Accept bad tenant roommates if one tenant is excellent?

[Lara Fobian]

(If you prefer to skip the details, I've underlined the key points below) ... One of our tenants (“Tenant Alpha”) wants to renew his Texas lease for a second year and move his two adult brothers in to replace his (now-ex) wife and (now-ex) father-in-law, who all moved in together about a year ago. Please, I need help deciding what to do about the brothers as the potential new tenants…

THE POSITIVES: Tenant Alpha owns and runs his own busy company as a roofer, and his two brothers work for him. The brothers’ income is guaranteed as long as Tenant Alpha keeps steady work coming and pays them. I assume that if the brothers flake out on paying rent and/or any utility bills, Tenant Alpha could potentially withhold it from their paychecks, I don’t know. Tenant Alpha has great rental history for the past year in this home and also from before moving in, and he makes EXCELLENT income where he COULD afford 100% of the rent on his own without help.

THE NEGATIVES: Tenant Alpha is not a U.S. citizen, but he has an ITIN number. Tenant Alpha’s two brothers are not U.S. citizens, they have no social security numbers, and they might not even have ITIN numbers … so background checks and/or negative credit bureau reporting is impossible. They also have no bank accounts, no tax returns, and their pay stubs or other proof of income is pretty informal since Tenant Alpha may pay them under-the-table through his company. The biggest concern is they have almost no rental history since moving to the U.S., and the little they do have is BAD, where they stopped paying after 3 months and still owe a few thousand dollars in back-rent to that landlord. I haven’t yet found out why that happened??? And I strongly suspect that Tenant Alpha ALREADY let his brothers move in a few months ago, without first getting our permission and approval of the new occupants, which may be why they stopped paying rent at the other place.

CURRENT QUESTIONS AND CONSIDERATIONS:

This house will remain a long-term rental buy-and-hold, and since there are a lot of things that make these tenants undesirable to most landlords and lenders, I believe they likely won’t be able to find anyone else willing to sell or rent them a place … which means they’ll likely stick around long-term and pay timely. Tenant Alpha has already proven a good rental pay history, and he makes enough income where he COULD afford 100% of the rent on his own without help.

1. So I’m not sure whether or not to allow the two brothers to move in or not (or to ALLOW them to stay if they already secretly moved in without permission, which I’m not happy about)?  If they're not allowed to stay and/or move in, then I could lose Tenant Alpha if he chooses to move out and not renew for the second year (so the 3 of them can find another place to rent together).
   
2. If I do let them move in, should we name them as tenants obligated on the lease or just as occupants, making Tenant Alpha the only tenant? If they’re added as occupants instead of tenants, then they wouldn’t get to piggyback off their brother’s assured continued good rental history.
3. If they’re added as tenants, they do NOT meet our rental qualification requirement standards, so I’m not sure how to avoid trouble there making such big exceptions … or maybe the rules are different in a roommate situation like this, since we can’t market the remaining tenant or roommate spots to the public, to move in with Tenant Alpha?
4. If they’re added as tenants, and if Tenant Alpha later wants one or both of them to move out, I believe it’s harder if they’re occupants vs tenants. As tenants, I think they can be evicted down the road for non-payment of their share of the rent (assuming Tenant Alpha covers the difference and provides proof to us of the brothers’ non-payment).
5. Typically when making any exceptions to our rental qualification requirement standards, we expect a double security deposit, a qualified co-signer, or both. Recommended here, or no?
   
6. I already have a security deposit from Tenant Alpha’s move-in equal to 1 month’s rent, so to collect a “double security deposit,” I assume the max I could collect from the brothers is another deposit equal to 1 month’s rent and NOT one equal to 2 month’s rent???

Thank you in advance for any expertise you can provide!

Lara Fobian, GRI

Investor (Home Freedom Properties)

Realtor® (StepStone Realty LLC)

“Solutions-Based Real Estate”