1 years rent up front

[Berdine Ramos]

We have a rental opening up Nov 1, and have one applicant with a credit score of 790 offering to pay the full years rent up front. Red flag?

Thank You

[Andrew B.]

We had a tenant do this and it was not an issue at all.  Some people just have cash and want to pay the rent off for a year.

One thing to consider that we did not, we got a check for around $40,000 and had to declare all of the income in that one year.  I wish I would have asked them for two checks or a payment after the 1st, etc.  You may want to consider that.

[Terri P.]

I'm following this post as I'm experiencing a similar situation: I have an applicant offer to pay for rent 1 year upfront on his Zillow (generic) application. My lease is only 6 months to account for the season. Credit Score 776. He has his business bank statement and personal bank statement showing his income. He does not have significant rental history as it looks like he's lived at the same apartment for awhile. His references are his friends as he is his own boss. No criminal history on the background check. Housing is somewhat competitive at this time, even for renters. 

I couldn't find information on the internet about whether or not taking 6 months upfront in California is legal. I only have come across anecdotes and posts of people talking about doing it. Not sure about how this would affect me filing for taxes, etc. but I am just holding onto money that would go towards the mortgage. I've read people responding to this saying it may be difficult to evict later -- but I'm not sure how that applies if you're evicting for other reasons (and not over unpaid rent).

[Terri P.]

Quote from @David Vaughn:

I wouldn't do it. I have never had luck with someone paying a large sum up front and so much so I now refuse every time. JMO

 Could you offer examples of what happened/what went wrong with these tenants? I'm very curious to learn about your experience and what I should be cautious of. Thank you!

[Bruce Woodruff]

Landlords - why would you want to hold money for a tenant? Now you're just playing banker.....

Don't we want the process to be as easy for us as possible?

[Paul De Luca]

Quote from @Berdine Ramos:

We have a rental opening up Nov 1, and have one applicant with a credit score of 790 offering to pay the full years rent up front. Red flag?

Thank You

 Here's an older & longer thread on this exact topic - https://www.biggerpockets.com/...

[Melanie Thomas]

I would NOT allow this. It is an accounting nightmare! What is the job? Drug dealer? (I am being facetious) It gets tricky when late fees, maint chargebacks, NSF fees etc are incurred also. I have done this in the past and its bites me every time. Document your screening criteria and have your applicants sign off before applying. Good luck & happy investing. 

[David Vaughn]

Quote from @Terri P.:

Quote from @David Vaughn:

I wouldn't do it. I have never had luck with someone paying a large sum up front and so much so I now refuse every time. JMO

 Could you offer examples of what happened/what went wrong with these tenants? I'm very curious to learn about your experience and what I should be cautious of. Thank you!

 So far every time I have taken lump sum payments be it a few months up to several months the same result has happened. At the end  of the period I get no more rent. Generally this happens when a person that normally doesn't have any money comes into an inheritance or maybe a lottery winning or proceeds from a lawsuit or something similar. Once the money is gone, and it goes quick they are not adept at managing day to day finance. JMO and how it's worked out for me.

[Matt M.]

Did it once, and turned out he was a drug dealer... He stayed 1 year and had to be evicted. 

[Jeff Copeland]

It can be a major red flag: http://www.evicttv.com/episode...

[Nathan Gesner]

It's a red flag, but you screen them like anyone else and move on.

The reason it's a red flag is that many people will offer to pay rent up front because it clouds your vision. You skip some screening steps because the "easy money" is all you can think about.

Watch "Pacific Heights" with Michael Keaton. It should be mandatory watching for every Landlord.

[Billy Daniel]

I recently had a tenant ask if they could do this as well.  I refused.  We got them setup on auto payments from a new account so they could "separate" the money.  Works out great!

[Bruce Woodruff]

Quote from @Nathan Gesner:

Watch "Pacific Heights" with Michael Keaton. It should be mandatory watching for every Landlord.

 Scariest fricking movie ever!