Yay or Nay? - accepting 12 months of rent up front?

Question

Story: Applicant just sold their home and needs a place to live quickly. Offering to pay 12 months rent up front. Inventory in my market is limited so I believe the offer to pay up front is to ensure a strong application.

Question: If the background and credit check for an applicant comes back strong (credit, employment, background) - would you accept 12 months rent up front?

Please throw all the flags in my direction, no matter how basic. This is my second rental and I'm running into a lot of scenarios for the first time.

Nathan Ruffrage · Answer

Hey there! My experience this is a bad idea. When you collect rent it makes it very difficult to evict a tenant if the need arises.

Quincy Lockett · Answer

@Jordan Mandel

Absolutely NOT! In my experience when people pay you up front in their opinion they OWN you. Anytime thereis a problem and it’s not remedied quickly enough they will throw that ‘I paid you $36K!’ in your face. Plus it’s harder to evict if they turn out to be a problem tenant. Having the tenant pay monthly gives you some power over the landlord/tenant relationship. I prefer month to month if I can get it.

Nathan Gesner · Answer

Red flags: they are hoping you'll ignore any red flags and pick them just because they waved cash in your face, they'll ask for a discount since they're paying in advance, or they'll try to leverage it against you in the future.

If you screen them normally and they meet all your qualifications, there's nothing wrong with accepting the rent in advance. I have an older man that pays his full year in advance and has done so for 10+ years.

Keep one thing in mind: just because the money is in your hand doesn't mean you can spend it. The money is not earned until it's applied to a rent charge, which means you still earn it one month at a time. All excess funds should be held in your account and applied each month, then it becomes yours. If the tenant breaks their lease in four months, you'll have to refund any moneys owed back to them.

Rolly Weaver · Answer

Dig deeper.

Whenever someone offers a lot up front and "needs to move immediately" there is almost always something behind the curtains.

I've fallen for this many times.

Of course judge the situation, though.

Matt M. · Answer

Yup, red flags. I’d much rather a strong candidate show me a bank statement with a ton of money in it. If they pass all your qualifications, sure let them pay 2 mos up front if they need to sweeten the deal for you but I wouldn’t take 12 mos. And some states it’s illegal anyway.

Bruce Woodruff · Answer

No, never. Too much leverage on their side that way.

Teresa Green · Answer

Hi. I did it. Tenant didn't have much credit history, but all other boxes checked good and I trusted the realtor. No issues for the past 8 months, he's a working guy.

Bruce Woodruff · Answer

But you can't use it until you earn it, so you'd have to save it up, which is really just like getting it in a normal way....

Michael Deering · Answer

Did you ask why he's offering it? I've offered six months up front because I really wanted a place.

Do take it if you could use it for needed upgrades/repairs.

Do take it if you are low in reserves.

Do take if you keep your books tight.

Possible eviction should never enter the calculation here. If eviction is in question don't take any rent and choose another candidate. I'd rather have rent surplus than rent deficit from a tenant I'm evicting. But again, if you're thinking eviction then this is not the tenant for you.

Sylvia B. · Answer

I've heard this before, and I'm curious. Is there a law that says you cannot have a yearly lease? Specifically, that the unit is leased by the year, not the month, with rent due up front? You can rent places by the day or the week, and I've heard of 99 year leases, so why not 1 year?

Yay or Nay? - accepting 12 months of rent up front?

Yay or Nay? - accepting 12 months of rent up front?

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