Help out a family member?

[Emg03063]

The situation:

My brother called today to tell me he's 2 weeks away from losing his apartment in NYC, and is asking for me to be the guarantor on his lease so that he can keep his place. 

The backstory:  My brother has never been a plan for the future kind of guy (obviously).  He got himself into trouble with credit card debt in his 20's and got bailed out by my parents (I'm told by my dad that he has since repaid them, and I believe him).  About three years ago, he won about $100k on a gameshow, and has now blown through the majority of his savings.  He has ~$7500 left in one stock holding (Purchased for $10k).  He initially asked if he could borrow some cash to make rent without having to sell for a loss, which I refused, but the need for a lease guarantor if he is to keep his place remains.  Financials are as follows:

Rent: $3100 for a 3br/2ba place in Manhattan.

He normally keeps roommates and charges them $1100 & $1200 respectively, making his share of the place $800/mo.  His two current roommates are planning to be out at the end of this month, but he's never had issues finding roommates in the past. 

He operates a cash business that he claims typically nets him $2000/mo, conservatively; potentially more if he worked at growing it. 

There are some mental health issues in the mix with him (anxiety & depression--nothing psychotic).

My options:  1.  Guarantee the lease.  Insist he get counseling, & report his financials to me on a monthly basis.
2.  Don't.

Option 1.  Pros:  Get to be the good guy, help out the brother in need & all that.  Help him save face by not having to turn to the parents (who could also guarantee the lease if he asked & they wanted to).  Help maintain some stability in my brother's life off of which he can hopefully build a future.

Cons:  Risk of enabling (obviously).  $18,600 liability if he completely defaults on the lease (unlikely, but possible), assuming he can get a 6 month lease.  $37,200 liability if a one year lease.

Option 2. Pros:  No risk of enabling, no liability.
              Cons:  No opportunity for me to help build a better relationship with my brother (at least not immediately).  Potential loss of stability for him if he doesn't find a solution to keep his home.

He wouldn't be on the street or anything.  He has plenty of friends, and in a worst case scenario, he can move back in with my parents (although I'm sure none of them want that--it probably wouldn't be a good situation for any of them, mental health wise).  Living with them would also hinder his ability to operate his business, for various reasons.

While I consider this, I've asked him to draw up a personal budget for himself, and I'll post it if he does.

[Goldielocks]

Why can't he rent a room at n someone else's place for $1000?  Seems like a lot of uncertainty with both roommates moving at once and two weeks to replace both...  Maybe they know something you don't ,like depression is back?

[GizmoTX]

Don't, unless you are able & willing to pay for his apartment.

Trust me, the relationship is likely to be awkward either way; do not think that bailing out your brother with this type of financial history is going to build any gratitude. I completely understand demanding financial reports; I did the same to help counsel my brother, who also had similar health & financial issues. Financial reports won't prevent him from using you.

Thankfully, he has options. Don't be his easy way out of them.

[MsPeacock]

Why is he unable to pay rent now but will be able to pay it in the future? I would be very hesitant to put myself on the line to sign something unless I knew I could afford to lose the money. It seems like a better option would be for him to find a place he can rent that he can afford outright (e.g. as a roommate, not as the holder of a lease for 2 more bedrooms). It sucks to move, but the arrangement he has now is clearly not working (thus the problem he is having) - so continuing w/ that arrangement seems like a bad plan.

[GizmoTX]

Why is he unable to pay rent now but will be able to pay it in the future? I would be very hesitant to put myself on the line to sign something unless I knew I could afford to lose the money. It seems like a better option would be for him to find a place he can rent that he can afford outright (e.g. as a roommate, not as the holder of a lease for 2 more bedrooms). It sucks to move, but the arrangement he has now is clearly not working (thus the problem he is having) - so continuing w/ that arrangement seems like a bad plan.

+1

[brooklynmoney]

I agree with those who say he shouldn't be lease holder but would be better off rentin a room

[BCBiker]

3 bedroom in manhattan for $3100!? I would ask for some official documentation if you are still considering this. That sounds like an unlikely deal. 3 bedrooms in even less desirable parts of Manhattan are going to go for >$5000 per month.

Not to be harsh but your brother is about to fall flat on his face through a $100k cushion. The $10-40k will barely slow him down. If  you are willing to put up that much cash, putting him into to some kind of life coach program would probably do him much more good than just helping him make rent.

[Josiecat]

He absolutely cannot afford that apartment.  No, No, No!  He must move immediately.  Don't do this. 

[Exflyboy]

Woah!... Absolutely NOT!!!!!

This guy has blown through his own savings and now he wants yur help... Do not lend him anything.. he clearly is o=irresponsible and I can guarantee he will take your money and you'll never see it again.

NOT YOUR RESPONSIBILITY!!!!!!

you talk about YOUR options?.. Your one and ONLY option is to not touch this situation with a 10 foot pole!

NEVER be the guarantor for anything.. This si the same as co-signing for a loan... Worst thing you can do.

Let the chips fall where they may and let him learn from the experience.

Frank

[Louisville]

Income $2000/month, rent 3100/month. That kind of says it all, doesn't it? He needs to move. You won't be helping this guy by co-signing his lease. He needs to abandon the lease.
Help him by telling him to stop doing stupid shit.

[Participant]

He's making about $2,000 a month in Manhattan, one of (if not the) most expensive parts of the USA to live in. That's $24,000 a year, the equivalent to $12/hour working 40 hours/week 50 weeks a year. Is that $2,000 after taxes and health insurance? It sounds like he would be better off as an employee rather than an employer, especially if he has anxiety and depression.

While his apartment sounds like a steal for Manhattan, I don't think subsidizing his poor decisions is going to help either of you in the long term. He needs to find a new line of work and/or a new place to live.

[iris lily]

NEVER sign your future money away to anyone in a charitable event.

Give today's money if you wish. That means: if you've got cash to give and you want to give it, then do that.

But to put your future earnings on the line, to agree to future obligations to be charitable, is not smart at all and that's what co-signing is.

[Mr.Chipper77]

One time event , I would give a break but this seems to be a pattern for him so your better off by saying no. I have an older brother that was 30 years ago the same way and guess what.........still is.  I borrowed him 1600$ 25 years ago and he has never even attempted to pay me back. I feel no remorse saying no.

[AlwaysBeenASaver]

I wouldn't do it, the risk is way too high and there are lower cost options. Instead you could offer to give him $ for first/last/deposit on renting a room in someone else's place, as another poster recommended. You may never see that $ again, but it's still way less than the risk you face on his lease.

[GizmoTX]

You had the right idea when you first refused to "lend" your brother money for his rent payment. Being guarantor means YOU become the renter, not him -- absolutely DON"T do this. It sounds like the landlord is now nervous about late or missing payments, unless you or your parents were the guarantors for his current lease. When is he ever going to learn to plan/budget/earn if you all keep bailing him out?

[mm1970]

How old is your brother?

Anyway: no

[Emg03063]

3 bedroom in manhattan for $3100!? I would ask for some official documentation if you are still considering this. That sounds like an unlikely deal. 3 bedrooms in even less desirable parts of Manhattan are going to go for >$5000 per month.

Not to be harsh but your brother is about to fall flat on his face through a $100k cushion. The $10-40k will barely slow him down. If  you are willing to put up that much cash, putting him into to some kind of life coach program would probably do him much more good than just helping him make rent.

That's the beauty of rent control, and the only reason I am even remotely considering this.  I'm not offering to front cash, just to backstop losses.  I can afford it.

[Emg03063]

Why is he unable to pay rent now but will be able to pay it in the future? I would be very hesitant to put myself on the line to sign something unless I knew I could afford to lose the money. It seems like a better option would be for him to find a place he can rent that he can afford outright (e.g. as a roommate, not as the holder of a lease for 2 more bedrooms). It sucks to move, but the arrangement he has now is clearly not working (thus the problem he is having) - so continuing w/ that arrangement seems like a bad plan.

He's able to pay rent now (assuming roommates); he just didn't want to sell his stock.  His current issue was created 6 months ago when he was experimenting with AirBnBing his spare rooms instead of having actual roommates.  He got behind and has remained a month behind ever since (if he is to be believed, and I do trust him that far).  His six month old problem just happened to become symptomatic now.

[AJ]

Nooooooo!!!!!!! Absolutely not!

You know what will happen here, right? YOU will be paying that $3100 a month. Can you afford that? 3100 x 12 month lease = $37,200 that you will be paying (maybe a few grand less, since he might pay the first couple months). Edit - Sorry - you do know this already...

No no no no. Do not enable him, and do not think you can change him by making him square his budget with you. That idea will fall away after the first month.

Even under the best conditions, the odds are overwhelming that this will ruin your relationship with your brother. If you care more about easing social tension now than maintaining a healthy life-long relationship with your brother, then this would be the way to do that.

I cannot stress enough how bad this idea is - for both you and your brother.

[mozar]

he just didn't want to sell his stock.

So it's OK to inconvenience you but he doesn't want to bother selling his stock. So he has to sell his stock. Tough poopoo. I would be concerned if he was about to become homeless but he has plenty of options without your help.

[Mutton Chop]

Personally, I would not help him out without collateral.

If you do this you have to be ready to accept the worst possible financial damage that can come from this situation.

From an insurance standpoint, being a co-signor means you might be accepting any resulting liability claims that result from his occupancy in this unit.  Make sure he has a good renters insurance policy.

[goodlife]

I have some experience in this, so here is my advice. Yes, you should help your brother, but there are more than your two options. You should not co-sign that lease. You should talk to your brother, tell him that you are not co-signing that lease, but rather you can help him rent a room somewhere that is affordable. You can help him by covering moving expenses, by paying the deposit etc. But co-sign the lease, no, I would not do that, that's a lot of financial downside and your brother given his financial situation shouldn't be renting such an apartment anyhow. So if you want to help your brother, I think there needs to be some tough love. You help him get out of this siutation, but don't enable him to drag you down with him. If he doesn't accept your offer, so be it, but signing that lease is not a good idea.

[Nancy]

I would not risk my credit by signing a lease for someone who has a history of late payments. Also, would you as the leaseholder be liable for any damage that he and his roommates might cause?

[RunHappy]

What happens if you sign the lease with your brother and he stops paying after the first month?

[Retire-Canada]

Don't help him. This is how things start to go down the sewer. A non-essential bailout that goes wrong and leads to a long and drawn out drama-fest. You end up never wanting to talk to him.

If you want to help him pay his back rent directly to the landlord and make it a gift with no repayment required or offer to give him first/last rent at a new place.

You can tell the landlord you are helping him to add confidence in the situation without signing the lease yourself.

Ultimately his situation is not sustainable so this is just the first crash and it won't be the last.

Steer him towards a living situation that is within his means...like someone suggested that probably means renting a room from someone else.

-- Vik

[ShoulderThingThatGoesUp]

A $2k a month cash business? Is it of the sort that the feds could confiscate property?

[RyanAtTanagra]

This is tough due to rent control.  That's an awesome price, damn.  As an SF resident I understand your desire to help him keep that place.  I would work out a plan with him, and if you're confident that you'll get your money back, I'd go for it.

Not sure I understand the hesitation to sell stock though.  If he has investments that he can sell now to make ends meet, then once he gets people in there, he can buy back the same stock just as easily as he could pay you back, and if it happens quickly he'll most likely get back in at pretty close to the same price.