Tenants Who Pay a Full Year Upfront

Real Estate Agent · San Antonio, TX · Member since 2017 · 814 posts · 466 votes

6y

No story here. Just wanted to post something because I read half or your post.

So, it was hard to evict someone that paid rent late, in a monthly basis, imagine what nightmare would be to evict someone that paid you a full year in advance....

1 Reply

Shiva Bhaskar

Investor · Los Angeles, CA · Member since 2017 · 523 posts · 476 votes

6y

I once worked as a rental agent in NYC. There was a large presence of international students from rich families in China and Hong Kong, and wealthy internationals in general.

They often paid one year upfront, because they had no credit history, and were living in properties owned by some of the biggest names in NYC real estate. From talking to leasing agents and others, it seems like things went quite well with these tenants.

However, I'd differentiate these folks from people with BAD credit, i.e. those who don't have a thin file, but have proven to be irresponsible. I'd never take a tenant who fell below my credit requirements for an area, regardless of paying a year upfront. Rather even take a bit less rent for a quality tenant.

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Billy Smith

Shawnee Mission, KS · Member since 2016 · 716 posts · 313 votes

6y

I have had experience in this area I see I responded while aback it boiled down to mainly 2 reasons. The first is bad credit the other is want a price break.

I resigned my first renters they paid up front again I raised rent, they are still under what I could get but not a BIG amount.

So, I take the clump invested it in stocks at the bottom in March see what happens so far so good.

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Wesley W.

Rental Property Investor · The Vampire State · Member since 2013 · 2k+ posts · 2k+ votes

6y

In NY, accepting any more than one month's worth of funds in advance (usually reserved for the security deposit) is illegal. So, the state government has unfettered the NY landlords from such weighty, complicated business decisions. Thank God for them.

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Account Closed

Rental Property Investor · Canton, OH · Member since 2017 · 1k+ posts · 1k+ votes

6y

@Scott Trench

I had 1 tenant pay 12 months up front and never had a single issue with them during that time. I had 2 others pay 6 months upfront and no issues either. I think it all goes back to screening them well.

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Ron H.

Investor · Melbourne, FL · Member since 2017 · 159 posts · 116 votes

6y

I have accepted a years payment several times, but only after they had already stayed there a year. From an eviction standpoint I see it no different than with people that insist on continuously renewing 1 year leases, which I now go m2m after a year. I had one year paid tenant move out after only a few months due to a reserve callup. No issues just return unused portion. He said he was using GI Bill money and wanted to make sure he had his rent paid.

1 Reply

Jenni Ellis

Property Manager · Member since 2018 · 174 posts · 185 votes

6y

I manage hundreds of rentals and I can say we have used this method a few times for tenants. It is not our go-to option, but one that gets considered. We have a pretty strict rental criteria and a less than 1% eviction rating. When we have a tenant that checks 3 of 4 of the larger criteria boxes, or if they have a ding on their credit that is medically related or directly related to a divorce, we offer other options. One may be 6 months up front, or 2 month security deposit, or adding a co-signor, etc. I would say that the full payment up front should be one tool in your toolbag, and not the only one. I would also say that as a manager, we never give the landlord all of this money up front. It is held in a reserve account. If something goes wrong and the tenant isn't in the property for a full year, you need to come up with their additional funds.

1 Reply

Wala Habiby

Real Estate Agent · Knoxville, TN · Member since 2020 · 79 posts · 29 votes

6y

@Scott Trench I have been through this before and 7 out of 10, a large payment was not worth the hassle of dealing with their issues BUT I have done it multiple times but I structured it a little different. Instead of taken 12 month rent payment, I would take 4-6 months deposit and then the rest can be the last few months on their lease. This one first I quarantine that they keep paying every month until we get to their "already paid rent" and of course I also have a VERY large deposit in case they mess anything up. I would keep an eye on them and if anything happens that I am not comfortable with (illegal activity or signs of them destroying the property) then I would evict them, fix what I need, rent it to someone else and usually I am still ahead by few months on the rent/deposit. Win/win...
Now I will say, in a hot market/area where rent is high and I have no problem in renting, I probably won't do it. I usually end up doing this when I have a property that goes vacant in a dead month such as December/January.

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Steve Bracero

Real Estate Agent · Westboro, MA · Member since 2016 · 1k+ posts · 471 votes

6y

I have had an issue with this. One applicant was transferring from out of state and only he could see the unit. Then he scrambled to fill out the rental application in full while viewing.

He then tried to write a check ( personal check) to secure his deposit on the spot. Needless to say when i checked out his references, it did turn on some on the info on his application was not matching with what i was being told. He calling me about a dozen times the day after the showing, ( in addition to texting me) and " wanted a break" since he was coming from out of state.

He wanted to pay upfront.. and said he could not get a cashiers check or money order.

2 Reply

Renata Tavares Wong

Member since 2020 · 10 posts · 1 vote

6y

Just the way you said ...

And, it's perfectly fair to say, "I had a tenant pay in full upfront because of X, Y, and Z. That tenant never gave me a problem, and I enjoyed the rent in full upfront, and they still live there problem free today several (more than 1) years later)." They were moving from on state to the other , booth of then had filled for bankruptcy. I took a risk , but the contract was written to details to cover me. They lived in our home for two years, without not problem. They left as they purchase a home in LV. Best tenants ever....

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Whitney HuttenPro Member

Investor · Boulder, CO · Member since 2016 · 1k+ posts · 1k+ votes

6y

@Scott Trench I've only had this happen once where the tenant paid 1 full year in advance. The tenant moved-in in December, so I was pretty happy getting the unite rented. Trust me, I was skeptical! I had the PM double-check everything... credit score, background, rental history, etc. Everything seemed to check out. The PM held the funds in escrow and paid out monthly to me (state law). The tenant was relocated 5 months later and paid a hefty lease break fee. It all went pretty smoothly.

I've had a few other tenants want to move in and pay 6 months in advance, however, they usually struggled with income qualifications. Those I have not accepted.

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John CasmonPro Member

Cincinnati, OH · Member since 2013 · 1k+ posts · 1k+ votes

6y

From many discussions with other owners, my own experience, and this thread, there seems to be a few takeaways:

1. A prospect asking to pay a year's worth of rent upfront is a huge red flag. Red flags tell us to proceed with caution and investigate further as something is abnormal. It doesn't mean you are about to rent to a drug cartel.
2. Find out why they want to pay in advance and how they got a year's worth of rent
3. If their credit and/or income is shaky, assume they will not be able to make payments beyond the upfront payment and plan accordingly.

1 Reply

David Avery

Flipper/Rehabber · Phoenix Arizona · Member since 2020 · 1k+ posts · 686 votes

6y

Great Topic, how many renters have a years rent up front. Are they shady, trash, drug dealers, etc. Of course a credit and rental history, and criminal background is always best prior. But really....

Money talks, if a tenant is self employed, maybe raised their own kids and had to cut corners to feed and house them.

Went through a bad divorce, etc, etc,. Is their money, bad?

Of course not, Maybe some red flags but there are reasons for it. They have $10,000- $20,000 willing to give you up front!!

They are a great tenant and will not bug you as much as those others the pick you apart!

They have the money and money talks!!

Best tenants have money and money in the bank, just say " can you send me a new bank statement?"

Most of them will that have this money up front. They may be at 600 credit and have a prior of 22 years ago, but really

this is why they are a tenant!!

Best Tenants have money!

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Account Closed

Member since 2020 · 1 post · 1 vote

6y

I'm posting here as a tenant. My wife and I were recently looking for a rental on the Central coast of California in SLO county, where there is currently a huge housing shortage. We both have great credit, references etc. Same landlord for the last 8 years. Every property management company we spoke to seemed to be very turned off or unimpressed by the fact that we could pay a full year upfront. We were not offering this to try and receive a discount or in lieu of poor credit or anything like that. We simply did it to try and have a lease signed on a place we liked 30 days before the lease start date, so 1 month.

I can see why a property management company may not care about receiving payment in full for the term of the lease but I would think it would be advantageous to the owner if they're wise with investing their money?

Apparently it threw up such a red flag that we needed to go interview with the owners... Luckily they liked us and we were able to get the lease signed. I'm still not quite sure why they even bother with a property management company since they do all the repairs themselves and apparently screen the tenants themselves as well...

Overall my wife and I were treated kind of poorly throughout the whole process and it left a sour taste in my mouth. We started looking for a September 1st rental the 3rd week of July and people would respond to us like we were crazy. On July 28th we still had property management companies telling us they were going to have the house rented on August 1st. Almost every place we looked at the attitude was this place will have a lease signed yesterday.

What kind of people who can afford to pay for a $3500-$4000 a month rental are ready to move in 1 week or less?? Is my experience looking for a higher end rental property similar in other parts of the country?

Maybe we are crazy for not buying or leaving California but I'm convinced there will be a correction in the market, especially in the more rural areas of California. Now does not seem like a good time to buy unless you are ready to hold for a long time or somehow find a great deal, despite the super low interest rates.

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Amy Aziz

Specialist · Los Angeles, CA · Member since 2019 · 587 posts · 269 votes

6y

We used to let tenants pay in advanced and it worked out great for most. Then we had a few tenants at a luxury apartment who paid in advance but we had to send them a 60 notice or evict them for other reasons. The process to get them out was much more difficult because we were accepting their rent in advance. Since that we would only let the members pay one month in advance if they paid online.

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Angela Smith

Member since 2018 · 161 posts · 152 votes

6y

I am one who accepted a full year's rent at lease signing. That lease just ended and the tenants are now on a month to month agreement. We accepted the full year because they receive a lump sum amount from her trust fund that is designated to be used for housing. They offered to pay all up front and we accepted that. They have been good tenants for the most part. They are not the best problem solvers, but they are respectful. September is their first month to pay since renting a year ago and they paid on time.

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Anna Laud

Investor · Indianapolis, IN · Member since 2020 · 234 posts · 194 votes

6y

I've had a few tenants pay up front like this and in my experience it can be good but you still want to talk with them to find out what's going on. In one case the woman got a large settlement and she was going to leave her husband she paid 18 months up front and never once stepped inside the property at the end of the term I never heard back from her except when she said "We are going to try and work it out."

Another tenant did this and the couple were "sex workers" where she was the main one working and he was her security. They were no trouble but at the end of the year they had no money and went to live with his parents.

I have also dealt with a few squatters but those signs are usually obvious if you know what to look for so I never take the money without still doing the background check.

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Shiva Bhaskar

Investor · Los Angeles, CA · Member since 2017 · 523 posts · 476 votes

5y

Originally posted by @Scott Trench:

Are bad news, according to nearly every experienced landlord I've seen chime in on these types of threads.

However, it seems that many newbie investors (some with even less than my three years experience) like to chime in and talk about how great a deal landlords get when the tenants pay in full upfront. These types of replies got a lot of "votes" in a recent forum thread, implying that the community agrees with that sentiment, while more reserved opinions regarding the matter of accepting large amounts of rent upfront in order to overlook certain applicant weaknesses got much less love.

So, this thread is for experienced landlords. Can anyone relate personal stories, or anecdotes based on REAL EXPERIENCE, regarding tenants that are at least one full year old, regarding accepting rent upfront?

I'd like to hear them.

And, it's perfectly fair to say, "I had a tenant pay in full upfront because of X, Y, and Z. That tenant never gave me a problem, and I enjoyed the rent in full upfront, and they still live there problem free today several (more than 1) years later)." That would prove me wrong and the other enthusastic newbies right - that this is a perfectly reasonable way of doing business, with excellent outcomes for all involved.

But I bet not.

This discussion is triggered by another thread, " Would You Rent To This Applicant". A couple of investors with little more experience than myself seem to dismiss the caution of experienced investors that had some wisdom to share and "vote" for replies posted by newer investors that may not have had a full run with accepting a year of rent upfront.

My opinion: I listen to my elders on this one and would refuse basically any instance where a tenant offered to pay a full year upfront. My criteria for income, credit, and criminal background are quite reasonable for the area I operate in, and I am not willing to bend them. Any time a tenant offers to pay a year upfront is a huge red flag, even if they otherwise meet my criteria.

Prior to working as an attorney (well, before a law firm job), I was a rental agent in New York City with @James Mercure and some other awesome folks. Manhattan like the Los Angeles area, is home to a large population of foreign nationals, whether that be UN diplomats, recent arrivals who don't have credit. Many of these folks worked in Wall Street, tech companies etc. These were folks from all over the world.

NYC also has strict eviction rules, so most Manhattan (and Brooklyn or Queens) landlords required at least a 650 FICO score, with many asking for over 700. They have no problem finding these folks either, even in less desirable areas.

However, folks who were foreign nationals with NO FICO score used to be allowed, by many buildings, to pay a whole year up front. I stayed in touch with some of these folks, and I think by and large were good tenants.

Many of the property ownership companies that allowed this, like Glenwood, Related Companies, Rudin, Blackstone Group (which owns Stuyvesant Town, the largest development in Manhattan), are some of the savviest landlords not just in New York, but the whole country. They had been allowing this for many years.

I say all of this just to highlight that there are cases where a year up front makes sense. Most of these tenants had employment letters for well paying jobs, or proof of enrollment at schools like NYU, Columbia, etc. So, it's not like they just showed up with a bag of money.

I do think (and this is probably getting into fair housing issues) that US citizens or residents who want to pay the whole year up front have a much less sound explanation. Many are likely to have credit or income issues, be involved in stuff that is not above board, and so on. It's much more questionable.

So, I can see why most landlords should probably be wary of this, but I wanted to point out that there are some cases and markets where it makes sense.

1 Reply

Angela Smith

Member since 2018 · 161 posts · 152 votes

5y

I'm wondering if the covid crisis, the eviction moritorium issues and the general current financial environment will have any impact on landlords' willingness to accept a year of rent payments as signing. Once covid hit, I was glad that we had made this arrangement with one of our tenants. There was no wondering whether we would be paid.

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Frank Chin

Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes

5y

Originally posted by @Angela Smith:

I'm wondering if the covid crisis, the eviction moritorium issues and the general current financial environment will have any impact on landlords' willingness to accept a year of rent payments as signing. Once covid hit, I was glad that we had made this arrangement with one of our tenants. There was no wondering whether we would be paid.

I read through my NOO mortgage documents once, and it has a prohibition on collecting rents more than two months ahead or I'll be in violation, and the loan can be called. That was quite a few years ago and I'm mortgage free now. All I'm saying is this is one aspect you have to check. Some owners collect the rents a year in advance, then skip out on the mortgage. On the other hand, the bank will never know, how would they, till the owner skipped town, and the tenant can prove the rent is paid up front.

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Alberto Nikodimov

Property Manager · Orlando, FL · Member since 2020 · 200 posts · 194 votes

5y

I had a horror story with a 75 year old tenant who stayed for a month in our short term rental property and then offered us to pay for a whole year upfront above market price and even do some updates in the unit. Everything looked good in the screening process, no eviction or collections. Background check also came back good and since we already had the tenant in for one month and the property looked great we felt confident. We accepted the offer and 4 months in tenant called us for a huge leak at the property caused by the AC. Long story short, tenant who was staying at a waterfront property never closed the balcony door which caused constant condensation and damaged the whole AC system. We had to replace the entire AC which cost us $2,800. The worst part was that the technician giving us the estimate told us he's never seen a property in a worse condition in his entire career. We went out for inspection and I have never seen a property in a worse condition in my life either. There was mold everywhere and all furniture in the apartment were destroyed. None of the doors were closing including the front door of the apartment due to the mold and humidity in the air. There were also 2 other unauthorized guests. We started the eviction process but we were not able to get them out for another 8 months due to the large prepayment. We received multiple fines from the condo and the renovations cost us a fortune.

What I took away as a property manager and landlord from this story is that you should never feel too confident with a tenant no matter how good they look on paper. If it seems to good to be true it probably is!

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Tammy Mason

Investor · Fontana, CA · Member since 2020 · 128 posts · 94 votes

5y

Going back to this thread only made me realize that its not bad having upfront payment given the pandemic we are into.

1 Reply

Steve Smith

Member since 2020 · 217 posts · 167 votes

5y

I'll take all the money they have, and have done so. That doesn't mean I'll accept less than a quality tenant. Never had an issue. And I take all the money and use it. If someone can show me a law in Florida that says otherwise, I'd appreciate it.

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Blake Ramsey

New to Real Estate · Sacramento, CA · Member since 2017 · 32 posts · 19 votes

5y

I have had this happen several times without issue for my properties in Colorado Springs.

One couple was making 400K/year and just didn't want to deal with paying monthly (they did break the lease early and we refunded the remaining months)

Anther was a lady getting out of a divorce, had cash excess cash but normally would not have qualified because her income was under 3X

Recently another couple paid 1 year upfront because they sold their house upon relocation. Income was slightly under 3X.

So far no issues to report. That said, we still expected good credit, clean background, great rental reference and only used that if their income was slightly under 3X.

1 Reply

Michael Temple

Rental Property Investor · Toledo, OH · Member since 2017 · 257 posts · 215 votes

5y

I have *some* experience with this. I have a tenant that paid 6 months in advance and the first 6 months is now over. They have taken great care of the yard and property. Grass is always mowed and they actually planted flowers outside. I have inspected the property twice and it is clean and well kept inside. They don't bother anyone and rarely contact me for anything. I ask each month for the water bill to be reimbursed, per the lease terms, and the payment is sent over within 15 minutes each time via PayPal in full.

They were both young college students who are receiving financial support from their parents. I did a background check on them, but I didn't find anything on them probably due to their age. I realized I was taking some risk by accepting tenants who were depending on parents for support, but to date it has been a great experience.

However, to@Scott Trench point if you overlooked stuff in your underwriting process in lieu of a big pile of rent upfront I can certainly see where that could lead to issues. I still completed my background check, but they were young college students so I didn't find anything.

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Tenants Who Pay a Full Year Upfront

Tenants Who Pay a Full Year Upfront

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