Ask Our Broker With Peter G. Miller: Rental Cash
Question: We want to rent a pet-friendly single-family home. Our credit is poor and we are currently unemployed but we are also prepared to pay a full year’s rent in advance. So far not a single landlord will accept our application. Shouldn’t a big payment up-front open doors for us?
Answer: There’s no doubt that rent in advance can be very attractive and some property owners might take it. That said, this offer has several parts. There’s the cash and then there’s also the unemployment, the bad credit and an unidentified pet. Some landlords will be dubious. Here’s why:
First, if you have bad credit and no jobs, then how did you amass such funds? There can be a very good reason for this situation. Maybe you have just sold a home and are moving to a new community. Landlords – like mortgage lenders – will want to know the source of this cash.
Second, many landlords have a strict no-pets policy. Pets can be enormously destructive. In some jurisdictions, they can also create substantial landlord liabilities. Owners may face steep insurance costs or even the loss of coverage with pets on the property.
Third, investor mortgages may prohibit the collection of rent in advance. Lenders may prefer the steady collection of rent to assure there are steady rental payments. The logic is that if the money is paid up-front, an imprudent landlord might spend it and not have enough left over to make mortgage payments.
Fourth, landlords may be prohibited from accepting rent in advance. This prepayment ban can be related to the way security deposits are defined. The description of a security deposit may be so broad that it includes even a final month’s rent. Landlords will need to check with attorneys to assure they have the right to collect prepaid rent in their jurisdiction.
Fifth, if a tenant check is somehow larger than the required amount, the landlord may call the police. The worry is that the check is part of an “overpayment” scam where the landlord is advised to process the check and then return any excess cash to the tenant. The check later bounces and the landlord has lost the money.
Sixth, landlords may worry that if occupancy continues past a year the tenants may not pay the rent given weak credit and lack of employment.
In today’s market, there’s no shortage of tenants who represent less risk. That, in the end, is likely the real reason why an applicant with big cash and little credit won’t get a lease.
Peter G. Miller is author of "The Common-Sense Mortgage," (Kindle 2016). Have a question? Please write to firstname.lastname@example.org.
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