Tenant wants to pay for year up front

14 Replies

Hello everyone,

My name is Greg from NY. This is my first post but I have been a long time reader of the forums.

I am looking for my first tenant as I am renting out my condo to move across the county. The first tenant I received an application from wants to pay for the full year up front as they do have income on the books. There are two applicants (boyfriend and girlfriend) one applicant is a nanny and claims to make $1000 cash per week to watch three children Monday through Friday. The other applicant is a self employed photographer who made 25k in 2015. I ran background and credit checks. No criminal backgrounds and no evictions. Credit scores are high 600 and low 600 respectively. Both have minimal credit. Also, their two references are their best friends. I do plan on contacting their current landlords and employers to get some additional info on them.

Can someone please give me an idea how to proceed. A year rent up front sounds great but also too good to be true so I am extremely hesitant.

Thanks in advance.

have them set up an escrow account and collect payments monthly.

@Greg Blasso I am always leery about tenant wanting to pay a year upfront.  It has worked out for some, but I have usually run into the ones that are trying to hide something and hoping to distract you with the money.  Their jobs sound like it makes it difficult to really know how much they bring home.  If you decide to proceced just make sure you base their income on W2s since one is self employed and the other is paid in cash.

@Greg Blasso

@Max Tanenbaum 's suggestion sounds reasonable. 

Like Caroline, I'm leery of tenants offering upfront payment, granted my skepticism is based off a sample size of one. A prospective tenant who happened to be a semi-celebrity talked a big game about upfront payment when seeing a property. He didn't lease it, and a few months later I saw headlines he had allegedly defrauded thousands of fans. Made me think he would have somehow jammed me too.

I have rented to two tenants over the years that paid one year upfront.  Both situations worked out fine because I did my due diligence and researched the tenants before moving forward.  Both had scores in the high 600's and I was able to understand their credit issues.  I was also sure they weren't hiding anything.  Are they asking for a discount for paying upfront?  If not, what is their motivation for doing so?  If you can't answer this question, I wouldn't do it.

Make sure you have a firm agreement with them if they break the lease and move out early.  Also prepaying will make eviction more complicated if necessary.

I have also turned down several prospective tenants who offered to pay upfront.  Had a bad feeling and saw pictures on the internet that made me nervous.

Hope this helps!

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Both your applicants sound very sketchy. I would not look into them any farther and move on to the next applicant. From what you have already provided neither will pass the basic screening tests of professional landlords. Employment, income, credit, references all unreliable.

The cash up front is nothing more than a bribe that bad applicants usually flash in front of naïve hobby landlords.  

Never accept payment in advance, it remains the property of the tenant until the beginning of each month and the landlord may not use any except the amount owed each month. There is no benefit to a landlord and, as I said, a bribe to entice dumb greedy landlords. 

@Jeremy Shepherd and I agree - - I take these as applicant knows or fears loss of income in the immediate future and needs housing any way the can get it.  At YE you will be seeing nonpayment and headed to eviction is my experience.

Offer M2M only and monitor payment history and promptness.  React as necessary.

btw: we must vet/screen tenants uniformly, but that does not mean they all get the same terms of tenancy.

Originally posted by @Thomas S. :

Never accept payment in advance, it remains the property of the tenant until the beginning of each month and the landlord may not use any except the amount owed each month.

Only in Canada, not the US. In the US, if a tenant pays you for a full 1 year term, that money is yours to do with as you wish. They cannot get a refund even if they move out early. It's the same as a month to month agreement, except it lasts longer. If a tenant has paid a normal month, but cause a problem half way through the month, you can still evict them under the right circumstances even though they still have 2 weeks paid left. Same goes if they have 2 months paid left. Depending on the situation you may have to refund them any unused portion of the rent...then again, you may not.

Generally it is a red flag when somebody wants to pay a year up front, but not always. You need to know exactly why they are doing this. I know a landlord with a tenant he has had for 9 years, every year he pays his rent a full year at a time. He's the type of tenant we would all love to have, very nice guy, very respectful of the property, no scam. He just likes to get his bills paid and out of the way.

I will agree with most others that this is a red flag.  If you choose to accept the full year up front, definitely make sure you do your due diligence.

I have 2 experiences with tenants paying up front. One tenant paid 2 months at a time and the other paid 6 months in advance.

The tenant who paid 2 months at a time was already a tenant for a year before he started doing this.  He worked for a construction company that did work out of state and didn't want to worry about his rent while away.

The tenant who paid 6 months in advance turned out to be a nightmare.  Within 1 month she said she was moving and demanded 5 months of rent be refunded to her, claiming that she was allergic to something in the apartment.  She said her doctor told her that the apartment was killing her.  Despite the fact the apartment was checked for mold, etc and found no problems there, and the apartment had fresh paint and brand new carpet throughout.

So my experience is 1-1 on these.  

If you do this and plan to renew their lease 30 days or more before the end you would be covered and have time to plan on a new tenant or a renewed lease with time on your side

I've had this request once.  It was actually my very first tenants and they paid 6 months up front.  They did it for two reasons.  1) They were moving to my area from out of state, but did not have jobs lined up yet  2) They requested I waive the $300 pet deposit if they paid 6 months up front (still paid the normal one month security deposit).

For me, it worked out well.  They were great tenants and did, indeed, get jobs shortly after moving here.  However, I also live in a landlord-friendly state.  If it weren't for that, I probably would not have rented to tenants who did not already have jobs.

@Greg Blasso , the downsides are huge and the upsides are small. 

It sounds awesome to have all the money upfront, and I read through all the previous comments and have never heard so many positive paid-upfront stories before. They are usually negative stories. Go with Max's suggestion of having them put the money into an account that they pay you from every month. If they can't manage their money, that's their problem - don't make it yours.

A credit score in the high 600s isn't all that great, and the low 600s really stinks. 

I'd go with Greg's suggestion of finding a different tenant. It is far far better to have a unit empty for an extra month while you look for a good tenant, than to go through the pain, time and money of an eviction for someone you bent the rules for.

Mindy Jensen, Real Estate Agent in CO (#FA100049656)

Thank you all for your responses they have been super helpful. I've decided to reject these tenants. I had the same thoughts and concerns on this as most of you and will hold out for a good tenant who checks all of the boxes on my screening list.

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