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Renting To Relatives: What Every Norfolk Landlord Needs to Know

Renting To Relatives: What Every Norfolk Landlord Needs to Know

Renting your Norfolk property to relatives can be a great choice if you've been unable to find reliable tenants for a long time. You might also decide to do so for the sake of helping them if they are struggling to find a good rental unit. Although renting to relatives can be beneficial in terms of having familiar and reliable tenants, it also comes with unique complexities that may become difficult to manage. 

However, regardless of the difficulties, if you still want to rent your Norfolk property to your relatives, here are a few things you should keep in mind.

Benefits of Renting to Relatives

Like every coin has two sides, renting to relatives has its advantages and disadvantages. Let us understand the pros first.

  • Helping Relatives is a Good Gesture

You create goodwill and build strong relationships by helping your relatives, like friends or family members. Also, it feels rewarding when they are ready to pay rent as per market prices. 

  • No Need to Promote Your Property

You need to follow different marketing strategies if you are renting to tenants that you don't personally know. If you decide to allow your relatives on your property though, you don't need to spend on advertising and promoting your home as they have probably visited it before.

  • Your Norfolk Property Remains in Safe Hands

Your relatives tend to take extra care of your property. Plus, they are likely to cooperate better during inspections and keep your property clean and safe.

  • Less Chances of Receiving False Information

While the unknown renters may lie during the tenant screening to qualify the process, your relatives are less likely to provide fake information.

Risks Involved in Renting Your Norfolk Home to Relatives

Along with benefits, you should also consider the disadvantages of renting your Norfolk property to relatives.

  • Relatives Can Be Demanding

Maintaining a professional landlord-tenant relationship with your relatives can be difficult as they might expect you to go the extra mile for them. For example, they might ask you to undercharge them, expect you to treat them like family, treat your property like their own home, or feel okay with bending the terms of the lease agreement. 

  • Increasing Rent Can be Hard

As landlords, you need to focus on increasing your ROI for your Norfolk property. However, while renting your house to relatives, it may become awkward to increase rent as much as you normally would, as high charges can strain your family relationships.

  • Taking Hard Decisions Can Be Tough

Balancing professional and personal relationships is like walking on a tightrope. You have to enforce the necessary rules while leasing a property and nurture your relations with your family members at the same time. Sometimes you need to make harsh decisions that may go against their wishes, which can create tensions between you, especially if it is a case of delayed rent payments or noise complaints from neighbors.

  • They May Not Report Repairs

Tenants are responsible for reporting major repair issues to the landlords. However, your relatives feel uncomfortable bringing bad news to you or may avoid informing you of every minor problem in your property, thus putting the condition of your property at risk.

Tips For Renting to Relatives

Does this mean that renting to relatives is out of the question? Absolutely not. You can definitely consider renting your Norfolk property to your family members, provided you decide and stick to some ground rules. Here are some crucial things you must consider while renting to relatives.

  • Conduct a Thorough Screening Process

You may know everything there is to know about your relatives. Still, you should screen your tenants as part of the process and enquire about their employment, credit score, financial stability, rental history, eviction records, criminal background, and identity.

We would also recommend asking them about the reason for moving out of their previous rental home. You should also be straightforward with respect to the expected duration of the lease and rent price. It will help you avoid further issues. 

  • Avoid Being Too Lenient

Avoid being emotional or too lenient when it comes to making solid decisions. If your relatives/tenants behave inappropriately, misuse the property, or break the lease rules in any way, do not hesitate to express your disappointment. You can offer them a second chance, but if they don't improve their behavior, enforce the lease agreement terms. 

  • Charge Rent Based on the Average Rent Prices in Norfolk

You may reduce the rent slightly while renting to relatives, but financially speaking, that is not going to make a profit for your business. Consider analyzing the current rental market in your area and charge competitively. You can consider offering a discount on rent. However, make sure you don't charge too low, or it might affect tax deductions on your rental property.

  • Have a Comprehensive Lease Agreement 

You are a professional landlord, so establish rules and put on your landlord’s hat. Create a foolproof lease agreement to share your expectations, tenancy rules, monthly rent payment dates, security deposit rules, rental policies, tenants' obligations, and various addenda relating to the property to ensure that you are on the same page.

You can customize your lease as per requirements, but it is crucial to set expectations for your relatives/tenants to comply with the landlord-tenant laws. It makes it easier for them to understand their responsibilities and obligations that you have included in a lease agreement. 

Understand The Tax Rules

Renting to relatives impacts your tax payments on rental income. As a landlord, you need to pay tax on monthly rental income deducting your expenses. However, when you lease your property to blood relatives, it is classified as a personal residence.

You might receive rental income but can't avail of tax deductions for the associated monthly expenses, such as maintenance or insurance. Here are a few things you can do to claim your tax deductions.

  • Charge fair rent prices and keep proof of it with you

  • Avoid offering gifts to your relatives to help them avoid fair-market rent

  • Give a 10% discount on rent while charging to relatives

  • Make sure your rental unit is the principal residence of your relatives

Know Norfolk Eviction Rules

Your relatives may take advantage of your helping nature and might overstay in your rental unit. In such scenarios, you might need to evict them. There is a thorough procedure for evicting your relatives or family members in Virginia. You need to collect information on tenancy and the person you want to evict, send an eviction notice to them, fill out the eviction form and file for a court hearing if your tenants deny leaving the property.

Should You Rent Your Norfolk Property To Your Family Members?

As discussed above, renting to family members can be a lucrative decision for some landlords in terms of earning long-term profit. However, not all can handle familiar tenants when it comes to enforcing leases and maintaining discipline in your rental. Hence, it is good to ask a few questions to yourself before allowing your family members on the property. 

  • Is It Legal to Rent My Norfolk Property to Family Members?

It is not illegal, but you need to be extra careful about mortgage and taxes as the rules are different when renting to family members. It would also help if you had the right mortgage option to rent to a family, as some lenders see higher risks in renting to a family than non-family tenants.

It is not because you don't trust your family about paying rent, but you may charge slightly lower to them, which may affect your monthly rental income and ROI. As you are still subject to responsibilities and obligations like any landlord, it is advisable to discuss the criteria for renting to relatives with professional lenders before making any promises.

  • Can I Offer a Discount to My Family Members?

The primary purpose of renting your property is to earn ROI. If you start offering huge discounts to your relatives, it will reduce your profits. Plus, you may need to pay additional expenses and taxes from your pocket, adversely affecting your monthly cash flow and ROI. 

Also, offering a discount on rent initially and increasing it later can create tension between you and your family members, ruining your relations with them. Hence, we recommend you charge the same rent to your family members as you do to other potential tenants, or at least do not give huge discounts.

  • Can I Evict My Relatives with No Rental Agreement?

An eviction process may be a bit messy for landlords when it comes to evicting relatives. However, the legal procedure remains the same regardless of the family background. If your tenants conduct illegal activities, keep unwanted guests, and damage your property, you can evict them even if you don't have any rental agreement.

Renting to relatives can prove to be a profitable business decision in earning consistent rental income. However, you need to be extra careful and avoid letting your emotions cloud your business decisions. If you are seeking more clarity on the rules of renting to your family members, hire a property management company like Doud Realty Services.

We can assist you in effectively handling your tenants, help you draft a comprehensive lease agreement, and conduct an in-depth screening process to ensure that the arrangement is suitable for you and your tenants.

For more information, contact us at Doud Realty Services.