Applicant has no job but wants to pay 12 months rents

16 Replies

Hi all, new landlord here. 

This applicant recently divorced with one kid and 2 dogs. She was a stay-home mom and has no income. 

As part of the divorce, they are selling the house, and it is under contract (verified that piece of information). 

She has funds from inherit IRA, saving, selling the house...

She offered to pay 12 month rent up front. 

Should I Consider? 

No. Unless she has verifiable sources of income to provide you assurances I would not rent to her. Do not fall prey to sob stories. It will bite you in the rear end. If she can get someone to sign the lease with her as a guarantor then you might consider it. 

@Liwei Zhou I wouldn't rent to this person either. They may have the funds to pay 12 months up front but they have no source of income. Once those funds run out, how is this person going to pay the bills? You have no security beyond the 12 month period and if you have to evict after those 12 months, the holding costs alone wouldn't make it worth it. 

I would consider it if she checks all of the boxes and her child and dogs are ok.  If I was skeptical I would consult an attorney and likely make a clear, tailored 12 month lease.

I have rented to recent divorcees before with horrible credit because of their significant others and have had very good luck.

There are many factors to consider besides income. She doesn't have a Landlord reference but she did own a house. However, her credit may show stable payments, but maybe her husband was the stable one and she's financially reckless? Also, people tend to go wonky after a divorce, engaging in reckless behavior, dating issues, etc. And she has two dogs.

Personally, I would pass. Many renters will offer to pay a lot of rent up front to avoid you looking too deeply into their past.

If you do I would sign a month to month lease with the funds in escrow.  While she doesn’t have a job she most likely has income in the form of child support and alimony.  How is her credit and what has she said her plan is for future income.  Hopefully in 12 months this moratorium nonsense will be over and if she doesn’t pay she can leave.  I would also suggest a co-signer, should be low risk for them since money is paid up front they are just guaranteeing she will pay or leave in a year.  

I can see how this could happen in a divorce situation, but I don't let that sway me in my business. I don't like upfront rent at all and don't want to be locked in for that year via a lump sum if they can't pay other things or can't do normal maintenance inside the house while living there.

This is tough because if he has the funds, then he should be able to withdraw monthly with ease. I would make sure I have a very solid lease written that protects yourself as much as you possibly legally can. Or, just get a normal tenant with a background, credit check, and jobs.

@Liwei Zhou  How about putting the rent in an escrow account and draw the rent each month on the due date? That way, rent is not actually paid ahead, but guaranteed for the year, and if something happens and you have to evict, you don't have to pay rent back.

@Liwei Zhou

Set up your own rental criteria you would be comfortable with frequently 3x or 4x rent as gross income. Min credit score. # of references. Whatever YOU feel comfortable with. If someone meets that criteria rent to them. If they don’t you pass. Decide if you will allow co-signer. But I strongly suggest to sit down and think about the criteria you want to use to protect your asset and set your standards.

Also be careful about state or local laws that allow you to only collect so much rent at once Or certain deposit sizes. She may have cash now and may pay rent for a few months but 100k in the bank doesn’t guarantee you get paid in throughout your lease.

Prepaid 1 year in advance looks wonderful if all your other conditions are met. Assume that is in the bank.

Focus on month 13. Ask your tenant for the plan after year 1 to determine if she will still qualify. She might not be able to show you recent work history, but could convince you she has marketable skills and could earn enough to qualify. Alternatively, maybe she's a retiree and can point to savings. You might be able to work something out where year 1 is pre-paid and year 2 is escrowed and she gets it back if she moves out; otherwise it is used for rent. It is probably unreasonable to plan past year 2.

Getting a co-signer would be ideal.

If she is recently divorced, she likely has child support. How much is it compared to the rent? How much is in the inherited IRA? Is it recently inherited and she is zeroing it out or is it set up for XX amount a year for so many years, or does she have to take the minimum distribution each year and how much it that compared to the annual rent?

She may have income, just not a job.

What are her plans for the future?  College?  Job training, does she have job skills, has she every had a job?  It may be that she is employable and had desirable job skills, just needs to apply, or she maybe a more kept woman that will never work.  Or she may be on grants for college for years and neve have $.

Lots of things to consider.

@Liwei Zhou

I would not allow a tenant to pay for a full year in advance for these reasons-

1. Although they may have the money for rent now, they may not be able to budget money and this could become a problem when it comes to paying their utilities on time . Even more so, if you are listed as revert to owner with your utility companies.

2. This could allow the tenant to become relaxed with no threat of eviction and could resort to unfavorable hobbies- such as drug and/or alcohol use. It could be more difficult to evict them because you have been paid in full for a year.