Author Topic: Prepaying Rent - Worth a Discount?  (Read 5464 times)

nippycrisp

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Prepaying Rent - Worth a Discount?
« on: January 22, 2017, 08:05:46 PM »
Question for landlords (and anyone with experience on the issue, I guess): I'm in the process of moving to a HCOL area and am planning on leasing an apartment or townhouse. I'll have the proceeds from a house sale, so I'll be relatively flush with cash. I was curious as to whether it was possible/likely to successfully ask for a discount on the monthly rent rate in exchange for paying an entire year's rent before moving in? I've never heard of anyone doing this, but it seems like it would remove some of the risk for the landlord and, if they're growing, give them capital for expansion. Is this something that might work better on professional management (e.g., big complexes) or sole proprietors?

Thoughts?

mrsstache

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Re: Prepaying Rent - Worth a Discount?
« Reply #1 on: January 23, 2017, 03:50:54 AM »
From my experience (which is hardly vast), it's unlikely landlord will reduce rent rate. Also quite possible they will worry you are a drug dealer or otherwise unsavory character if you offer to prepay for a year. Plus, I don't see any real advantage for you. If landlord turns out to be a total tool or something comes up to make living there undesirable for the future, you will have a hard time getting your cash back. I would say it's not worth it.

supomglol

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Re: Prepaying Rent - Worth a Discount?
« Reply #2 on: January 23, 2017, 11:29:36 AM »
There is simply no harm in asking/offering.  A tenant once offered to pre-pay rent as part of his qualification because he was a young guy who didn't have much credit yet.  It worked out great, I got 3 months of rent upfront and he got a place he wouldn't have otherwise qualified for. 

Not exactly the same situation you're describing but the worst they're going to say is "no".  I don't think it will hurt your chances, in-fact it may help prove your financial position just by offering it.  As a landlord, and not knowing the rest of your rental and financial history I couldn't say exactly what I would do in that situation.  I think it would be a case-by-case basis for sure. 

robartsd

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Re: Prepaying Rent - Worth a Discount?
« Reply #3 on: January 23, 2017, 12:07:38 PM »
I rented a storage unit at a facility in my college town that offered 5% discount for paying 3 months at a time or 10% discount for paying 12 months at a time. I've also seen plenty of apartment complexes that offer lower rent for 12 months leases than for month-to-month agreements (usually a 5% discount or less).

I could see offering a discount based on the reduction in vacancy risk plus expected investment returns on the prepayment. If the property already has a standard 12 month lease or the landlord finds it very easy and inexpensive to fill vacancies, the discount for reducing vacancy risk might be negligible. Since the landlord would be taking on the risk of any investment returns, the landlord would also expect to receive most of the reward - in today's market, I wouldn't offer a discount greater than 1% for a 12 month prepayment (effective return close to 2% since the payment is only 6 months early on average).

Drifterrider

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Re: Prepaying Rent - Worth a Discount?
« Reply #4 on: January 23, 2017, 12:09:18 PM »
In the OPs position I might offer three months rent at once for a substantial discount but I'd never prepay one year.  What happens if you have to move?  What if the property is in foreclosure?  You might well forfeit your advanced rent money.

ALWAYS   ASK!!!  It is free to ask.

MommyCake

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Re: Prepaying Rent - Worth a Discount?
« Reply #5 on: January 26, 2017, 11:11:49 AM »
I would definitely give a discount for prepaying.  In the past I have offered tenants $50 off if they pay before the 1st.  As everyone else said, it doesn't hurt to ask. 

tralfamadorian

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Re: Prepaying Rent - Worth a Discount?
« Reply #6 on: January 26, 2017, 07:27:51 PM »
Actually it may hurt to ask. I had heard feedback from other landlords- and probably would be my response as well as a landlord- that they would presume there was a problem- drugs, upcoming bankruptcy, other legal problems- if someone was offering to prepay rent, the landlord would turn that person down outright from renting from them at all.  Something to consider...
« Last Edit: January 27, 2017, 10:27:34 AM by kellyincville »

cchrissyy

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Re: Prepaying Rent - Worth a Discount?
« Reply #7 on: January 26, 2017, 09:11:28 PM »
landlord and renter here


yeah, prepaying a year is too strange, it would make me think you are hiding assets... upcoming bankruptcy? divorce? being sued?  hiding assets is shady in any case and I don't want shady tenants.

part of the reason it's strange is because most people who have the $ where they could pay in advance are smart enough about money that they'd rather invest it, or they'd rather keep the leverage over me in case anything was wrong with the rental. like, what if *I* skip town or go in to foreclosure or something?
The renter ought to be extra concerned that "landlord who I just prepaid for the whole year" is MUCH MORE likely to disappear than "landlord who needs to maintain this place every month or i'll stop paying".

as a renter, I would prepay like, 2 or 3 months, if there was some doubt about my ability to pay and doing so helped me get approved. but i wouldn't offer that unless I sensed some hesitation, and i wouldn't expect a discount.

nippycrisp

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Re: Prepaying Rent - Worth a Discount?
« Reply #8 on: February 10, 2017, 12:02:04 PM »
Following up on this question IRL, we're currently speaking to prospective landlords and I've floated the question a few times. Thus far, no one has been receptive to the idea. Reason cited #1: they have no mechanism to process a full-year payment. Reason #2 (from a different place): it becomes more difficult to evict for other reasons than non-payment once you prepay. No idea if this last one is true (it's California, which is kind of a weird state for renting as I understand it), but this is my experience so far. Worth noting that these are usually large rental complexes with dedicated staff, not individual landlords. 

robartsd

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Re: Prepaying Rent - Worth a Discount?
« Reply #9 on: February 10, 2017, 05:30:33 PM »
I believe in California a landlord typically can cancel the rental agreement with 30 day notice if you've lived in the unit less than a year; after a year the landlord must give 60 days notice. I could see it much more difficult to excercise that right if you ar a problem tenant who has already paid for future rent. I suppose a landlord could write up a contract that would allow them to cancel the agreement and refund the unused rent money, but there's no incentive for them to have a lawyer review the contract rather than using their standard agreements.

marty998

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Re: Prepaying Rent - Worth a Discount?
« Reply #10 on: February 11, 2017, 05:02:04 AM »
Wouldn't want the prepayment to cover too far into the next financial year. It can have some negative tax consequences by bringing income forward without the related deductions.

 

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