I would simply disclose who, what, where and let the client decide. I have no problem separating business from friendship, but some might.
I would not inspect anything I currently owned or that an immediate family member owned, but anything else, I just let the client decide. Heck in some small towns, you would put yourself out of business if you did not inspect based on friendship.

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Jim Luttrall
Mr. Inspector.net, Inc.
Allen, Texas 75002