I had one applicant offer this once, but they did not meet our criteria...so I've never done this.

But, if you offer 1-year leases, and an otherwise qualified tenant says "I'll pay the entire 1-year lease up front", what are the downsides to accepting this?

If they do this, and then violate the lease after several months, would you be able to evict for cause and simply refund them any un-used portions of this money?

Other issues?

People who offer a full year in advance are hoping to blind the landlord with greed so the landlord will not look too closely at the application.

Good decent tenants with sufficient income to pay their rent never offer extra months payment in advance. It just never occurs to them to do so.

I don't see a lot of advantage to it, anyway. It doesn't make your bills go down or your income go up. It doesn't even guarantee you a whole year of rent on time because if the tenant is truly awful and you evict him, the courts are going to make you give the unused rent back.

Well you can’t evict for non-payment. This kind if offer concerns me just like applicants that wave cash around to sucker you in to accepting them.

You will find a lot of helpful (and humorous) dialog on this same topic under WMH's thread "Paying in Advance Really" from yesterday.

I don't like to use an upfront year's rent as an excuse to let an otherwise bad tenant in. The only reason I take significant amounts as paid in advance is if there's a valid reason, such as a college student who gets once-per-semester aid/scholarship disbursements.

Usually, a pile of cash is a signal that someone is either desperate or a very poor manager of money. I don't want either one. Also, a bad tenant can easily cause more than a year's worth of rent in damages to a unit, then you're left holding the bag plus evicting, and likely by then all their money is gone.

From my own experiences,

after using the screen x3 process,

including a Private Investigator,

the 3- times I accepted a 1- year, rent paid in advance,

it was successful on both ends.

They all left after their 1- year agreement

and bought their own homes. (No surprise to me)

Would I do that in todays world ?

Odds are, NO.

I had one tenant who had been fully screened and approved. About two months into the tenancy, he told me "I just got a personal injury lawsuit settlement and I want to pay 10 months rent in advance." It was fine with me. At the end of the ninth month, I wrote to remind him that he had paid ten months in advance and that his month payments should resume on __[date]__. He then paid me six more months in advance, before resuming monthly payments.

There was no downside in this situation.

Thanks

Kevin, yes that’s a risk but no more than if she filed bankruptcy when she was paying each month, right?

I've had the BK concern for many years. Several tenants have declared BK but in every case the Trustee has instructed that rent be paid. Once that happens they can't miss payments because they will be violating the BK agreement. Thrown off BK protection.

I did 6 months upfront with a student a few years back. She did move 6 months but was a horrible tenant. I have to take the blame for not screening well.

My current tenants paid six months up front and were recent grads and the male half was an obvious saver and budgeted and they have been fine. I screened better as well but could still do better.

Thanks 6x6,

I took a full year from a newly widowed woman a few years ago. She had lost her husband only a month before and needed to move to town to be closer to family, she was moving from 45 miles away. She didn’t have a job because she had lost it when the husband became ill. But she had a small life insurance policy and paid the first year.

Hoosier,

My recent two year-ers were from out of town with only one in the couple working, the partner still looking/interviewing so not enough income to qualify today. Both couples moving back to hometown, closer to family.

One had inheritance money, the other from an insurance settlement.

Both in affordable housing, not high dollar. Fully employed in a few months.

Screened normally, just short on income during the application period.

Remembering two a few years ago. Both in wheelchairs with huge accident quarter mill settlements.

Just had a similar one today. Fresh divorce, trying to get organized, will pay 6 months up front to make up for no rental history - owned their home.

Downside? Their rent is paid and we SELDOM have behavior problems.

If things went sour we could refund unused monies.

BK: my experience thru many BK renters is the atty says to use up all their savings toward future rent because the court will seize any cash. The courts allow them to continue to pay rent to keep a place to live.

I had a carefully screened and well qualified tenants show up to the lease signing with four months rent, $6400, all in cash. Plus $1900 for the security deposit and I was awfully nervous as I rushed to the bank to get it put safely away.

I took that, but he'd never offered extra rent or deposit to sway my decision and he screened really well. The advanced rent was a surprise.

I suspect that he doesn't like the banks. Every now and again he pays the rent in cash. His credit is excellent and he doesn't have any judgements, so he isn't hiding money from creditors. Oh well. I'll take the rent any way I can get it.

Every other applicant that wanted to throw wads of cash at me had evictions and/or criminal record, or their income came from something illegal.

Check your state laws. In PA, we can't accept more than a total of two months rent and one month security unless there is some financial advantage to the renter.

I have had several people offer it and I have only ever accepted it one time. As others have pointed out, it is usually a bad sign, either because the tenant is not qualified or because they are trying to negotiate the monthly rate down.

If the situation makes sense, I would consider it again.

In the case of the one that I accepted, tenant was a married couple that were well qualified based on screening, had high credit and stable jobs. They had two down sides though, they had a doberman and only wanted a 9 month lease. They had recently sold their home and were in the process of building a new one. They were smart enough to realize the difficultly they were having finding a place with those 2 downsides, so they offered slightly above my asking rent, pre-paid.