Renting Your Investment Property to Family or Friends?

Here’s What Landlords Should Consider

Renting your investment property to a family member or friend can seem like an easy arrangement.

You already know and trust them, they need somewhere to live, and you may be able to skip the usual process of finding a tenant. But mixing a personal relationship with a tenancy can bring challenges that aren't always obvious at the beginning.

At D Residential Group, our advice is simple: if someone is renting your property, treat it like a proper tenancy from day one, regardless of your relationship.

Clear expectations and the right processes don't make the arrangement less personal. They can actually help protect the relationship.

The Problem Is Often the Assumptions

When renting to someone you know, it's easy for both sides to assume they're on the same page.

One person may expect some flexibility if rent is late. The other may expect the property to be treated exactly as it would be by any other tenant. A landlord might offer discounted rent without discussing how long the discount will apply, or a tenant might assume repairs and maintenance will be handled differently because of the relationship.

These small assumptions can become much bigger issues once the tenancy is underway.

Conversations about money, property damage, rent increases or ending the tenancy can already be uncomfortable. When you're dealing with a family member or close friend, they can become even more difficult.

That's why it's worth having the potentially awkward conversations before the keys are handed over.

Treat It Like Any Other Tenancy

Even when you know your tenant personally, putting the usual tenancy processes in place can provide clarity for everyone involved.

Have a Written Tenancy Agreement

A written tenancy agreement clearly sets out the terms of the arrangement and gives both parties something to refer back to if circumstances change.

It can cover the rent amount, payment frequency, length of the tenancy and other agreed conditions.

Rather than relying on "we talked about it" six months down the track, both parties know exactly what was agreed from the beginning.

Handle the Bond Properly

If a bond is being charged, it should be handled in accordance with Western Australia's residential tenancy requirements and lodged with the Bond Administrator.

Being related to or friends with your tenant doesn't remove the need to follow the appropriate processes.

Complete a Property Condition Report

"They're family, they'll look after it."

Hopefully they will. But a proper property condition report is still important.

Recording the property's condition at the beginning of the tenancy, supported by clear photographs, creates an agreed reference point for both landlord and tenant.

It removes the need to rely on memory later and can make discussions around the property's condition much more straightforward at the end of the tenancy.

Agree on the Details Before They Move In

Some of the most important conversations are also the easiest to put off.

Rent: Will you charge market rent, offer a discount or allow them to live in the property rent-free? Whatever you decide, agree on the amount, when it is due and how it will be paid.

If you're offering discounted rent, it is also worth being clear about whether that arrangement is ongoing or will be reviewed in the future.

Repairs and maintenance: Make sure everyone understands how maintenance should be reported and how repairs will be arranged. A tenant shouldn't avoid reporting an issue because they don't want to "bother" you, particularly when delaying a repair could cause further damage.

Notice and future plans: Circumstances change. You may eventually want to sell, move into the property or return it to the wider rental market. Your tenant's plans may change too.

Understanding the appropriate notice requirements and discussing expectations early can help avoid a difficult conversation later.

Keep the Landlord and Personal Relationship Separate

This can be one of the hardest parts of renting to someone you know.

When you're their landlord one minute and their friend, sibling, parent or relative the next, the lines can quickly become blurred.

You may feel uncomfortable following up on late rent. They may feel awkward reporting damage. Routine inspections can feel overly formal, and discussions about money can spill over into your personal relationship.

Having a clear process from the beginning helps create some separation between the two.

A Property Manager Can Be the Buffer

You don't necessarily have to choose between renting to someone you know and keeping the relationship separate from the tenancy.

A property manager can manage the tenancy in the same professional way they would with any other tenant, providing a neutral point of contact between both parties.

It means tenancy-related conversations can stay where they belong, rather than becoming part of family dinners, group chats or catch-ups with friends.

For many landlords, that little bit of distance can make the arrangement much easier for everyone involved.

Renting to Someone You Know?

Renting to family or friends can work well, but goodwill shouldn't replace good property management.

Clear expectations, proper documentation and professional processes from the beginning can help protect your property and your personal relationship.

If you're considering renting your Perth investment property to someone you know, D Residential Group can help you put the right processes in place and manage the tenancy professionally from day one.

Contact us today to discuss how we can help manage your investment property and keep the personal and property sides of the relationship separate.