Renting a house is sometimes a difficult and time-intensive task—you have to prepare the space, find a renter, evaluate the renter and then manage the tenant while he's present in the home. You may think that renting the house to a family member makes things simpler, but in some cases it can prove just as complicated if not more. Take a few precautions to avoid issues associated with renting to a relative.
Schedule a sit-down meeting to discuss the arrangement face-to-face with the family member. Explain to him that you have to treat this arrangement the same as you would if he were a stranger.
Decide if you're going to require a credit and background check for your family member before renting the house. If it's a very close family member who you've known for years and trust, you may decide to skip the credit check. If you're planning on renting to a distant relative, you may want to run the check before agreeing to this arrangement.
Set a monthly rent charge for the family member. IRS regulations state that if you rent to a family member you must charge a fair rental price or else it is considered personal use for tax purposes (you may have limitations on deductible expenses in this case). A fair rental price is the market rent—what others in the area charge strangers for renting a similar home. You can check fair market rents on the U.S. Department of Housing Fair Market Rents website.
Compose an official lease, just as you would with a regular tenant. Do not settle for a verbal lease just because you're dealing with a relative. Clarify all term of the lease you've agreed on, including the rent amount, length of the rental and amount of security deposit required to take possession of the home. You can find a standard lease online for free or for a fee.
Try to maintain a very professional business relationship with your family member during his tenancy. When it comes to issues regarding the house, communicate with him as formally as a landlord communicates with his unrelated tenant.