Have you ever thought about renting to your relatives? It’s a great way to get wonderful tenants you already know.
Of course, renting is still a business agreement – even if your tenant is your college-age child or your retired in-laws.
As with every business agreement, this rental requires a clear understanding of what is and isn’t permitted by law. So set down the ground rules, then you can relax.
The Core to a Safe Rental Strategy
Here’s a good tip to remember when renting to relatives (it will help you escape the rental triple whammy): Charge a well-documented and market-supported fair rent to your relatives.
That way, your rental property will not get misconstrued as a second home.
Here are a few ways to prove the rent you charge is fair:
Print listings for similar rentals in the same neighborhood from craigslist.com
Cut out comparable rental ads from local newspaper want ads
Get letters from property managers
Obtain an independent appraisal
Get the Whole Picture
There are many more best practices for renting to relatives. To get all the details, read the whole article: Tax Savings Tips When Renting to Relatives. (Plus, get great tips for what to do with a vacation rental).
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To recap: Be sure to charge your relatives fair rent. Keep your relationship in good standing and your tax deductions on solid ground.