Does your financial screening rule change IF the tenant offers to prepaid the entire lease?

Question

I had an applicant called me a few days ago asking about a 1/1 unit I had for rent, I told her that it was just rented.

She asked for how much, I said $1000 a month,but since I have already rented the place and signed a lease, I declined.  I said I am still in the process of repairing and getting the place ready, and I have already rented it.

She then offered to repair anything that needs repairing, she would pay $1100 per month, and she would prepay the entire year up front plus security deposit with a cashier's check that day...now she hasn't seen the place yet.  I politely declined, and she thought I was crazy.

This is not the first time I have an offer to prepay the entire lease term.  Last year I had someone - a student who applied and she had no job, but her parent came with her and again offered to prepay the whole year.  That one didn't pan out either because of pet restrictions.

So my question is, if you are being offered rent for all 12 months, will you still go through the same screening process?  I believe you would still do the criminal records, eviction records, credit history etc...but would you still require a minimum income?

Sam Leon · Answer

Possibly, one never knows.

On the flip side, I have rented to foreign students, and in some cases they have offered to pay a full year or twice a year.  For foreign students to come to the United States for education often times the US Embassy prior to issuing visa require proof of funds for all four years tuition, room and board.  It is not uncommon for those students to have a bank account with sufficient funds for the lease term.  After all if they stay at a dorm they are paying by semester, twice a year.  So paying everything up front is rare but not all that uncommon.

Jesse T. · Answer

That first situation - repairs, unseen, all upfront - seems very shady.  That much money and they would be pretty close to a down payment.  I think it is most likely an attempt to overcome/hide some issues with them being a good tenant.  It could be a scam where they try to get in the place with a bad check and live there until they get evicted.

The parents/child lease seems a little more reasonable.  You would want to check criminal/rental history and credit check for the tenant.  I would also have the parents as a responsible party on the lease and I would run a credit check on them also.

Bryan N. · Answer

If they offer a whole year upfront it's usually for a reason you don't want to be associated with.

Marcia Maynard · Answer

Well... that would take care of rent for year one...but what about year two? I would still do full tenant screening, including income verification. If they didn't make 3x I might consider working with them and also would require an additional security deposit. As you say, drill down and there might be a logical and legit reason. Then again, they might be a sociopath.... think "Pacific Heights". :-0

Sam Leon · Answer

In both cases I already had an applicant ahead of them that I was in the process of screening or waiting for lease signing, so I never gave their offers serious consideration.

But if they were the only serious applicants, I was thinking what my process would be.

#1, I couldn't let them do my repairs, that's out of the question.

#2, I would have to wait till the check clears, plus the time needed to complete my repairs.  We never got to negotiate that point.

#3, A background check is required still.

So the only thing is the financial portion of the screening.  I require normally 3X rent for income.  Would you still require that if the rent is paid up?  Like last year when a parent offered to pay 1 year's rent for his 22 year old daughter going to school.  The daughter has no income, so obviously will fail the monthly gross income > 3X rent rule.  So would you turn an applicant away if they have the cash to pay but income wise fail?

The desperation is concerning, why need a place immediately, and never even have seen it?  But again, I didn't ask, because it's not available.  But if it were, I might have inquired as to why the urgency and there may be a legit reason.

Bill P. · Answer

@Sam Leon

While this scenario seems to be a GREAT opportunity, I would caution you to still screen the person. You will need this to make sure your minimum requirements are met as when the lease runs out you will still need to collect a monthly payment from them or be forced into eviction. Also, remember that bank checks are easily manipulated so the checks may be bogus and you won't find out until they have moved in. (Bad on their part but it does happen) Lastly, you have to look at the deal and determine if it makes sense. Your scenario doesn't to me. But if this happens again, just do your due diligence and don't be swayed by the amount of money collected.

Joe Moore · Answer

In L.A., you accept the money only if the tenant initiate the offer.  I would do a total background check and ask where the money came from.  Truly this unusual and would proceed with caution.  As Jon Huber said, this is a red flag situation.

Jon Huber · Answer

@Sam Leon

Huge. Red. Flag.

Someone would be willing to give you a cashier's check for $13k for a 1/1 that she has not seen? Eh.

Pete T. · Answer

I would absolutely screen this person.  For one, I would make sure you can take all of the rent up front, as that is not legal in some states.  Also, there are a lot of red flags w/ someone willing to pay more and all in advance.  If you look everything over and it makes sense, it might be a good deal.  We have a tenant that will pay a couple of months of rent at a time and it is great.