What rent discount do you give for paying a year in advance?

20 Replies

Help. I have a possible tenant that wants to pay a year in advance for her daughter who is in collage. Should I give her a discount on the rent or is this a bad idea,

Oh I forgot Im in St. Louis.

Thanks

Did she ask? If she didn't bring it up then you shouldn't either. I'd probably  be open to giving like a 5% discount for a year paid in advance if they were requesting a discount. Make sure you check local laws to make sure that's ok.

I would probably take the payment, but no discount.

Check with your accountant before accepting more payments than the number of months remaining in the year. You'll have extra income where you'll have to pay taxes on but no additional expenses. 

I wouldnt do it. If she turns out to be a party animal and you want to kick her out it might be hard to do with a year of rent pre paid. Make the renter or the mom hold the money and pay monthly.

No discount.  I would not even accept rent paid a year in advance.  We stick to month-to-month rental agreements.  If we need to get a tenant out, it is much easier to do so.

Thanks everyone for the response I didn't feel right about it. It sound good at first but way to many possible down sides for me to do it. Owe and since I posted she asked because she is paying in advance could we skip the background and credit checks and move in tomorrow something stinks here to me.
Thanks again it is so nice to have so many people to ask when your stuck

I know landlords who accept semester payments, it is common in our area for students but not the year so this does stink. For students sometimes searching police log and google  tells you more then that background check.  You will see citations there that aren't in a criminal record check.  Driving by the current address is also sometimes is helpful.  A parent who is honest about a reason for a quick move would be more okay with then one that seems to be hiding something.

Owe and since I posted she asked because she is paying in advance could we skip the background and credit checks and move in tomorrow something stinks here to me. 

Red flags waving and sirens blaring!!!  Absolutely do the background checks.

I would never accept a years rent in advance for exactly the reasons @Marcia Maynard  and @Wade Sikkink  bring up.  I only do month to month, which might not work for student rentals.  But these folks are telling you there's a problem.  Listen to them.

@Brent Ludwig  Now, if you haven't already, find the movie "Pacific Heights" and watch it!

Establish a solid screening process and keen operating procedures.  With both in place you will be in a better position for success.  Then stick to them.  

Too many red flags as @Jon Holdman points out.   Look carefully at all your candidates. Good luck.

Well it doesn't sound like they are scammers, just not the brightest people in the world. Either way, you dodged a bullet on this one. As far as student rentals, it is fairly common to pay for the semester up front, but generally not more than that.

I wouldn't think there'd be a problem with taking the prepaid rent. But only after doing background checks and deciding you'd rent to them even if they didn't prepay, because the fact they want to prepay is a red flag that they're trying to get you to not look closely at their background or credit. Sounds like you made a good choice turning them down.

@Adam Moehn  

It will depend on the tenancy laws in the jurisdiction.  Here, for residential rentals, we are not permitted to request or accept rent payment beyond the next rental period (i.e. month or week).   For commercial properties it can be done.

We have only had tenants propose to due this twice and, in both instances, we suggested they setup and escrow account and have their monthly rent payments withdrawn and paid to us automatically.

Updated about 4 years ago

Opps ... should read "We have only had Tenants propose to "do" this .....

I would never accept the money in advance for a year, a month yes but a year no, and here is why!!! How would you handle the funds should she have to be evicted?? She would most likely be due a refund but if she has paid in full good luck evicting, would make it tougher to do in my opinion b/c the tenant would have a lot of leverage in front of a judge but thats my opinion.

Originally posted by @Roy N.:

@Adam Moehn 

It will depend on the tenancy laws in the jurisdiction.  Here, for residential rentals, we are not permitted to request or accept rent payment beyond the next rental period (i.e. month or week).   For commercial properties it can be done.

We have only had tenants propose to due this twice and, in both instances, we suggested they setup and escrow account and have their monthly rent payments withdrawn and paid to us automatically.

Yes, you'd first want to be sure your local laws don't restrict this. The book "Landlording on Autopilot" mentions accepting a year's rent as a possible reason to qualify an applicant that doesn't have enough verifiable income to otherwise qualify. But I've not run into the situation myself.

Id take that year in advance, subject them to a lease subject to successful monthly inspections, with lease call in provision for failure or access not provided.

This business is about money and you're getting it all upfront. As long as its just a credit issue and not a wanted felon or something crazy issue...take it.

@Brent Ludwig no discount. Your supplying housing, not your fault she probably has no credit or is a student. If the mother was going to house her child on campus she would pay the boarding in advance too with no discount. Be firm, but fair.

@Brent Ludwig also, there is no incentive to receiving the money in one lump sum for the year. What if they end up being a crap-*** tenant? How are you going to evict them? I think if you take that money it's as good as honoring a 12 month lease. Make them pay monthly for sure, and take no mercy if it's late. This is the real I would do it, the other comment I left was if you were going to take the money, then no discount. But it's safer to take the rent by month I think.

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