Dear Dave,
I’m about to buy my first home. My plan is to buy a duplex and rent out the other side to help pay down the mortgage quickly. A friend of mine wants to be my renter, but I’m worried that this could jeopardize our friendship. What do you think?
Jerry
Dear Jerry,
This can work, but the odds aren’t in your favor. When you do business with friends you always face the risk of running into a situation that can damage the relationship.
Does this mean you can never do business with friends? Of course not. I do a lot of business with friends. But I make sure that the specific requirements of our relationship are laid out very clearly, in writing.
It would be a good idea to make sure he understands that he absolutely must come talk to you ahead of time if there’s even a chance that he might not make the rent one month. Most problems can be worked out, but you’re not running a charity. This needs to be emphasized in a kind-but-firm manner.
Sometimes friends have unrealistic expectations on both sides. The friend who is renting may think he’ll get some slack on the payments, or the friend who’s the landlord may assume the renter will be a model tenant. These dangerous myths need to be addressed and ironed out before anything is signed.
You can make it work, Jerry. Just be straightforward, and make sure the rules are understood by everyone involved. Then, when you have to enforce the rules, do it gently but firmly.
—Dave
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