord renting to relatives without clear boundaries.

2. Difficulty Enforcing Rules

Imagine needing to evict your cousin for nonpayment of rent. Even if you’re in the right legally, the personal fallout could last for years. Eviction lawsuits involving family members are more common than many think, and they can create lasting rifts.

Example: A landlord in Oklahoma City rented to his brother-in-law. When the tenant fell six months behind on rent, the eviction process created a family divide that lasted years. This is one of the clearest examples of the risks of renting to friends or family members.

3. Loss of Professionalism

When landlords skip formal steps, like credit checks, background screenings, and written leases, because the tenant is a friend or relative, they expose themselves to significant financial risks. If problems arise, it’s harder to rely on legal protections without proper documentation.

4. Family or Social Drama

One bad experience can ripple through a family or friend group. You may find yourself at the center of disputes during holidays or social gatherings, and mutual acquaintances may feel forced to “pick sides.”

5. Financial Risks

According to TransUnion rental screening data, only about 13% of consumers have their rent payments reported to credit agencies, which means many on-time payments go untracked. While this may sound positive, it also highlights the risk: even if you trust your friend or relative, there’s often no reliable credit history tied to rent. If they default, you could face both financial loss and a strained relationship.

Legal Considerations When Renting to Friends and Family

Even when renting to family members or someone you know, all landlord-tenant laws still apply. Skipping legal protections because “it’s family” can backfire. Here’s what you need to know:

1. Written Lease Agreement is Non-Negotiable

Always use a legally binding lease. This is especially critical for a landlord renting to relatives, since skipping paperwork often leads to disputes.

This should include:

• Rent amount and due date
• Security deposit details
• Rules on pets, smoking, or subletting
• Maintenance responsibilities
• Late payment policies

Tip: In Oklahoma, landlords can collect up to the equivalent of one month’s rent as a security deposit.

2. Fair Housing Laws Apply

Under the Fair Housing Act (FHA), landlords cannot discriminate against tenants based on race, religion, sex, disability, familial status, or national origin. Even if you want to prioritize renting to a relative, be cautious not to violate anti-discrimination laws when advertising your rental.

3. Eviction Laws Still Apply

If your friend or family member doesn’t pay rent, you must follow state eviction laws. In Oklahoma, for example, landlords must provide written notice before filing an eviction lawsuit in court. This process applies even if the tenant is a relative.

4. Tax Implications

If you rent to a relative for below-market rent, the IRS may classify the property as a personal residence instead of a rental property. This could limit your ability to deduct expenses like mortgage interest, depreciation, and repairs.

Best Practices If You Decide to Rent to Friends or Relatives

If you choose to go this route, there are steps you can take to protect both your investment and your relationship:

1. Treat Them Like Any Other Tenant

Run a background check, verify income, and collect a security deposit, just as you would with a stranger. This ensures fairness and sets clear expectations.

2. Use a Professional Lease Agreement

Avoid verbal agreements or informal arrangements. A lease formalizes the landlord-tenant relationship and protects both parties.

3. Set Boundaries Early

Make it clear that while you value the personal relationship, you must enforce the same rules as you would with any tenant. This helps prevent misunderstandings later.

4. Communicate in Writing

When possible, keep communications in writing; texts, emails, or official notices, so there’s a record of what was agreed upon. This prevents “he said, she said” disputes.

5. Consider a Property Manager as a Buffer

Hiring a property management company can help preserve personal relationships. If issues arise, the manager handles rent collection, late fees, and even evictions, reducing the direct conflict between you and your friend or relative.

Safer Alternatives to Renting Directly to Family and Friends

If you’re hesitant about renting to family members or close friends but still want to support them, you have several alternatives that avoid the financial and emotional risks of becoming their landlord. These options allow you to help without blurring boundaries.

1. Offer Temporary Housing Instead of a Lease

Instead of signing a long-term rental agreement, consider providing short-term housing. For example, letting them stay in your property for a month or two while they search for another place can give them breathing room without locking you into a landlord-tenant relationship. Be sure to set a clear timeline upfront so expectations don’t drift.

2. Co-Sign on Another Rental

If your friend or relative struggles to qualify for a lease due to credit or income issues, co-signing can be a way to help. In this case, you’re not the landlord; you’re simply providing financial backing. However, be mindful that if they fail to pay rent, you’ll be legally responsible for covering it. This option works best if you have full confidence in their ability to pay, but they just need a boost to get approved.

3. Provide Financial Assistance With Move-In Costs

Sometimes, the biggest hurdle isn’t the rent itself but the upfront costs, security deposit, first month’s rent, or moving expenses. Offering to cover or lend part of these expenses may be less risky than entering a rental agreement. This way, you provide meaningful support while keeping your investment property separate from personal favors.

4. Refer Them to a Property Manager or Trusted Landlord

If you’re in real estate or know other landlords, use your network. Referring your friend or relative to a property manager you trust ensures they still have a safe place to live, but someone else handles the rental relationship. This creates a professional buffer and keeps your role supportive without financial entanglement.

5. Help Them Explore Government or Community Resources

Your friend or family member may qualify for housing assistance programs, rent subsidies, or community aid. Guiding them to these resources can provide a longer-term solution without relying on personal relationships to fill the gap.

6. Consider a Written Support Agreement

If you decide to provide any type of help, whether it’s money, temporary housing, or co-signing, put the terms in writing. Even among friends and family, written agreements prevent misunderstandings and protect relationships.

These safer alternatives give you flexibility: you can still provide meaningful support without taking on the risks of renting to friends and relatives, such as strained relationships, financial loss, or legal headaches.

Expert Opinions on Renting to Friends and Family

• National Association of Residential Property Managers (NARPM) advises against renting to friends and relatives unless landlords use the same professional processes as with other tenants.
• Investopedia notes that personal relationships can cloud judgment and lead to landlords making poor financial decisions.
• Real estate attorneys often caution landlords that evicting a family member is one of the most emotionally difficult cases they handle.

Should You Do It?

Having a relative or friend as a tenant can work under the right conditions and strict professional boundaries: professional agreements, clear boundaries, and mutual respect. But let’s be honest, the risks of renting to family members or close friends are higher than with unrelated tenants. You’re not just managing a property; you’re balancing personal ties, finances, and legal obligations.

So, you must treat it as a business relationship first and a personal relationship second. If you move forward, make sure every step, lease, payment, and communication is handled the same way you would with any other tenant.

Ask yourself these questions before making a decision:

• Can I enforce the lease even if it hurts my personal relationship?
• Am I comfortable saying “no” if my friend or relative asks for special treatment?
• Do I have legal protections in place in case something goes wrong?
• Would hiring a property manager be a better solution to avoid personal conflict?

When in doubt, remember: protecting your investment doesn’t mean you care less about your loved ones; it means you’re safeguarding both your finances and your relationships.

If the answer to any of the questions above is “no,” it may be wiser to avoid renting to people you have close personal ties with.

FAQs About Renting to Friends and Relatives