When Should Tenants Become Property Managers?

When does bartering with a tenant make sense for a landlord? Is it a good idea to conduct business with tenants? If the answer is yes, then what would be the proper way to implement a business deal?

To answer these questions, we have to first explore some situations that made questions like these develop as well as the positive and negative benefits of having a working relationship between tenants and landlords.

Is Subleasing a Good Idea for Tenants?

With short-term renting being so popular today, the workforce has become so mobile that renters have been more tempted to sublease their own units to other renters. The way they usually do it is by having a roommate that pays a certain amount for rent and utilities. Another way is to rent their entire home while they are on vacation or traveling. In some cases, the renters see doing this as a form of investing in real estate by taking full control of the property by making profits without owning the property. For property owners, this is usually a bad idea and can involve a lot of risks and unanswered questions. What if rent isn't paid on time? Who fixes the plumbing when issues come up? The only real way to know if a tenant can be trusted to sublease is if they have already been a long-term tenant with them and if they have already proved that they are responsible tenants.

Should Property Management Be Shared?

The case of sharing property management is mostly seen among smaller properties, a mobile home park, or even with self-storage. The way this works is by having a real estate investor entrusting in a tenant that has been well-established in the property. They then allow them to manage their property. In exchange, the tenant is usually given free rent and must collect all tenant rent and at times fix minor issues that may come up.

The downside to this though is that if the property manager has no experience and begins to "lay down the law", then they run the risk of losing tenants or even collecting the rents for themselves and never be seen or heard from again. This is why it is very important to know what you are getting yourself into before hiring a tenant to take care of an investment. You want to continue making money not lose it.

Should Your Contractors Rent From You?

It's not uncommon that property contractors want to rent where they work, the problem is if you should let them as well as if bartering should be done to determine if rent is exchanged for any and all services they provide. If anything, your safest bet would be to play it safe and allow current tenants who have handy-man skills but forego with the free rent. The best thing to do is give credits for fixing tenant issues. If you do this, be certain that their work gets checked. That way if their work is not up to your standard, then you can refuse to have any future maintenance completed. You need to keep in mind to maintain the market rates for all of your rents. This will help avoid your property from devaluing and also to maintain clear communication between other important relationships you may have and lease agreement.

Final Thoughts

With so many benefits of having a tenant sublease, there are also many problems that come along with them. What it boils down to is making sure everybody is on the same page for the good of the entire property. Otherwise, the property value can easily dwindle over time.