Potential tenant wants a 6 month lease agreement advise?

Question

Hey BiggerPockets family as the title states I have a potential resident that wants to sign a 6 month lease and pay for the entire period up front the property is a single family house. I’m open to all advise , opinions and experiences or concerns.

Jaron Walling · Answer

That's the BIGGEST red flag you can get from a potential tenant. Don't waste your time. Give them the didn't meet our requirements phone call, email, or text and wait for other applicates.

Nathan Gesner · Answer

Be careful. Many renters will try to pay cash in advance in hopes you'll avoid screening them.

Why do you rent for one year? Because other people do it? What if the tenant wanted to sign a 3-month? What if they want to sign a 5-year agreement?

You need to know WHY you rent for a certain period of time. Then, if that reason is important enough to you, there shouldn't be any adjustment from that unless the applicant makes it worth your time. I try to rent on a one-year lease with a start/end date between April - September. This provides some stability and allows me to find a new renter while the market is hot instead of in November/December when it's difficult to find renters. If a tenant wants to rent for six months, ending their lease in the slow part of the year, I won't allow it or I will charge them a premium of 20-25% higher rent to off-set the risk of a vacancy in winter.

Theresa Harris · Answer

Nathan is right, why do they want a 6 month lease.  That is the first question, if their story is reasonable and checks out, then start the regular process.  I wouldn't take the full amount of rent in advance.  Screen them as you normally would.  Some locations it will be hard to find a new tenant in the winter, so that is another thing to think about.

Gail K. · Answer

Why only a six month lease?  Are they building a house or staying in a job that has a short term contract?

For what it's worth I once rented to an older woman who had a year lease but wanted to pay the first six months all at once.  She had rented for over 10 years with the same landlord in a community that was deemed unsafe due to chemicals in the soil.  Homeowners were paid to move out and for houses that had renters both the owners and the renters were compensated to move (the homes were eventually torn down).  This woman suddenly had more money then she had likely ever seen in her life (about $40K).  We discussed the fact that my rent was about $300 more than her previous rent and that even with this windfall she needed to be careful about handling this money.  She did work but still needed to be careful with her spending.

She did pay the six months rent in advance.  The only problem was when it came time to begin the monthly rent after six months had passed she had nothing left.  Her deadbeat relatives had come out of the woodwork and begged, pleaded and whatever her remaining funds.  I eventually ended up evicting her for failure to pay rent.

Gail

Laci White · Answer

@Andrew Roberts I don’t think wanting a 6 month lease is always a red flag (although it could be depending on the circumstance). Having been in property management for many years now, I would say that if they pass the background and credit screenings and have verifiable income, consider it. However, if it were me, I would be inclined to increase the rental rate by at least 5% for any lease term shorter than 12 months.

Adam Martin · Answer

It may or not be a red flag that they are willing to do this and context is everything.  I question why they are wanting the short lease, thats about the time it takes to build a house and they may just need a place to stay while their new one was being built.  My cousin was in this situation and no one wants to rent to someone short term since turnover is a killer.  If it were winter and that was the situation I may consider if I was having problems renting.  Now we are in a hot market and the market where I'm at really slows around November or December so not a chance.  If you do decide to do it though make sure you are getting a premium.

Justin Phillips · Answer

Here's an exhaustive thread on accepting rent upfront, Tenants Who Pay a Full Year Upfront (biggerpockets.com)To save you time: It's almost always a red flag, and putting yourself in a very hard position when the lease (and their money) is up.

Potential tenant wants a 6 month lease agreement advise?

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