Tenant has low credit but offered 1 year rent upfront

Wayne, NJ · Member since 2016 · 23 posts · 4 votes

Hi guys, I had a potential renter approach me and tell me that his credit is low but he will pay 1 year rent upfront in cash. It sounds good but I feel like this is a huge red flag. Anyone ever experience something like this? What are the cons of taking 1 years rent in one lump sum?

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Mindy JensenPro Member

BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes

@Ned Micic , I work here at BiggerPockets, and my job has me in these forums all day every day. I see this question every so often.

Everyone on the site always says "no, don't take the year upfront." Everyone. Some people still decide to take their chances because "they are a good judge of character" or "they are good at reading people" and feel confident they are good people.

And every time someone accepts upfront rent, it turns into a disaster.

Don't look for reasons to qualify tenants. It is FAR better to have a unit empty for a month, than to evict someone who doesn't meet your criteria.

[email protected]Podcast Guest on Show #261

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Kevin Branin
Mt Holly, NJ · Member since 2017 · 13 posts · 13 votes
9y
What is his job? did his employer give good reference, does he have good previous landlord reference, if so go for it, use the money to invest in something else, guaranteed rent for 1 year, bad/low credit could be from defaulting on mortgage bc of divorce, or defaulting on a car loan to pay his rent.
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Jim Shepard
Investor · Edwardsville, IL · Member since 2015 · 432 posts · 481 votes
9y
Several problems with taking a years worth of rent upfront. Your State may not allow it. Most will not allow that much deposit. Another problem is how many renters can afford a years worth of rent upfront? Where did it come from...drug money? Another problem would be if he was a problem tenant. Getting the rent upfront will make it harder to evict him if necessary. I wouldn't just pass on this one but run!
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Mike CumbieBusiness Member
REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
9y
Hi @Ned Micic,
I wouldn't recommend it. How difficult is it to get someone out who paid a year up front? Even if they were using the place as a meth lab? Decided to bring in a second tenant, started a cat rescue of felines with poor bladders? If you do evict where is this person going with no credit? I would guess hanging on to your place until the Sheriff pulls them out.
Just my thoughts, good luck with whatever you decide!
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CJ Ashton
Investor · Gilbert, AZ · Member since 2017 · 54 posts · 44 votes
9y
Danger, Will Robinson! Danger!
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Andrew Acuna
Investor · Mission, TX · Member since 2017 · 220 posts · 135 votes
9y
Ned Micic this is a bad idea. I've see guys do this with a tax return or something. When that time is up what condition is your property in? Probably not good, sounds like a tenant that will be a ton of problems!
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Mindy JensenPro Member
BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
9y
@Ned Micic , I work here at BiggerPockets, and my job has me in these forums all day every day. I see this question every so often.
Everyone on the site always says "no, don't take the year upfront." Everyone. Some people still decide to take their chances because "they are a good judge of character" or "they are good at reading people" and feel confident they are good people.
And every time someone accepts upfront rent, it turns into a disaster.
Don't look for reasons to qualify tenants. It is FAR better to have a unit empty for a month, than to evict someone who doesn't meet your criteria.
[email protected]Podcast Guest on Show #261
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