When a Tenant Wants to Pay Rent in Advance

By E-Renter Tenant Screening
Posted on September 8, 2011 under Landlord and Tenant FAQs | Be the First to Comment

Every now and then, landlords are faced with unusual requests from their tenants. One we’ve heard of recently involved a tenant asking for a discount on rent in exchange for paying a full years’ worth up front.

The rent is $650 per month, and the tenant offered a full payment of $7,200 or $600 per month. The landlord wanted to know if it was a good idea to accept the tenant’s money and move on, knowing she didn’t have to worry about late rent for a full 12 months.

While it might seem like a no-brainer to eliminate one concern that comes with being a landlord, this might not be such a smart way to go. Here’s why:

• Even if the landlord put the entire amount into the bank, interest rates are hardly attractive right now. Other investments might garner more return—or not. Is the risk worth it? There are few incentives for the landlord to give up $600 in rent.
• Offering a tenant a discount doesn’t make sense when you consider the lease stipulates rent is $7,800 per year, to be paid monthly at the rate of $650 per month. Monthly payments are all a landlord needs to do to make rent easier to pay.
• Entering into negotiations such as this with tenants could lead to others seeking discounts for paying two, three or six months in advance. This could lead to a bookkeeping nightmare for the landlord. And anyone who thinks tenants won’t find out about such an arrangement should think again. Tenants talk!
• If the tenant breaks the lease, or the landlord needs to evict, holding the tenant’s money for future rent could complicate matters.

In the end, a $50 discount is far more generous than any bank would give the landlord—so why give it to the tenant?