So everyone hears you bought a vacation home in Hawaii and now everyone's your best friend. Here is how I suggest you handle these folks who would like you to let them use your vacation rental property for free.

If your friend wants a peak week in your cottage and wishes to book ahead of time, then by all means, let them. Just charge the full price. Here's what I tell my friends: This is an investment, and a business. If I give you the week for free, that's like taking $X (the rental rate for the requested week) out of my pocket and handing it right to you. If you would like a week for less (or free), then I will let you know when or if I have a last minute week open. If it's not booked, you are welcome to use it.

That may sound cold, but it's true. I am happy to let my friends use my condo or cabin, but not if it takes money out of my hands. You may, of course, want to consider having a “friend rate.” After all, they will be using the power, water, etc., and that will cost you money. A fair minimum friend rate is between $25-$50 per night.

And as a note of caution, I would not allow your friends to clean the property themselves before leaving (unless you require all renters to do so). Their idea of clean may be entirely different than yours. It's best to have them pay the cleaning fee.

A quick note: If you are claiming your vacation rental property on your income taxes as an investment property, you can get yourself into big trouble if the IRS finds out you're giving time away to friends or family for free or reduced rates. Click here to read more about taxes and friend rates. 

How do you respond when friends ask to stay in your vacation rental at a reduced rate? "I politely tell them that vacation renting is a business for me and I have to treat them like I treat all of my guests.  I explain that it's nothing personal, but if they'd like a reduced rate, they're welcome to stay in my home during the off season." - Tran M., Gatlinburg, TN.

Offering Discounts to Potential Vacation Rental Guests While it may be tempting to jump on any offer from a renter, consider these discount guidelines.   The Skinny on HomeAway Special Offers Just what exactly is a Special Offer and what can it do for you?   How to Set Your Rental Rates for Your Vacation Home Tips for properly pricing your vacation rental property, including how to assess the competition and how to pick your peak season.   How to Advertise Realistic Rental Rates When completing your advertisement, you don't want to forget your rental rates.