Preserving the Friendship
by Dave Ramsey

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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. How do you feel about this kind of thing?

Jerry

Dear Jerry,

This can work, but the odds aren’t in your favor. You need to be really careful. 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 has to 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’s 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 this work, Jerry. Just be straightforward, and make absolutely sure the rules are understood by everyone involved. Then, when you have to, enforce them!

– Dave

Comments on this article	ADD COMMENT
Doing business with friends and relatives. Posted by Linda Anne from Taylorsville, UT We have had the experience of renting a house to firends as well as the experience of selling cars to relatives, always resulting in problems with the relationship with the friend or relative involved. We have learned not to do business (rent a house or sell a car) to a friend or relative.
Make sure things are in writting Posted by Tracy from Minnesota In addition to the advice given, make sure your agreement is in writing including rules of upkeep, entry, repairs, security deposit, noise and party rules, etc, etc. Just because it's a friend doesn't mean you don't need a good written rental agreement in case problems occur later.
Just another thought Posted by Kathy from Maine Sometimes folks who rent from friends may have the perception that they are doing their friend a favor by renting from them providing an income for their friends and since they are doing that, they may also think their friend "owes" them somehow. A healthy relationship allows for both sides to be clear on the deal and stick to it.