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Being Informal- How it can open you up to risk as a DIY Real Estate Investor!

To those investors who do it on their own – The Power of Formality and why you should take it seriously.

informalSo your childhood best friend knows you own rentals, asks you if they can rent one of your units, and you say sure – they are your friends *kind of* it’s ok to relax with them right?

DIY Real Estate Investors don’t have any shorter tasks lists than property managers do, but one advantage they do have is that they can often be a bit more informal than we can. The old saying give someone an inch, and they take two can very much pertain to the relationships that DIY Real Estate Investors have with their tenants. And… that can cause some unnecessary and added stress.

An informal Real Estate Investor has the luxury of saving some time on the daily grind of managing rental properties. You are not legally required to keep separate bank accounts for maintenance, and overhead expenses, business expenses for each property. You are required to keep security deposits safe, and unused in escrow though.

You don’t necessary need to track your marketing, or contacts and inquires, keep detailed reports, you can be lenient on when you consider rent late, and when you issue eviction notices, you don’t even have to get bids from 6 different contractors in order to find the best solution for what you are trying to get repaired, or any multitude of tasks that property management companies are expected, and obligated to provide for their clients.

But having a real life, and a day job, this is a great thing to be able to not have to committed to. Chances are, if you were required to provide that level of professionalism and formality, you could probably kiss your social life goodbye, as well as spending weekends with your family. It really is a great luxury and freedom to have!

However, there are some aspects to managing real estate investment properties that you should be incredibly formal about because the risk is not worth exposing yourself to.

Some areas where being too informal can cause you big trouble, including legal trouble!

Generally if you put the tenant in a position to dictate your process, chances are that is a sign you should not go that route.

  • Tenant Screening
  • Eviction Processes
  • Late Rent expectations
  • Lease and Document preparation


If you have been in the industry for any amount of time, you have always heard the sob stories…. Well if it’s your Aunt Lou, or second cousin, or childhood best friend… those stories are only going to increase if they happen upon a financial hardship, or spent too much on that luxurious vacation and can’t quite get you money right away – but will next week! For sure! They really do want to pay you, but having an informal relationship is where they can justify why you will totally be ok waiting an extra week for rent.

Another great saying is the quickest way to end a friendship is to lend someone money…. Finances can cause a lot of tension and turmoil in relationships… rent not being paid can be one of those big ones. If you have to evict your childhood best friend…. Chances of that relationship continuing is pretty slim.

So do everyone a favor and start that relationship off with clear expectations and policies and procedures. Need help writing yours and making sure your basis are covered? Contact us for our DIY Landlord starter kit!

Tenant Screening – Be VERY careful with being informal on this one. Discrimination and Fair Housing laws are incredibly risky to be playing with.

When you know someone’s entire life story, where their income comes from, where they live, how they live, how they treat their neighbors, any issues they have had….. and struggles…. Can make for a recipe for disaster if you do not have clear policies and procedures written in place.

The same goes for a referral of your wife’s co-worker’s daughter – you can’t assume that person is in a place to be a great tenant and choose not to screen your tenants.

Here is a video about what can happen when you miss these two important tips for screening tenants here!

We want to help protect you, and help you be an informal landlord to help accomplish your freedom, while not exposing yourself to costly risk.

Make sure you have your ducks in a row.

Here is another great article about what you need to do set yourself up for success before you start renting out properties here AND reducing your stress as a landlord!

We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.

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