Property Management Blog

Tenants and Prepaid Rent

Tenants and Prepaid Rent

Sometimes tenants pay rent ahead of time, and that's a good thing. We have to be careful with how we handle those funds, and we'll explain why.

Let's start by stating a few reasons why tenants pay rent ahead of time. It's not always because of bad credit or a lack of credit history. Some people use it as a way to beat out the fierce competition that can exist for a home. If we have 100 people wanting to see the home, and 5 applicants with scores above 700... paying rent a year in advance is appealing. 

On occasion renters like to stay a few payments ahead throughout the duration of the lease. This could simply be for comfort, or perhaps their job is somewhat seasonal and it's their way to stay prepared.

So what happens with prepaid rent? Does it go right to the owners? We hold onto the prepaid rent, and it is disbursed to the owner each month the same as a regular monthly payment would. The reason we do this is to prevent a situation where we've disbursed funds we have to get back for one reason or another. What we are doing is minimizing risk.

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