At Realty Masters, we do not accept large sums of money in advance to be used as prepaid rent. Unfortunately, accepting a year’s worth of rent upfront could present challenges for the landlord, tenant, and management company.
We occasionally get requests to accept advanced rent in order to bypass tenant qualifications during the application process. This happens often when someone is selling their house and relocating to the area without a job or does not meet the credit criteria but does have substantial savings. While we understand the reasoning behind this, we do not recommend this practice to either a landlord or the tenant.
If you are a tenant offering to pay a year’s rent in advance in order to get approved for housing, I would recommend that you exercise extreme caution. Unfortunately, housing scams are abundant and while many management companies will not accept this proposition, a private owner, and especially a scammer would. In my years as a property manager, I have seen scams where tenants have lost advanced rent, and security deposits, and are left with no recourse. I have also seen this occur when property management companies went out of business and it was apparent that tenants deposit funds were utilized in an illegal manner. Likewise, I have heard of private owners who have disappeared with deposit and/or advanced rent funds. Thus, I would caution you to use extreme discretion when offering this as a solution for your housing. If you’re looking for a trustworthy Pensacola landlord, we have plenty of homes available for rent.
Holding extreme sums of money is a liability for property management companies. Advance rent funds are treated like a security deposit and must be held accordingly with the Florida statutes. This is a lot of extra accounting, work, and an additional liability for the property management company to escrow and timely release advance rent payments.
While this seems like an advantage for a landlord to have the security of rent prepaid in advance, I would also caution landlords against this practice. Keep in mind, there are entire scams with stolen identities and fake documents. This could be a way to get into a house and then default with fake money orders or a bank check.
Not only is it a liability to keep this amount of money on behalf of another person, but accepting a year‘s rent in advance can also come with legal challenges. Having rent paid up front can make it more challenging to evict the tenant if you need to. What if the tenant vacates and you need to refund the rent?
If you were to accept this situation, we would recommend you keep the advanced rent in accordance with Florida statutes and release it monthly. Do not spend it as it is not yours until the rent period you are collecting for is due. Additionally, depending on the situation, you could be subject to taxes when you collect the rent, not when it is due.
For Pensacola landlords, rather than collecting a large amount of advance rent, we recommend you look into other options to help guarantee a tenancy like a strong screening process, an additional security deposit that is held in escrow, a cosigner, or holding out for a tenant that meets all qualifications. If you’re looking for an experienced Pensacola property manager, reach out to our team to chat.
