tenant offered to pay 12 months rent up front should i take it?

Question

Thanks for taking a moment to read this post I could use some advice.

This potential tenant was formerly my landscaper who moved south with his wife a few years back. Long story short, she became ill, medical bills turned them upside down and sadly ended up passing away. He sold home to cover medical bills, and received a 6 figure death benefit after she passed. To add more sadness to the story, he was diagnosed with stomach cancer which was under control until recently discovering it is back.

Bottom line- he needs to come back to NY for treatment, needs a place to live with his 2 black labs and is willing to pay 12 months up front. I am on the fence for obvious reasons.

So far I know his landscaping business is still open, run by a partner however I do not know their agreement and his income just yet. He claims to have over 100k in the bank now my concern is how long that will last. Even with good insurance it could cost a fortune to be ill.

The unit is 2 bed 2 bath detached cottage with private backyard and we are in the process of renovating it. It will have new kitchen, new bathrooms and flooring with washer/dryer in the unit. I have no doubt I will be able to get a good tenant in quickly in my market.

What would you do?

Steve Hall · Answer

@Frank Mirando

Like @Thomas S. said, there must be a reason this guy wants to pay 12 months up front. (I disagree with Thomas that it is always a "bribe". He's stereotyping tenants. That is why I did not up vote his comment.) Did you ask the guy why he wants to pay 12 months in advance? Did you tell him that you still needed to run a background check?

I tried this once, paying 12 months rent up front. No property management companies would even consider me, so that left me with individual landlords. Most thought I was on the lam, a drug dealer, or a sexual predator. Really, I just did not want anyone to know where I lived. I didn't want to give my social security number out, I didn't want my name on their rent roll, I didn't want to show my 1040's to them, I didn't want them pulling my credit history and I didn't want them reporting my address to the credit bureaus.

If someone approaches me with an offer to pay for a year in advance, I would consider it as long as they explain to me their reasoning and they agree to let me run a criminal background check. I would ask them questions about their business, why they don't buy a house, how they can afford to pay $10k+ in one lump sum. I might also make them show me proof of funds (i.e. where the money is coming from.) I would work with them based on their situation, not jump to unreasonable preconceived conclusions (as most landlords do) on what this might mean.

Kathryn Daniel · Answer

@Frank Mirando

Don’t do it. In my years as a property manager I’ve always been advised to never accept more than one month of rent in advance. There is usually something shady going on, and if the tenant violates the lease it will be extremely difficult to get him out (or so I’ve been told - I’ve never accepted rent in advance like this before). When people make this type of offer they are usually hiding something or trying to offset other issues that would otherwise result in a denial of their application.

Shauna Gingras · Answer

@Frank Mirando

As a tenant I’ve asked to pay in advance for a period of time, 6 or 12 months, etc. I also asked about pre-payment discounts, which they did provide.

I was fine with them following their regular screening process, I just didn’t want to worry about paying rent monthly, at the time this place took payment by check monthly, they didn’t have an online or automated option.

On a side note, I did this when I was quite ill and downsized from a OO to a rental, he is sort of in a similar situation. Ask the guy what his intentions are. For me it was a mental thing. Even though I had a terminal illness I figured if I pre-paid to live somewhere for a year I’d need to be alive to do that. It sounds a little nutty but having cancer messes with your brain a lot.

He may have less than good intentions with his request but give him a shot at explaining them so you can make a decision.

Good luck

Aiden Harris · Answer

@Frank Mirando I’m not seeing an issue. I did this in college. I was a goofy out on his own sophomore, who was concerned about cash flow management. I didn’t want to end up being short on rent ever, so I wrote the property management company 12 months up front. They were skeptical at first, but after explaining my situation they permitted it.

Chris Szepessy · Answer

When I did PM, we had a guy who would rent from us for 6 months to a year and paid in full in advance. He would do live in flips basically and if he didn't have another house lined up, he'd rent an apt. for a short period of time. Never had an issue with him. Every situation is different, though. Like already stated, potential tenant turnover in a couple months if he should pass away is a small issue. But if he's clean and doesn't damage anything, any costs associated with that would be minimal. I would screen him like any other tenant and find out the agreement with his partner to see how much, if any, income he's making from the business.

Nathan Gesner · Answer

@Frank Mirando

Big red flag? Only bad tenants?

Screen him like you would anyone else. If everything looks good, except the year's rent in advance if your state law allows. Do not spend the money until it is earned! You need to have the funds available if he expires or breaks the lease and deserves a refund of any amount.

I manage over 300 rentals. I've only had a few tenants pay the entire year in advance and in all cases they did it for many years and were excellent tenants the entire time.

Scott P. · Answer

My application actually offers 5% off per month for months paid in advance. That's quite a discount. I've had a few people take advantage of it but not many, for example if they recently sold their home and were between houses and had $.

My State is not difficult to evict though. So I suppose I have an advantage if something goes wrong.

The tenant takes on some risk too in paying in advance.

Alex S. · Answer

Yes take it. If he pays upfront for 12 month.

Dave Lynch · Answer

@Steve Hall this is solid advice. I have one tenant who does it. She is a shut in and hates having anyone even talk to her. Only issue I’ve had is her ignitor went out and had to send hvac guys out. She was fine for them but just wanted them gone ASAP. She does have a lot of stuff but 🥴 so do a lot of my renters.

tenant offered to pay 12 months rent up front should i take it?

tenant offered to pay 12 months rent up front should i take it?

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