How much is a known quantity (tenant) worth to you?

[bigchrisb]

Question for you all.  I've purchased a property that I intend to be my house.  The tax laws in my area mean that if I lease the property for 6 months or more, all the closing costs are immediately tax deductible.  That's about a $40,000 tax deduction, or about $20,000 into my pocket, so something I'm intending on doing.

A good friend who I trust would look after the place is currently looking for a place to rent for this period.  However, they are looking in a lower price bracket, and could not afford this place. 

For a 6 month lease, what is a known quantity, with dates that line up perfectly worth to you, compared to a random tenant from market?

For reference, its a fairly high end property.  Weekly rental on market is approx $650, my friends are looking in the $450 bracket.  i.e. out of pocket cost to me to do this would be $5,200 pre tax, or about $2,600 of real money (post tax).  My gut feel is that for peace of mind and convenience, its probably worth it?

Over to the MMM crowd.

[MacGyverIt]

I agree with the general consensus of this thread - http://forum.mrmoneymustache.com/real-estate-and-landlording/higher-rent-or-better-tenant/ -- better tenant (i.e. known quantity) is ultimately less heartache for you and less potential damage to your investment. Although a friend would still have a lease and payment method in place. Best of luck.

[marty998]

It's a stretch, but if audited, the ATO may assess you on full market rent if you are charging $200 a week less as mates rates. This is because you would be claiming full value for all your deductions, but not declaring all of your rent (unless Canberra collapses and you can prove that $450 is the new market rent - not too far fetched)

Or potentially deny you all the deductions if they determine you are engaged in a "scheme" with the dominant purpose being to reduce tax (Part IV A) - balance of probabilities it won't happen but you never know.

Thats the only downside I could see.

[happy]

I was going to say its worth it for peace of mind. After reading Marty's reply maybe you have to decide which peace of mind you want.