Have you ever dreamed of having your own business or empire? And if you had your way who would you imagine helping you run it? You and your spouse, your best friend, or someone from your family? It is natural to dream big and want to bring the people who have supported you on this journey. However, business and family are two different areas of life and are meant to stay separate. So when does it make sense? In this article, I will share my experience and the lessons I have learned when attempting to intertwine the two.
If You Want to Know the Path Forward ask Someone Coming Back
When I was 23, me and my now wife were blessed with great jobs that supplied high incomes that really accelerated our financial goals. We saved more money than we knew what to do with and we decided to ask the people around us what we should invest it in. And naturally, everyone told us to invest in real estate. This is when we started our journey investing in real estate. We learned so many lessons including hacks on how to fix repairs and how to tell when a property is a good deal and when it is not. Through real estate, we were able to achieve many things we did not believe possible.
With Great Opportunity Comes Great Responsibility
As our portfolio grew we decided to manage the properties ourselves to save costs from having a management company manage it. We did not know how to market and how to attract renters so naturally we looked to the people we knew around us if they were interested in renting one of the properties. One by one we got each rented and the numbers seemed to make sense where we were making enough to cover the mortgages and also enough for profit. 3 properties were occupied with close family relatives. All had agreed to the rent amount we set for each property and pay on time. We are grateful that we asked people who were successful in real estate for advice on how to get started but the asking for advice did not continue after we got started unfortunately.
If You Give an Inch They will Stretch for the Mile
A few months went by and things were going well. Then the first “favor” from one of our tenants came. Simply asking if they could split half the rent in 2 weeks and the other half in 2 weeks. Naturally in our mind we did not see the harm since as long as the full amount is accounted for it should not be a big deal. After all, this was one of our siblings and why not do a favor when we had the means to do it? Next month back to normal as scheduled but the following month another request came again but this time to give them an extra week since they got behind on their bills. Each property that we had rented to family had their own unique requests but the theme was consistent. The minute we cut them slack was the moment they would push to see what they could get away with. Eventually we got to a spot where we had to put our foot down and stop cutting slack and we had to align expectations with each.
Opportunity Waits for No Man
At the peek of real estate market in 2022 came the opportunity that if wanted to sell one of the properties we would make top dollar. So we looked at our portfolio and the one that made sense was the one that was closest to the city and closest to the schools. Only issue? Our tenant was my older brother who I was the closest too. We had always supported each other in everything we did so this conversation should be easy since he should naturally understand. Wrong. This conversation was very difficult since we did not know that they actually really enjoyed staying at that property and weren’t thinking of leaving any time soon. The location made sense for where the kids were going to school and wasn’t too far of drive from work. However, if we wanted to sell this property we would need to sell it within a few months before the market changed. But since we wanted to give enough time for them to find another place we gave them almost another year. Luckily they ended buying their first home but in the process we had missed our window to sell the property. The property sat on the market for 3 months and we couldn’t sell it.
Business with Family can Damage Your Relationship
After this experience our relationship did take a hit and things took awhile before they went back to normal. Selling the home was good for business but having to remove family from the home does not leave a good taste in your mouth. Before thinking about doing business with family always think of all possible scenarios and outcomes before engaging. Not only think but also being able to personally accept and live with those outcomes.
Business with Family: Serving an Eviction
While the property was being listed we had to deal with another issue at another property. Missed payments. Turns out they had lost their job and weren’t going to be able to continue paying and requested to stay for the full month and only pay half. Not only that they entire house was a wreck! We would have to spend hundreds if not thousands to get the property ready to rent again. An eviction is not the same with family as it is with a stranger, in this case we had to actually start packing their things for them, not kidding. Then we also had to bring other family in to get the rest of the things out and give them a place to stay. Hopefully by now you can feel the pain that we had to endure.
The Money Saved was not Worth the Paid Endured
Then fast forward a couple of years forward to our 3rd and final eviction. This one was especially unique. What made this one especially unique? These tenants were my parents. To give some backstory during the time when we had this one listed for rent they were in transition to find another place to stay until they were going to “save money to buy a house.” (Please take notes of the quotations they are intentional) We all love our parents and how can we not help the people that actually gave birth to us and raised us. I know that is not always the case but in my case I had a pretty decent childhood. However, this temporary rental quickly turned into their forever home with no communication aligning that same expectation.
The issue is that since they were my parents I never raised the rent! Or let them know all the extra expenses this property had incurred over the years. So after the prior experiences we had, we knew the money we were saving on property management expenses was not worth the pain that we went through. We made the decision to completely quit doing business with family altogether and hire a property management company. But this one was the hardest. To spare all the details of how the conversation went, let’s just say our relationship has never been the same. There is always a price for the decisions we make.
Conclusion: Business is No Emotions Just Decisions
Does it make sense to do business with family? The short answer is No. Only special occasion I would leave room open for discussion is passing a family business. Don’t just take our opinion for it. We had asked others about their experiences and the ones we have asked, they have all had an experience similar to ours if not worse. Business is separate area of life that is meant to stay separate. Why? Because with business there is no emotion just making decisions. If your decisions are affected by how you feel you will be tossed and turned like the wind. Making decisions takes courage, strong values and honoring to stick to your decision.
Took us 3 hard experiences to learn this does not work for us. How many will it take for you? Or are you smart enough to learn from other people’s mistakes? Have an experience to share or have a different opinion we would love to hear it in the comments!
