Applicant offers to pre-pay a year's rent in cash

[Astrid Dymond]

I just had a prospective tenant tell me that he would want to pre-pay the yearly rental fee in cash upfront because "that is just the way he does business."  My gut tells me that this is a red flag.  I would still screen this applicant.  Is it ok to accept the yearly rent upfront in cash? What are the potential pitfalls?

[Curtis Bidwell]

@Astrid Dymond I have often had tenants pay rent in advance and just accepted 7 months advance payment on a $2500/mo rental.   I like having the money in my bank, not just confirming they have it in theirs! Just be sure not to spend it until the rent is “due”. That way if you do end up terminating early you can refund unused rent.  

There are many reasons it can be appropriate.  Folks just moved to the area and need time to get new jobs, but have excellent history.  Divorcee using settlement $ to pay in advance to clear obligations while they reorganize life.  Don’t have great credit so want to assure you they’ll cover the rent.  Etc... 

Screen, screen, screen! Use a professional service. Contact last 2-3 landlords (5-7 years history), contact employer to confirm likelihood of job continuity.  

In some cases, prepaid rent is used at the end of the lease instead of the front end (maybe they pay 4 months but it is applied to months 9-12) 

Of course they may be a problem hoping you’ll leave them alone once you have the money so they can go about their devious business.  So stay connected to them, do periodic inspections, and address any issues right away so they know you are not an absentee landlord.  During my move in orientation I let them know that we will do a follow up in 30 days and then do quarterly inspections to “appropriately maintain the property”. 

Good luck to You!