Should I make my brother sign a lease before moving in?

Question

Hello, I am new to real estate and still finding ways where I can learn more such as reading and listening to podcasts.  Recently me and my fiancé just bought a house and his brother is planning on moving in come September. I thought this would be a great opportunity to start practicing on becoming a landlord for our future buy and hold properties.  I was wondering if it would be a good idea to write up a lease and have him sign it? Will this lease and rental income count as landlord experience in the eyes of a mortgage company?

Greg Scott · Answer

I would not have a lease simply because I would NEVER rent to family.    There are too many potential pitfalls and nobody wants to ruing family holidays because of a fight.  I've heard too many newbies rent to family members and have a terrible experience.

Your mortgage company won't care about the "experience".  However, if you try to qualify for another loan, they will want to see both a lease AND that monies have been collected.  Have those and it is easier to qualify for the next loan.

Again, I urge you to reconsider renting to family.

Julie Hartman · Answer

@Lourdes Medina The short answer is yes, you should absolutely have him sign a lease. The long answer leans toward what @Greg Scott said, renting to family is a minefield of problems. You indicate in the title that he's your brother but in the main body of your question you say he is the brother of your fiance. That could be an important distinction. Does your fiance want him to sign a lease? If this is something you must do then require he sign a lease and hold him to it. Good luck!

Ramon Jenkins · Answer

yes, yes

security deposit, first month rent and even try last month rent ( suggestion )

Matt Ziegler · Answer

Fences make good neighbors. Leases make good tenants. Yes you should have him sign a lease! But before he does that, have the conversation, this is a business here are the rules and guidelines. If this works for you great if not rent from somebody else! We have done this With several family members with good results. It all comes down to open and honest conversations.

Cheers

Michael W Sullivant · Answer

@Lourdes Medina

As others have said, if you rent it out, make SURE you have an understanding of what the expectations are or you will have a misunderstanding. A family member with good character, integrity and personal responsibility is going to lead to a good experience…but a different type of person will give you untold headaches…especially with family. They might be great people at gatherings and all, but consider how they are doing in their personal lives/finances…if they’re irresponsible now they’ll be irresponsible when they move in.

Caveat - People can change.

As for experience and/or leasing goes, if you’re using a PM, that’s not going to count against you. What the bank wants to see is the signed contract and that the payments are being made.

Matthew Crivelli · Answer

Really? If he didn't pay would you take him to court for it? if the answer is no, then it's a waste of time. It's your brother, either do him a solid or tell him no.

Lourdes Medina · Answer

@Theresa Harris

Yes he will be renting out a room from us and paying rent. Okay thank you for you advice .

Theresa Harris · Answer

Is he actually renting from you and paying you rent?  If so, find a standard lease for your area and have him sign that.

Lourdes Medina · Answer

@Julie Hartman

Thank you Julie. He is actually my fiancé’s brother I was just trying to keep the title short. My fiancé was not requiring the lease, it was actually my idea because I thought it could benefit us in the future if we need landlord experience for financing .

Lourdes Medina · Answer

@Greg Scott

Thank you for your response Greg.  I’ve heard many times that renting to family could be an issue but the way we were looking at it was that this could be money we can save and use to our first rental property. So just to clarify a rental agreement and monies coming in every month would help us qualify for another loan?  I was thinking in terms of a purchasing a multifamily with a VA home loan. I have read before that you need to have landlord experience.

Should I make my brother sign a lease before moving in?

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