Hello BP community,
Essentially my question to you all is this: if everything on an applicant checked out but their credit, would you rent to them if they paid a years rent up front?
I am a 21 year old house hacker looking for some advice from those with more experience.
why not you should still do quarterly inspections but take the money, FYI many countries overseas they pay the Year upfront
No. If they don't have any credit, why would you check anything else?
Plenty of people with good credit to choose from. If you don't get any applicants with good credit, recheck your rent amount. Your asking rent is too high.
I would much rather rent for a lower price to a more qualified tenant than at the highest price possible to just anyone who is willing to pay. It will cost you much less to choose your tenants carefully.
Disregarding the tenant quality, as an example in Florida prepaid rent must be held in a segregated account and drawn on as the rent comes due. If the tenant decides to leave early, it is possible they may be entitled to some of the unused rent if you re-let the property. I don't see a whole lot of value in prepaid rents...but I do see liability with it. I personally don't care to accept it.
I had an applicant that wanted to pay the entire year upfront. That did concern me, because it makes you wonder what's going on. I did a background check on all applicants and found that although this person had good income, their job background showed that the moved around alot and changed jobs a lot. I found a good applicant that had a decent job, stayed at their apartment for 5 years and held their current job for the past 3 years.
@Chad Miles What is the reason to checking credit? To make sure you get paid... If you have the money and the rest of your due diligence is done, then it's best case scenario.
Disregard most of the above, its bias on one side of the street or another.
The average business exec will move more times in a year than your average teenage girl will change boyfriends.
IT personnel move where work takes them, or where the pay raises are.
Job history is irrelivant, only employment fact that matters is:
A: do they maintain constant employment?
B: does the pay go up, go down, or stay the same?
A tells you whether they are changing for the good or bad, with short gaps being for the good, long gaps for the bad.
B tells you whether they took a new job with better pay and benes, a wprse job because of either a pay cut, relocation, demotion, and lastly it tells us if they are laterally moving to another company because of jumping ship, or being let go.
Next, the question to ask is HOW do they have a years worth of rent saved?
If theyve always had a steady flow of employment, chances are they are good at managing money.
They wouldnt have a years worth of rent otherwise.
Chances are they have bad credit due to an old incident, not a new, most likely divorce or something else beyond their control.
One thing all people with truly bad credit have in common is bad money management skills and little to no savings.
A years rent saved up is far from "little to no savings"
Instead of one year up front I would opt for a much larger deposit. If the tenant does not pay rent on the 13th month your still in a bad spot. If you collect say 6 months of rent and the tenant doesn't pay rent on the 2nd month your in a much better position to come out ahead.
I have had people do this a couple of times.....
I actually, don't treat it much different than my normal screening process...
Of course, it is non-standard, so I simply see the rationale. For example, I am in a summer tourist town, so I had a seasonal jeweler that simply paid me six months advance on a condo rental every year for a few seasons... He did not want to write six one thousand dollar check, so one for 6K worked for us both... (of course, I still did the full app and process, all checked out).
Another time, a much younger person (who was a bit erratic) pushed me a large stack of one hundred dollar bills, hoping to avoid the screening with a money talks approach to just pay for the lease term. I guess he though I would get green eyes and hand the keys. I simply offered him an application (which he would not take, a real red flag as I find those with serious eviction, credit issues, or criminal history treat my app like a vampire does daylight, literally moving away from it....)...
Short answer--it does not matter much to me--all up front or monthly... You still focus on the quality of the tenant.
Don't do it. If you have to get rid of them for any reason it will be a lot harder if they have pre-paid a years worth of rent.
Why can't they just hold the money in a savings account and pay the rent when it's due? If they are not responsible enough to pull that off then they probably wouldn't be a good tenant anyway.
Friend of mine took several months rent on a $5k a month place upon move in. That was the last time he was paid. Turned out to be a drug dealer who had to be evicted.
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