Sell house and rent from friend?

[twodanes]

We (SO & I) want to sell for several reasons but basically over the past 12 years we’ve discovered that we just don’t enjoy home ownership. The constant repairs and maintenance, lawn care, snow removal, etc. just aren’t our cup of tea. We do enjoy our privacy and our house is currently sitting on a secluded 2 acres so we’re hesitant to go straight to apartment living. We also have a giant breed dog so most apartments won’t even consider renting to us anyway.

So, we’re thinking about moving into a friends basement. The basement is currently an unfinished 1500 square feet with a separate entrance and the plan is to finish it into a 2 bedroom with 1.5 baths and a large open kitchen/living area. SO and I do not need a lot of space and don’t like clutter so we don’t have a lot of stuff. Rent would be set at $1200 per month and include all utilities and cable. We would need to agree to a 3 year lease as friend does not want to put the money out to finish the space unless we commit to a set time period so he can recoup his outlay since he wouldn’t be finishing the basement otherwise.

We’ve rehabbed properties with this friend before so we’ve mixed the personal/business relationship several times and already have a history of dealing with disagreements without throwing the friendship out the window so I’m not concerned that he’ll be our landlord and a friend. This scenario will save us a boatload of cash. Currently our housing costs are 36% of our net income. If we rent from friend our housing costs will drop to 17.5% of net income.

So in the attempt to simplify our lives and reduce housing costs is this potentially a good idea or is it full of red flags?

[whoisjohngalt]

Bad bad bad idea. Even if you mixed personal/business before, living together, and yes, you will be living together is on a whole new level.

Lena

[NomoreDramaQ1015]

Agree with Lena. Business vs actually living under the same roof are two TOTALLY different things.

The grass is always greener on the other side.

[Opti]

Have you ever taken vacations together? If you have and its gone well you might be OK. If not, have you discussed the arrangement in detail? It could work out well or go horribly wrong and with the three year lease you don't have much wiggle room if it turns out this isn't a good idea.

If you decide to do it see if you can write the lease so that you could sublet or find tenants they could live with if three years doesn't work for you.

[cronewitch]

Just say no thank you.


The landlord tenant relationship is bad enough without mixing friendship, large dog and desire for privacy. They would be laying out money to get you in then if anything goes wrong would you feel right about asking them to fix it? What if they can't afford or don't want to spend the money to fix it? What if your dog does something to bother them like barking, digging, biting, causing allergies and you need to kennel it, who pays for the kennel?

They aren't used to being landlords or having people in the basement especially friends. Will you see each other socially more out of obligation? Parking can be an issue too.

[2kids10horses]

No.

It might not even be legal. They're turning a single family residence into a duplex. Is it zoned for that?

For $1200/mo you probably can find a house to rent.

You'd still have to remove the snow and mow the grass, but if the water heater blows up, you're not responsible for that.

[whoisjohngalt]

Tbird, you are way too optimistic. I give it 5-6 months.

Months 1-2 - everyone is excited - honeymoon period
Months 3-4 - all those little annoying things will start to pop-up
Month 5 - all those little annoying things become "are you kidding me, no freaking way" things
Month 6 - major blow out.

I could be wrong. I've been wrong before

Lena

[whoisjohngalt]

And one more thing - 3 yrs is a long lease to sign with someone else. What if you and your boyfriend break up? Or one of you gets a job in China? Whatever the reason, breaking lease with a "regular" landlord is one thing, breaking a lease with a friend can be very very different.

Lena

[debtheaven]

Three years sounds WAY too long to me. Which is ironic coming from me, because three-year leases are standard here in France. BUT, since this is a very tenant-friendly place, the TENANT can break the lease before three years (with three months' notice), but the LANDLORD cannot.

I don't like your friend's reasoning. He is finishing the basement because he has decided it would be a good money-maker for him. Fine. But if he can make money renting that apt to you, he can also make money renting it to somebody else. Maybe even for higher rent. Either he wants a tenant for extra income, or he doesn't. You're visibly not a charity case. He shouldn't tie his decision exclusively to you, and you shouldn't tie yours to him either.

If I were you (since you seem to want to do this) I would suggest doing it for a year. (If I were me, I'd do as 2kids suggests and rent a smaller house with much less land). But I would NEVER make a three-year commitment, no way.

ETA: Another thought: since you two and your friend have rehabbed things together in the past, are you and your DH going to help him rehab this space, and then have to pay him rent for the fruit of your own labor?!

Just something else to consider.

[zibazinski]

Can you even sell your place?

[phil5185]

How about a Condo or a Townhouse? Wouldn't that meet your needs w/o the 'cons'?
The interior is yours - so the dogs are your call, not the landlords. And all exterior stuff is handled for you - lawn, snow, etc.

[Opti]

The giant breed dog is a limiting factor. I'd be surprised if any condo or townhome association is OK with large dogs.

Have you considered selling the house and downsizing to a smaller one with a smaller lot? If you save enough money perhaps you could afford a service to take care of all the lawn maintenance and maybe even plowing your driveway.

[twodanes]

Hi All. I appreciate the feedback. This is an idea that we’ve been kicking around for about 2 years so we’ve considered it from many different angles and talked about lots of the pitfalls – such as many of the things that have been mentioned so far. I didn’t mention them because I didn’t want my original post to drone on and on about all the bases we’ve already covered. I was really looking for everyone’s initial knee jerk reaction and I think we can safely say “Mission Accomplished!”

To answer some of the questions asked:

@ Optimist, We’ve taken several long weekend trips together that have gone well but never a full week long vacation. I do like the subletting idea.

@ Crone, definitely some good thoughts that we haven’t talked about since we’ve just been thinking it’s a new space. But we should know by now that new doesn’t necessarily mean there won’t be any issues. We’re not too concerned about the dog issues though. He’s nearly 11 and not very mobile so we don’t have to worry about digging or destruction. He’s not much of a barker either but again good thoughts.

@2kids, Our friend’s neighbor went through the township a few years ago to add an in-law suite in the garage and it was OK. But this would definitely have to be checked out if we were to proceed.

@ Debt, We would not be involved in the finishing of the basement so we wouldn’t be providing free labor and then paying rent on top of that! We’re looking to rent because we’re too lazy to want to work on our own house, there’s no way we’d volunteer to do the work on this one!

@whois, I’m not concerned about SO and I breaking up. We’re hitting the 20 year mark together this year. I know this has always been a hot topic on ‘Your Money’ but our assets are and have been co-mingled for most of those 20 years. Fortunately the set up has worked very well for us. I know better than to say ‘it’ll never happen’ but even if we ended up separating we would both need a place to live. One of us would stay and the other would find a new rental, which would be what we’d have to do if we separated while in our house.

@zib, We’re pretty confident we could sell our house. We have a decent amount of equity so we can be pretty flexible with the price. At the height of the market it was appraised at $325K, I think now we could probably get $250K and we owe $70K on the mortgage.

@phil, We’ve tossed around the idea of a condo or townhouse but we’re pretty turned off by the idea of an HOA. We also don’t like compact neighborhoods, which I realize limits our options. In the end we may end up doing something like this if the laziness truly wins out.

@pat, Since we’ve already rehabbed some properties with friend we know he’s a perfectionist so aren’t too concerned about a sloppy finish. I honestly don’t know that he has it in him to do poor work. He’s single with no kids and not a big partier so noise shouldn’t be an issue. I would hope that I’m well adjusted enough that if he had a party and didn’t invite me I wouldn’t care. 


Obviously the consensus is overwhelmingly against this from a personal standpoint. I figure if we haven’t ruined the friendship after all these years and several projects together maybe we aren’t trying hard enough? Maybe this venture will really seal the deal. ;-) Really, I imagine this will be one of those pie in the sky ideas that we pull out and think about whenever we’re too lazy to clean out the gutters or when the next big repair comes up. It’s fun to think of all the extra cash we would have to spend on wine and beer if our housing costs were cut in half!

I am open to other suggestions for reducing housing costs without moving into our friend’s basement. Phil threw out the condo/townhouse idea, any others?

[cronewitch]

When you rent a house you still have to mow the lawn. If you rent part of someone else's house it doesn't mean they won't expect you to do any yard work.

When I lived alone in a house I had to do all the yard work. My boyfriend moved in and I didn't ask him to do any yard work. I worked days, he worked swing so I did yard work while he was at work. Weekends we went fishing. When he was home and I was working he didn't do any chores, but I hadn't asked him.

One day he was talking to a friend and the friend was saying if he waited long enough his wife would mow the lawn. He said he rented so didn't have to mow. When we left I explained when you live in a house you have to do yard work. He was renting a house when I met him and had to mow, landlords don't mow for tenants most of the time.

You really need to define carefully what is covered in the rent. Also MIL apartments are for Mothers' in law or other blood relative not as rental units where I live.

It could work or might not but I wouldn't risk it. My mom lives in my brother's house and it seems to be working. She has her own rooms and doesn't go in their part of the house hardly ever. She has been a good MIL for 42 years and they understand the dynamics. They own the house and hire out the yard and house work, mom wasn't expected to contibute at all except to pay them room and board.

Even that has some odd little things they probably didn't really think of. Mom was invited to a pot luck party they aren't going to. They provide all her food and do all her cooking. I am going to the pot luck with mom and told her what I wanted to bring thinking two people taking one dish was enough. SIL said don't worry I will make you something to take to mom. Seems to me that wouldn't be included in her rent and she should provide the food she wants to take. Mom has company when they aren't home and they leave her a meal to serve her company. So they are thinking all her food to eat or serve or take places is included in the rent. Mom still probably feels like she should be buying food. I take her to Costco or something and she buys food she knows they like and food she likes, should they reimburse sense they are to pay for food?

It would be very easy to have hurt feeling or misunderstandings about cost when living under the same roof.

I would personally buy a place with a large fenced yard and make it a rectangle of grass, no flowerbeds or gardens so you only need mowing as yard care, hire a kid to mow and be done with it. My grandmother paid to have her's mowed about 25 years and did away with all flower beds when she was too old to weed. That is my plan for when I am old or a yard that is a forest floor of pine needles and a brick house with a roof that doesn't get moss and gutters that don't need cleaned. Very easy to maintain a house like that.

[Peace77]

One more thing to consider: Have you been in the basement when someone is walking around upstairs?
Many homes are quite noisy in the basement. I was recently in a basement apartment and could hear the family upstairs walking around and arguing.

[8 Bit WWBG]

Its the 3 year lease that adds far too much risk. I think if you could do a 1 year, it would be worth trying. I understand his reasoning for wanting that commitment, although as was said, there are probably other tenants to be had.

Maybe you should move into his unfinished basement for a week or two just to see how it goes. I know that sounds kind of stupid, but you don't buy shoes without trying them on either.

[NomoreDramaQ1015]

I figure if we haven’t ruined the friendship after all these years and several projects together maybe we aren’t trying hard enough?

A trip is not THREE YEARS, a business relationship working on a house is not THREE YEARS. It is not sharing a bathroom, a house, food, utilities for THREE YEARS.

That is a long time to live as roommates with another person, which like it or not that is what you will be because you are renting his basement.

It isn't like you paid for a hotel suite and he paid for a hotel suite and you can do whatever you want like a vacation.

You will have to respect and follow the rules of HIS house because you are renting it from him. Are you going to be able to handle your friend dictating to you how you are going to live in his house for THREE YEARS.

Then there are things you learn about people while living together that you don't see when vacationing or doing a business project together, what if you find out he likes to dance around the house in women's lingere? Not exactly something you find out on vacation.

Your entire private life and his entire private life are going to all be central in one house. You are going to have to be constantly mindful that someone is living upstairs and he will have to be mindful someone is living downstairs.

Being good friends doesn't mean you will be good roommates or that he will be a good landlord.

I rent from my parents and while it isn't bad, there is a HUGE difference between renting from a professional landlord and renting from my parents.

A lot more personal gets into the equation since they are my parents. The same thing will happen with your friend.

I also get an entire HOUSE, you are going to be restricted to just his basement. Think about it.