Hypothetical: tenant paying a years lease with good credit?

12 Replies

Hey guys,

This is purely hypothetical, I'm just interested to see what landlords think about this.

Suppose you have a tenant who's being transferred or is a contracted worker and will only be in the area for 12 months. They have good credit history, good references, no evictions, etc. and their story about only being here for a year checks out (employment verification or something). 

They ask to pay the entire year upfront (maybe because they don't want to worry about it, maybe that's the way their company wants them to do it, whatever).

Would you do this? Would you agree to it, but ask the tenant to also sign a contract stating they're responsible for any issues that arise (painting, scratch on the floor, etc)?

I've seen a lot on here warning landlords not take a year in advance, but those almost all had to do with cash only incomes or bad rental history.

Would you do this if a tenant was solid?

@Jamie Scharbrough  never seen this work. But the employer may be paying the housing for them, if so I would consider that. Your lease should still be signed it will just all be prepaid per say. No legal or accounting advice. I would also get 1 months deposit just to be safe. Although save that money because if they move early, they may be entitled to a partial refund. Even though its your agreement never seen a judge let you keep it after you re-rent it. 

You might not want to do it for IRS tax reasons. You will realize all the income for 12 months all at once, and have to pay taxes on that, but your expenses will still hit when they hit. 

Originally posted by @Steve Babiak :

You might not want to do it for IRS tax reasons. You will realize all the income for 12 months all at once, and have to pay taxes on that, but your expenses will still hit when they hit. 


January...........good !

Originally posted by @Jamie Scharbrough :

Would you do this? Would you agree to it, but ask the tenant to also sign a contract stating they're responsible for any issues that arise (painting, scratch on the floor, etc)?

That contract thing is called a lease and of course you'd have them sign it.  You should also collect a security deposit to cover said damages, just like any other tenant.  

Screen the tenant and if they fit all of your criteria I'd still rent to them.  I wouldn't give them any preferential treatment over a monthly paying tenant.  

Sorry Patrick, I should have been clearer. I meant would you make any special additions to the lease or have a separate document listing those additions.

check your state laws and see if there is any issues legally.

Personally I see only heartache and no gain as a landlord. What happens if they decide to move out early? Most people want a discount but honestly I see no purpose to do it. It seems like there's a lot of liability on I the landlord that really doesn't need to be there! If they are auch a good tenant than why can't they pay like normal people!

I did something like this with my very first tenants.  They signed a one year lease, but were moving in from out of state and neither person had a job yet.  Though they each had a long employment history where they were currently living and there was a very good job market for their skills where I live.  I did do my typical renter screening and verified employment (though they were leaving), current landlord, and credit check/bank statements.

They told me they had been saving a long time to move and offered six months payment in advance for my accepting them, even though they did not yet have employment in my city.

I'm sure the BPers reading this are now frightened and in horror that I agreed to do this.  But it actually worked out fantastically.  They each found good jobs within a couple weeks of moving here and I used the up front payment to get ahead of some debts.

Of course, I was a newbie landlord and it never occurred to me this might not be legal in my state (I still don't know if it is).  After the six months, they just went to the typical paying the rent each month.  They were always on time and were great tenants.

One caveat is the eviction process in NOLA for nonpayment of rent sounds like it is fairly easy and quick.  I would not have been so, "Eh, job-schmob," if I lived where evictions are difficult, long, and costly. 

I had a tenant who proposed exactly that in NC.  He was no problem, an ideal tenant, until the year was out.  After the initial year he wanted to stay but refused to pay rent on time, if at all.  We wound up evicting him and fixing a good bit of damage and replacing the fridge and stove. He stole them.  

He checked out great, was clean-cut, spoke well, and everything you would want from an in-person screening.  It turns out he was screwing the system with a student loan and never went to school.  He would sign up for classes and never attend.  Turns out another tenant had a class with him, and he never showed up.  Our apartment building is near a bus stop so it is appealing to people with no car.  Our office is also very close to a bus stop, so we never thought twice.  Turns out the guy sat around all day and drank beer and watched TV.  I guess he took the student loan money and paid his rent then screwed off for the whole year.  Must be nice.  I'd like to take a year off, too.

I would never do it.  Odds are not in your favor most the time.  Even if they checkout "clean" it most likely just means they outsmarted you.   It's a red flag. 

I would not want to do this. There are a couple issues. Depending on state law, in my state of Florida the statutes require the advance rents to be segregated. Basically, this means the landlord has no use of these funds....but does have the LIABILITY of holding them. The landlord can only then take one months rent out of the segregated account at a time as it comes due. Therefore, I see no value. What if they decide to break the lease? What if the military deploys them? If you can find more benefits vs liabilities to doing this then that option should be considered. I don't see any (at least in Florida).

Why would accepting a full years rent in advance be an issue?  My wife and I are in a similar situation (I've just left my job) and would like to rent a place for a year in a new town so we have a chance to figure out what parts of town we like before buying/building.  I'd rather just write one check now and be done with it for 12 months (plus we're hoping it will help us slide into a place that a number of other people are interested in).  I must be missing something here - this seems like a no brainer to me.

In some places, such as our home jurisdiction, a landlord it not permitted to require, solicit, or receive rent payment in advance of the the next rental period ... i.e., I could accept March's rent, but not April's today.

We had an international student a year ago whose father wanted to pay the entire year in advance.  We ended-up working with him to set-up a trust account at a Canadian bank (in his son's name) and arranging and automated transfer of the rent amount to us on the first of each month.

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