Applicant wants to pay 18 months up front?

Question

Hey Bigger Pockets,

So I currently have an applicant for a house I’m renting that’s offering to pay 18 months (our preferred lease length for this listing) up front. He’s a legal immigrant with a work visa that owns a restaurant and gets a lot of money each month from a family business in South Korea. It was hard to understand a lot of the details because of the language barrier, and it seems like a complex situation. I know it sounds extremely sketchy, but I met him at the property and he seems like a nice guy with a family. He showed me his monthly bank statements too, and he is receiving a lot of monthly income.

I know not to accept a couple of month’s rent up front and the problems that it can bring. But I’ve never heard of a situation where someone is willing to pay for the entire lease period up front. We’re fixing up another property now and that cash up front would help a lot right now rather than receiving it over time from another tenant. Is there a downside to renting to this guy that I’m missing?

Thanks for any feedback!

Nathan Gesner · Answer

It's not a financially wise decision on his part, so you have to move forward cautiously. Is he just not smart about money or is he trying to buy his way into the home when he otherwise wouldn't qualify?

I see it as a red flag. Many bad renters will offer to pay up front in hopes of skipping past your background check. After all, why do you need to check Landlord references if they're willing to pay that much before occupying?

You also have to remember the money is not LEGALLY yours until it's earned. If he pays 18 months in advance, you don't get to keep the money no matter what. IF the tenant breaks their lease in six months, you are legally required to find a replacement tenant and can only hold the original tenant responsible for up to that point. All the remaining funds have to be refunded. So don't go spending it on another investment or a new car!

Just don't deviate from your screening process when someone waves money under your nose. If he qualifies, accept him and let him pay in advance. If he doesn't qualify, move on.

Cameron Tope · Answer

Hey Will,

I don't think there's much more to say - @Nathan G. covered everything!

Make sure you still process them through your normal qualifications.

Best of luck!

Timothy Hero · Answer

Check the state laws. I believe some states have a max amount of rent payments collected at once.

Will Vines · Answer

Thank you all for the replies! Yeah that all makes a lot of sense. I’ll definitely go with another applicant.

Jay Hinrichs · Answer

or they move in an start an illegal grow and ruin the house ask me how i know.

Michael Garofalo · Answer

@Will Vines I would not do this. While it sounds tempting to accept that much cash up front and parlay it into something else, this to me indicates something is off. Just think about the situation at hand and your own comments made. If it feels sketchy, it is sketchy, and jumping to rent to this guy may end up costing you more in the long run.

Applicant wants to pay 18 months up front?

Applicant wants to pay 18 months up front?

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