Tenant has no income but money upfront - too risky?

Lender · San Diego, CA · Member since 2022 · 235 posts · 94 votes

I know people say not to accept tenants if they have no active income, but this is a medium-term tenant who would stay 3 months and they can pay the entire 3 months upfront. In this case, is it a risk to let them stay?

My only thought is that they could try to stay there and refuse to leave I suppose, but that's a risk even when someone has active income coming in.

Also, if they have a guarantor, would that help? I'm not sure it would since they're paying all three months upfront, but I had that thought

Any advice would be great! Thank you :)

2 Reply

76 views

Most Popular Reply

Nicole Heasley Beitenman

Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes

This would be a huge factor for me. If they're a student, sure. If they're a professional with a solid work history who hit a bump in the road, is relocating, and needs some time in their new market to look for a new job, new housing, etc, that works for me. Basically, if their story makes sense and doesn't raise any red flags, I'd gladly consider them.

2 Reply

See this reply in the discussion

25 Replies

Jump to latestLatest

Sort by

Dave KushPro Member
Frankfort, IL · Member since 2022 · 204 posts · 133 votes
2y
Hi Mary,
That's a good question, and I see where you're coming from. I would definitely be tempted to take that as well, since they'd be able to pay the whole term.
It might be worth a few dollars to get an opinion from a lawyer in your state, and even your county if it is particularly active. I think in most areas it's faster and easier to remove a tenant when the lease has ended/expired versus just when there's a dispute or unpaid rent. Additionally, in general, it would probably be good to find out how long the typical eviction takes in your area. I am near cook county, which is where Chicago is located. An eviction there can take anywhere up to 9 to 18 months. In neighboring counties though, it is much much shorter.
If you can find that information it would give greater insight into how much downside you could potentially be exposed to if the tenant doesn't leave as agreed.
Finally, if I were in your spot I would be interested to learn, if I could, more about the circumstances of the potential tenant. That may also help put your mind at ease or alert you to a possible issue.
0 Reply
Marci Stein
Rental Property Investor · New York, NY · Member since 2011 · 956 posts · 510 votes
2y
Yes, if they have a guarantor to sign the lease along with them, it would help because they would be responsible for payment as well.
Otherwise it feels a little sketchy to me, and I would not risk having to evict them after only three months payment.
0 Reply
Mary Ainsworth
OP
Lender · San Diego, CA · Member since 2022 · 235 posts · 94 votes
2y
Quote from @Dave Kush:

Hi Mary,
That's a good question, and I see where you're coming from. I would definitely be tempted to take that as well, since they'd be able to pay the whole term.
It might be worth a few dollars to get an opinion from a lawyer in your state, and even your county if it is particularly active. I think in most areas it's faster and easier to remove a tenant when the lease has ended/expired versus just when there's a dispute or unpaid rent. Additionally, in general, it would probably be good to find out how long the typical eviction takes in your area. I am near cook county, which is where Chicago is located. An eviction there can take anywhere up to 9 to 18 months. In neighboring counties though, it is much much shorter.
If you can find that information it would give greater insight into how much downside you could potentially be exposed to if the tenant doesn't leave as agreed.
Finally, if I were in your spot I would be interested to learn, if I could, more about the circumstances of the potential tenant. That may also help put your mind at ease or alert you to a possible issue.

Thanks for your input! That makes a lot of sense, I don’t want to go through an eviction so it’s just a matter of determining if I can trust that he will leave

I will look into Oklahoma processes
0 Reply
Mary Ainsworth
OP
Lender · San Diego, CA · Member since 2022 · 235 posts · 94 votes
2y
Quote from @Marci Stein:

Yes, if they have a guarantor to sign the lease along with them, it would help because they would be responsible for payment as well.
Otherwise it feels a little sketchy to me, and I would not risk having to evict them after only three months payment.
That makes sense! However he won’t have any payments to make after the three months, so what would the guarantor be there for?
0 Reply
John Ojo
Real Estate Agent · Northern California · Member since 2021 · 17 posts · 15 votes
2y
Quote from @Mary Ainsworth:

I know people say not to accept tenants if they have no active income, but this is a medium-term tenant who would stay 3 months and they can pay the entire 3 months upfront. In this case, is it a risk to let them stay?
My only thought is that they could try to stay there and refuse to leave I suppose, but that's a risk even when someone has active income coming in.
Also, if they have a guarantor, would that help? I'm not sure it would since they're paying all three months upfront, but I had that thought
Any advice would be great! Thank you :)

0 Reply
John Ojo
Real Estate Agent · Northern California · Member since 2021 · 17 posts · 15 votes
2y
I feel the biggest risk you take on renting is who you decide to place into your property. You can have an amazing or nightmare experience depending on who you elect to place into the property. The background check is important. What is there plan after three months? Do they have a place? Can that be verified? Are there no other parties interested? How does credit and past rental history look? Are there any evictions? What are the tenant rules in your area because that can also make the process harder. Depending on how everything looks you may want to see if they have a co-signer to ensure someone with income is able to back their play..if no one is willing to do that...there may be a reason.
Evaluate risk and minimize as best as possible..you can loose a lot more with the wrong tenant.
You got this!!!
0 Reply
Marci Stein
Rental Property Investor · New York, NY · Member since 2011 · 956 posts · 510 votes
2y
The guarantor will be there in case he does not leave
0 Reply
Jeremy Jareckyj
Real Estate Agent · Salt Lake City, UT · Member since 2020 · 490 posts · 205 votes
2y
guarantor would be the safest bet.
0 Reply
Zachary DealPro Member
Lender · Member since 2023 · 465 posts · 425 votes
2y
Guarantor is definitely the safest bet but I would also take into consideration their credit/background checks. Do they have funds for more than just the 3 months of rent? That could be something else to consider
[email protected]
0 Reply
Jonathan KlemmBusiness Member
Moderator
Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
2y
Hmmm that is an interesting question @Mary Ainsworth
My first question would be why don't they have any income? Do they plan on getting income? Why is the stay only for 3 months? Have you checked with references?
For me here in Chicago, I think it's more risk than it's worth because of the strick landlord laws. We are going through several evictions and the process is NOT fun at all - screening is by far the most important you can do as a landlord to avoid huge headaches down the road.
[email protected]
Quality Builders4.967 Reviews
Website View Page
0 Reply
Mary Ainsworth
OP
Lender · San Diego, CA · Member since 2022 · 235 posts · 94 votes
2y
Quote from @Zachary Deal:

Guarantor is definitely the safest bet but I would also take into consideration their credit/background checks. Do they have funds for more than just the 3 months of rent? That could be something else to consider

He did pay the application fee and his credit is 791 with no late payments on record and no criminal background which is good. And his bank has more like 11 months worth of rent which is also a good sign. I'll be calling his references later today!
0 Reply
Zachary DealPro Member
Lender · Member since 2023 · 465 posts · 425 votes
2y
Great! Those seem like strong mitigating factors. Obviously the most important thing is that you feel comfortable with the situation
[email protected]
0 Reply
Erin Spradlin
Real Estate Consultant · Colorado Springs, CO · Member since 2017 · 354 posts · 386 votes
2y
Quote from @Mary Ainsworth:

I know people say not to accept tenants if they have no active income, but this is a medium-term tenant who would stay 3 months and they can pay the entire 3 months upfront. In this case, is it a risk to let them stay?
My only thought is that they could try to stay there and refuse to leave I suppose, but that's a risk even when someone has active income coming in.
Also, if they have a guarantor, would that help? I'm not sure it would since they're paying all three months upfront, but I had that thought
Any advice would be great! Thank you :)

@Mary Ainsworth - You know, this is kind of how Airbnb Long-Term stays work. You don't know if they have income, you only know that they can pay the full amount. You background check them differently. You are protected by Airbnb, but the reason why I mention it is because it probably happens on Airbnb all the time and you don't know it. For this reason, I think I would be open to someone that can pay the full rent even if they are without a job.
2 Reply
Erin Spradlin
Real Estate Consultant · Colorado Springs, CO · Member since 2017 · 354 posts · 386 votes
2y
Quote from @Marci Stein:

Yes, if they have a guarantor to sign the lease along with them, it would help because they would be responsible for payment as well.
Otherwise it feels a little sketchy to me, and I would not risk having to evict them after only three months payment.

@Marci Stein @Mary Ainsworth - You could also ask for previous landlord reviews, and/or to have them fill out a background check. It's not a perfect system, but past behavior is a great indicator of future behavior.
0 Reply
Nicole Heasley Beitenman
Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes
2y
This would be a huge factor for me. If they're a student, sure. If they're a professional with a solid work history who hit a bump in the road, is relocating, and needs some time in their new market to look for a new job, new housing, etc, that works for me. Basically, if their story makes sense and doesn't raise any red flags, I'd gladly consider them.
2 Reply
Savannah Yingling
Realtor · Chevy Chase, MD · Member since 2023 · 74 posts · 51 votes
2y
Quote from @Mary Ainsworth:

Quote from @Zachary Deal:

Guarantor is definitely the safest bet but I would also take into consideration their credit/background checks. Do they have funds for more than just the 3 months of rent? That could be something else to consider

He did pay the application fee and his credit is 791 with no late payments on record and no criminal background which is good. And his bank has more like 11 months worth of rent which is also a good sign. I'll be calling his references later today!

Hi Mary! I am in Property Management, I was going to ask if any of this was taken into account. Seems like a strong applicant. I agree with Erin, reach out to previous landlords. We always reach out to previous landlords to verify rental history. It can tell you a lot about how they'll be/treat your property once moved in!
0 Reply
Colleen F.Pro Member
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
2y
@Mary Ainsworth The main question I would have is why are they there? Someone in the area short term to be by family, in a training program, relocating with a profession with potential in you area? A gaurantor is good but if they have 11 months rent now and the reason makes sense I would be ok with it.
0 Reply
Michael SmytheBusiness Member
Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
2y
Have them sign an actual lease and then send them a legal 30-Day Notice to Quit (eviction) on day 59 of their stay.
Doing this, will allow you to quickly start eviction process if they overstay and don't pay.
Logical Property Management4.9460 Reviews
Website View Page
0 Reply
Mary Ainsworth
OP
Lender · San Diego, CA · Member since 2022 · 235 posts · 94 votes
2y
Quote from @Colleen F.:

@Mary Ainsworth The main question I would have is why are they there? Someone in the area short term to be by family, in a training program, relocating with a profession with potential in you area? A gaurantor is good but if they have 11 months rent now and the reason makes sense I would be ok with it.

Yeah he told me he just got out of the airforce so now he's actively applying for jobs in the area so he is working on getting one, which is good!
0 Reply
Mary Ainsworth
OP
Lender · San Diego, CA · Member since 2022 · 235 posts · 94 votes
2y
Quote from @Michael Smythe:

Have them sign an actual lease and then send them a legal 30-Day Notice to Quit (eviction) on day 59 of their stay.
Doing this, will allow you to quickly start eviction process if they overstay and don't pay.

Good to know! Thank you
0 Reply
Adam M.
Investor · Texas (DFW & West Texas) · Member since 2023 · 86 posts · 55 votes
2y
@Mary Ainsworth I personally see no issues. We did this a few months back with a tenant and has worked out fine.... there are of course a few things you must bear in mind that were safeguards for us:

1. Background check is non-negotiable. Evictions? Credit Score? As you mentioned he should be fine here so that's good to go. Also something no one has mentioned yet-- communication!!!!! Do they respond to your emails/texts? Are they proactive keeping you updated? If not, this can be a red flag.
2. Narrative-- WHY is he paying up front for 3 months? For us, our tenant got a $250k compensation check for a distressing family matter and simply wanted somewhere to relocate to as he worked on those issues. The deposit was provided and he actually ended up paying a year up front.
3. Contract: this is the most important one in my opinion. Not sure where you are based but our tenant was in TX. You need to clearly explain when the lease ends and ample notice needs to be provided if an extension is required. Also are utilities included? If not, you will need to see proof that he can pay utilities by himself since he has no steady income. You must obtain payment for all three months before move in, otherwise you are leaving yourself open to liability.
4. Not sure why people here are recommending a guarantor? I would maybe consider a higher up front deposit as a consolation but not sure a guarantor is needed... if anything calling references.
5. That all being said, if you feel comfortable going ahead with it and and there aren't any superior leads then why not?
6. Finally, as a landlord a word of advice choosing tenants like this. Be careful will how that lump sum is handled. It can actually be riskier (investment wise) as you are not getting a traditional check every month, but added responsibility that you will hold onto the lump sum throughout the 3 month tenancy to accommodate for repairs, mortgage payments etc...

Hope this is helpful and good luck!
0 Reply
Mary Ainsworth
OP
Lender · San Diego, CA · Member since 2022 · 235 posts · 94 votes
2y
Quote from @Adam M.:

@Mary Ainsworth I personally see no issues. We did this a few months back with a tenant and has worked out fine.... there are of course a few things you must bear in mind that were safeguards for us:

1. Background check is non-negotiable. Evictions? Credit Score? As you mentioned he should be fine here so that's good to go. Also something no one has mentioned yet-- communication!!!!! Do they respond to your emails/texts? Are they proactive keeping you updated? If not, this can be a red flag.
2. Narrative-- WHY is he paying up front for 3 months? For us, our tenant got a $250k compensation check for a distressing family matter and simply wanted somewhere to relocate to as he worked on those issues. The deposit was provided and he actually ended up paying a year up front.
3. Contract: this is the most important one in my opinion. Not sure where you are based but our tenant was in TX. You need to clearly explain when the lease ends and ample notice needs to be provided if an extension is required. Also are utilities included? If not, you will need to see proof that he can pay utilities by himself since he has no steady income. You must obtain payment for all three months before move in, otherwise you are leaving yourself open to liability.
4. Not sure why people here are recommending a guarantor? I would maybe consider a higher up front deposit as a consolation but not sure a guarantor is needed... if anything calling references.
5. That all being said, if you feel comfortable going ahead with it and and there aren't any superior leads then why not?
6. Finally, as a landlord a word of advice choosing tenants like this. Be careful will how that lump sum is handled. It can actually be riskier (investment wise) as you are not getting a traditional check every month, but added responsibility that you will hold onto the lump sum throughout the 3 month tenancy to accommodate for repairs, mortgage payments etc...

Hope this is helpful and good luck!

Thank you! This is super helpful, he is very responsive to my messages which is good, thanks for calling that out. I agree on the guarantor thing lol, but I did solidify one just in case it comes in handy. And I didn't think about him paying utilities but yes, he is responsible for them so he'll need to have the funds to cover them, but he sent me his bank statement and he does have the cash so that's good
1 Reply
Adam M.
Investor · Texas (DFW & West Texas) · Member since 2023 · 86 posts · 55 votes
2y
@Mary Ainsworth You're most welcome! Hope it works out and keep us updated!
0 Reply
Jeff Filali
Rental Property Investor · Broken Arrow, OK · Member since 2016 · 1k+ posts · 1k+ votes
2y
Not enough information.
Why only 3 months? Why no income? What’s their plan after 3 months?
There are people who do this knowing they’re going to stay longer until evicted.

In the current market it’s a sellers/landlords market. There’s no issues finding good longterm tenants.
Only way I'd consider this is if they also pay a deposit, sign a solid lease and I'd be charging more like it's STR rates.
0 Reply
Jamie Banks
Real Estate Consultant · Reston, VA · Member since 2022 · 513 posts · 521 votes
2y
I've housed tenants in this situation who were students. That is the only tenant profile I'd allow it for because they're relying on financial aid or being funded by parents. I've required rent up front for the entire period, proof of funds to ensure they could cover rent 3x for each month they were staying and a letter from their program administrator ensuring that the students were on rotation and were required to relocate after their rotation was over. The students were international in my case and it was difficult getting a guarantor.
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.