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Is it a good idea to be a landlord to your friends?

In May, we shared some tips for anyone thinking of becoming a landlord. Many people find themselves with an extra room or a finished basement, but not everyone wants to or is capable of renting that space out. Nonetheless, the practice of taking on a few tenants is increasing in popularity here in New York.

In fact, some people are buying residential property for their own families with an eye toward also taking on renters. As news articles explain, the strategic move is a way to buy nicer properties than they could otherwise afford.

An article in the New York Times discusses the benefits of such a situation, for those who can make it work. In many cases, homeowners can afford a bigger mortgage (allowing them amenities like a yard) because they earn extra income as landlords. Tenants in these situations often get to share in these extra amenities and enjoy having landlords who are easily reachable when they need something. Sometimes, tenants are chosen because they are friends of the property owners.

It should be noted, however, that these ad-hoc landlord-tenant relationships are not always ideal. In the article's comments section, many New Yorkers shared warnings that the transition from friends to landlord-tenant can be very messy for both sides. Tenants may expect that they can pay rent a little late. Landlords may expect that they can drop by unannounced and help themselves to a beer from the fridge.

To be sure, buying a property with plans to live there and to become a small-time landlord can be a very worthwhile investment. However, it is crucial to know what you're getting into and what your rights and responsibilities will be as a landlord. Would-be tenants also need to do their homework to learn about their rights and responsibilities.

As we have mentioned in previous posts, seeking the help of an experienced real estate attorney may be the best way to protect your investment as a property owner, a landlord or a tenant.

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