Dallas-Fort Worth Real Estate Investor Club

Accept full year's rent?

  • 05 Jul 2023 2:57 PM
    Message # 13223905

    What are the pros/cons of accepting a full year's rent in advance? 

    It makes me uneasy because *I* always pay as I go, but this is a reverse-type situation.

    Would it mean that I would have more trouble evicting them if it came to that?

    Thanks for your thoughts.

  • 06 Jul 2023 12:23 AM
    Reply # 13224082 on 13223905

    That is strange.  Makes me suspicous too.

    You can't evict them for non-payment of rent, but you can evict for any other lease violation.

    Last modified: 06 Jul 2023 12:23 AM | Neil Aggarwal
  • 06 Jul 2023 1:21 AM
    Reply # 13224088 on 13223905

    If it's a brand new tenant, I'd be very suspicious. I'd have to have a good understanding why, and be comfortable with their answer.  I'd also be worried that they suddenly came into money and if I would have trouble collecting rent after their year lease is up.  I think there's also a higher chance that the tenant will feel entitled and may require more attention over the course of the year.  Regardless, you should do your normal background checks: sufficient income, good credit, no evictions, etc.

    If you decide to accept it, I wouldn't spend the money early.  If they decide to break the lease early, you will likely have to refund the remaining pre-paid rent (although depending on your lease you may get to keep the security deposit.)

  • 06 Jul 2023 7:20 AM
    Reply # 13224175 on 13223905

    Thanks Neil and Jason. All good thoughts.

    A friend brought up another possible scenario--it's drug money!

  • 07 Jul 2023 7:33 AM
    Reply # 13224735 on 13223905

    There certainly is no legal reason why you can't collect a years rent in advance but as others have said, non-payment of rent will no longer be grounds to evict and JP courts are not always in favor of non-rent reasons for eviction. Finally, I would visit with your accountant and all rent will be income for the year you accept it. 

  • 19 Sep 2023 1:26 PM
    Reply # 13256474 on 13223905

    I hope this message finds you all in good health and high spirits. Recently, I've been presented with the opportunity to receive a full year's rent in advance from one of my tenants. While this may seem like a convenient and potentially advantageous situation, I wanted to reach out to gather some insights and advice from fellow members of this community.

    Here are a few questions and considerations I have regarding accepting a full year's rent:

    Are there any legal or financial considerations I should be aware of when accepting a full year's rent in advance?

    How might this impact taxes or other financial aspects of property management?

    Could accepting a full year's rent affect the tenant-landlord relationship in terms of flexibility in addressing any issues or changes in circumstances that may arise during the lease period?

    Is there a potential for disputes or complications regarding lease terms or conditions?

    How can I mitigate the risks associated with accepting such a substantial sum of money upfront, ensuring both parties are protected?

    How does receiving a lump sum affect the landlord's responsibilities in terms of property maintenance and repairs throughout the year?

    What steps can I take to ensure that the funds are handled and allocated appropriately throughout the year, and how can I protect them against unexpected events?

    I appreciate any insights, advice, or experiences that you can share to help me make an informed decision in this matter. Your expertise is invaluable, and I'm eager to hear from you.

    Thank you in advance for your assistance!

  • 19 Sep 2023 6:23 PM
    Reply # 13256625 on 13223905
    Robin Carriger (Administrator)

    In my experience, some tenants who want to pay many months of rent in advance are protecting themselves from themselves.  Somehow they've come into a large sum of money, and, if they keep the money, they know that they'll spend it irresponsibly.  Therefore, they get it out of their hands quickly toward something they know they're going to have to ultimately pay anyway.

    If I accept a significant amount of rent in advance, I've learned that I'll need to start communicating with the tenant who paid in advance a few months before they will need to start paying rent again, because they will be very unlikely to keep track of when they'll have to start paying again.  If I don't do that, it won't go well.  Ask me how I know.  :-|

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