Year in Advance Rent...Thoughts?

Question

I have a property that is coming available. One of the potential renters is offering to pay the whole year's rent in advance in addition to the security deposit. Does anyone see any issues in doing this?  The property is a higher end rental that is very desirable and the potential renter works for one of the very large corporations in the area.  My research on the guy seems to bode well for him being a good renter for a year long lease.

Alexander Felice · Answer

I feel it can eliminate a few problems commonly associated with advance rent payments.

1. the temptation (that you shouldn't have, but just in case) to spend any of that money is now removed.

2. If the tenant was using this method as leverage, that option is now removed from them.

3. If you want to evict a tenant who has paid a year in full, it can get messy. This can simplify that process or even eliminate the tenant from trying to bail early if they know their money is locked up in escrow.

Obviously it's not a bullet proof plan, just a method that I have come across and wanted to share. I personally wouldn't take a year rent in advance so I have no direct experience with this.

Michael Hayworth · Answer

Run the background checks you would run anyway. Oftentimes, payment in advance is an offer from people who have horrible credit, are hiding assets somehow, or have other significant issues. Don't let the quick money blind you. If they damage your home, or won't leave after a year, you'll wish you had checked them out.

Also, in many states, you legally have to escrow that money and only draw down from it as the rent would normally be due.

Account Closed · Answer

I have experienced a tenant who tried the leverage you mention. It was funny because we had the money and a solid lease, so the leverage was a joke. Good call. I agree with not spending it so this would help if you just can't control yourself. Number 3 is true, especially if you don't have the money anymore. Thanks for explaining. As soon as someone tells me they want to pay in full I ask WAY more questions than normal. I could see how some beginners (like me years ago with the attorney) get excited, take the money, and skimp on screening.

I'd say to the original post, learn from my experience, not your own.

Account Closed · Answer

Pure curiosity: why would you pay to put this money in escrow?

Account Closed · Answer

I strongly echo the statements about not skipping any of your other screening steps. My absolute WORST eviction had paid 2 years in full. He was an attorney (not a protected class by the way) and used a settlement and was looking for another at the end of the lease. Found out he had done it before.

Screen as you normally would, which I hope is awesome, and then take the money. I have had plenty of these go well. Just treat it like you normally would. I also suggest you don't spend the money early. Let it sit somewhere and earn interest, and draw it down if you want.

Jesse T. · Answer

I think the rest of your screening becomes more important - income still matters because what happens after the year is up.  If it is to compensate for credit issues - the maximum deposit(including last month if permitted) and month-to-month lease may be the best idea from your side.

Alexander Felice · Answer

There are more downsides to upsides for this type of situation.

I think the best way to do this is set up an escrow account between you and the tenant with your lawyer. He can give all the funds up front but your disbursements come at the regular time.

Brett S. · Answer

My leases all have a clause that says tenant is liable for 100% of rent if they leave early.  They can get an agreement to break the lease but only after I find a new tenant at their expense.  Don't see why you would treat this differently; just take the monthly rent and the cost of a new tentant out of whatever balance they haven't used.

Harvey Greenstein · Answer

I would not accept a year in advance. My understanding is that it will be difficult to evict if you need to once you cash the check.

Year in Advance Rent...Thoughts?

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