Prepayment plans

Does anyone offer their residents an opportunity to 'prepay' their rent 6-12 months in advance?

I have a resident that just moved in a couple of weeks ago and has submitted a prepayment request for the remainder of the year. As a general rule, I oppose arrangements like this, because if we need to ‘welcome the resident to leave’ for whatever reason; a significant prepayment can make it more difficult.

This resident is to pay $815 per month for the unit plus $20 per month for the parking totaling $835. If he prepaid 11 months; it would be $9185. I would like to counter with a quarterly plan, paying 3 months at a time, or $2505, for 3 quarters, and the remaining 2 month payment at $1670.

Usually when I receive a request like this it is because the resident would like a 10% or more discount for paying in advance. Since I don't offer or provide this discount I inform the person there is probably no advantage to paying such a large amount at once and perhaps they may consider paying every two months instead. If the person insists, I will accept it. My issue is typically that property owners who wish to sell the asset don't want to pay out a large prepayment of rent when they work with sellers (there is no benefit to the owner to have that amount sitting in the account if the property is for sale.)

There is no pending sale of the property at this time (My last property there was, and the one before that, there should have been). The resident is not asking for any considerations of a rent reduction; just a way to limit the number of monthly transactions. I do not like this for the simple fact that if the resident chooses to be a 'bad neighbor' and generate lease violations and violate local law; it can make it more difficult to seek lease termination; although I do not see this being an issue with this resident.

Not that this is a problem for me, but this resident has told me they are saving up to buy a home; but most mortgage lenders look for a pattern of rent payments to show fiscal responsibility and when they do not see this, it may raise red flags.

I think I am going to advise that the resident set up a savings account with the funds set aside and instruct the bank to mail rent payments monthly as a better alternative.

You're the manager. You can just say no. There are a good number of reasons, among them being the possibility of being unable to evict. Another is accounting purposes.

Automated online payments make it a complete convenience for a resident to simply "pay" the rent on autopilot each month without thinking about it. Even if your community doesn't offer it, most banks have such a repeating online payment setup that costs the account holder nothing.

Making a monthly payment is no longer a burden or inconvenience that requires a special arrangement. I would be suspicious, too. I have been asked about the "discount" thing for prepayment, but they're not asking for that. When someone wants to dump a large sum of money, it's a bit odd.

You need to check the management agreement. Some owners (such as financial institutions) will not permit more than 3 months to be paid in advance. Also, the issues with a breach of lease are harder to deal with when the resident is prepaid.