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It is just that if things don't go well, neighbors and family are still around while you can show the door to clients and never have to deal with them again. My neighbor asked me to care for her son. I saw how different her parenting style was from mine and knew she wouldn't be a good fit. I did tell her I valued her as a neighbor and didn't want to mix business into our friendship. She had no problem with that.
I had my grandson at my daycare for over 3 years and I gave my daughter a reduced rate, just enough to cover my food costs. My daughter signed the same contract as all my other clients except for the cost and she followed all my policies and treated me with respect.
If you enter into an arrangement with a neighbour or family member I suggest you talk to them honestly about your contract and explain that all rules must be followed and anything that pertains to daycare is business, not friendship/family. If you have mutual respect and demand that from day one it may work out.
I have had a neighbour's kid in the past. And things didn't go well for the little girl. One of those ones that just doesn't adapt well...never seemed happy and became stressful for me and the rest of the group. I spoke to the mom expressing my concerns (she was also off work at that time) and so she decided right then and there that she wouldn't be returning. She paid what was owed, and left. She came back crying about her decision...unsure of what she'd done. Talked to me about the new daycare she tried. Came back crying again about her disappointment comparing the 2 daycares and eventually found a place where her daughter was finally happy.
It all could have been very awkward and either one of us could have taken things the wrong way. But, we didn't. We're not next door neighbours so I guess those 4 houses in between creates enough of a barrier, but we see eachother outside and all is good. Just didn't work out for either of us and nothing lost.