Upfront Rent Payment

[Matthew Russell]

Hi All!

I own a SFH rental in the Charlotte, NC area and I am currently working with an applicant interested in my rental. For some background I have already received a rental application and performed my due diligence and the applicants check all the boxes (income, credit, rental history, etc) and then some!

As we were working out the details of the lease, he asked me the following question: "Could they pay the 12 month lease upfront with cashier's check for a 5% total discount?" 

I am considering this since it would give me security over the term of the lease and I could use this funds to invest elsewhere.

My main question to the BiggerPockets community is: What happens if they voluntarily break the lease after 6 months, then it take me 2 months to rerent (so previous tenants are on the hook for 8 months). Am I obligated to pay the additional 4 months of prepaid rent back to that tenant?

Thanks!!

[Thomas S.]

Never take payment in advance. If you do it is still the tenants money until applied to each monthly rent. If you do anything other than deposit in a designated account it is stealing regardless of the agreement. When a tenant changes their mind you get screwed. As the landlord you have no right to touch that money except to withdraw the rental amount owed at the beginning of each month. Never give a discount as if they leave they will be entitled to any unused portion back.

Legally you will also owe them interest on the money.