Here is a means of having your neighbor sharing your internet connection and isolated. However the isolation is only there as long as they dont connect directly to the single cable going into their router. If they connect to wifi or any hard wired LAN ports of their router, they will be on their own DHCP and network branch.
They will be subject to a small amount of latency between the internet and them. Your internet connection would be slightly less latent because your closest to internet connection and they are 1 additional device away. Bandwidth is shared equally under this setup so if they start downloading like crazy, they could affect how slow stuff is to load and buffering of streaming content.
If this becomes a problem, your option is to throttle their bandwidth so that you have more bandwidth than them. You would need to find out the MAC address of the router that they use and then add a rule on your router if it supports QoS to limit how much download/upload bandwidth they are allowed. Such as say you have a 25/5 internet connection and they are causing troubles with too much bandwidth use, if your router has a QoS option you can limit them to 5/1 and so you have 20/4 for yourself. These numbers are download mbps / upload mbps.
For some ISPs its a violation of user agreement to be passing internet to neighbors. In the day of wifi its harder for them to control, but if the cable guy found a Cat5 or Cat6 cable strung from one residence to another, you could be fined as well as they take your internet away etc. If you have an appartment building and they are right next door and cable is out your window and into their window it might not get detected by your provider or hole in wall etc if landlord doesnt mind.
Also to know is that if they do anything illegal, your door would be the one busted down and you handcuffed etc. So if you trust your neighbor then I guess its ok. Just some stuff to be aware of.
Additionally.... the neighbor should be made aware that their connection is not secure! Your smack dab in the middle and they are susceptible to whats known as Monkey in the Middle, where you can see all traffic to and from their connection and so I am assuming you 2 are friends and you dont intend to do anything illegal, but for them, they are not as secure as you are. Your traffic they wouldnt be able to sniff out, that is unless they plug directly into that green connection that is suppose to remain plugged into their router.
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