Tenant Has Offered 6 Months Rent in Advance - What Do I Do Next?
In this blog, we cover what to do if one of your tenants has offered you 6 months in advance, as well as the steps to take after.
This is an interesting one. On the face of it, a tenant offering you six months' rent in advance is great, right?
Not always.
It’s probably fine. It’s probably well-justified. It’s probably innocent.
But on the other hand, it’s probably because the tenant intends to use your property as a cannabis farm.
Told you it’s an interesting one. 😉
Why Would a Tenant Offer 6 Months Rent in Advance?
There are a number of perfectly valid reasons why a prospective tenant may choose to offer 6 months' rent in advance.
It might be so they can gain an edge over other applicants in what is becoming a very competitive rental market. When a tenant is up against 20+ other applicants (which isn’t unusual at the moment), offering rent in advance may tip the scales in their favour, because it means the landlord would be getting a lump sum of 6 months' rent straight in the bank.
Another reason may be to address credit history problems. It’s fairly common for people to have a bad credit score and/or a low income while having plenty of money in the bank. Offering the rent in advance is a way of skipping the red tape that may prevent them from being able to rent.
It may also be a simple case of personal preference. Paying the rent in advance means the tenant would have fewer outgoings on a monthly basis, making it easier to budget for things in the long run. If the tenant has the means to do it, then offering rent in advance can be a real win-win for both themselves and the landlord.
But there’s also the dark side of offering rent in advance. Tenants who intend to use a property for illicit activities tend to offer 6 months' rent in advance because no rent issues mean it is less likely for the landlord to come a-calling. Wherever there’s a cannabis farm, you can place a pretty firm bet that a rent-in-advance offering came before it.
What to do if a Tenant Offers You Rent in Advance?
Find out why
The first thing you’ll want to do is establish the why. Sit down with them and hear their reason for offering the rent in advance. Look ‘em in the eye. If the reason is genuine and they seem trustworthy, then it should be OK to give it the go-ahead. We’ve said this before and we’ll say it again: trust your gut.
Referencing
If you’re happy to proceed with the tenant in question, the next stage is referencing. And it can’t be stressed enough how important it is to acquire references for tenants offering rent-in-advance.
The usual checks should suffice, i.e references from employers and former landlords, as well as credit and ID checks, and possibly even DBS checks. Be as thorough with these as you can.
Rent Guarantee Insurance
You’ll also want to consider acquiring Rent Guarantee Insurance (RGI), as this will protect you if you don’t see any more money from the tenant after six months. Note that RGI usually requires sufficient referencing to be carried out.
All good?
Then go for it; enjoy the cash! However, you would still be wise to treat the whole situation with caution. Carry out an inspection or two during the six-month period (remember you must give 24 hours' notice)...
… If your property has been turned into a cannabis farm, you’ll smell it before you see it…
… And then you can bribe your tenant for a lifetime’s supply of cannabis!
Just kidding. Call the police.