We are working through the process of starting up a rent credit program. I’ve had a few people ask if they can still put money down on the home and just have it added to their “rent credit bucket” so that they are that much closer to being able to buy the home. With many of the tenants, money management isn’t one of their assets so if they keep the money, they will just blow it on something else but I don’t think I can take their money and act as a savings account. Thoughts?
I would allow them to prepay their rent. I have people prepay rent all the time. I don’t see how that would be illegal. You could point out that they will get the rent credit on it.
I would definitely ask a lawyer or, at a minimum, your state MHA. My personal opinion is that having them prepay the rent, as stated above, is the correct path.
mobilehomepark,Do you run into problems with anyone that prepays their rent? If needed, are you still able to evict or non-renew them if they’ve prepaid?
Yes, it makes non-renewal much more difficult. You can return the rent, but it is still not what a judge likes to see.
I think that misses the point. They may want to put the money down because they know if they don’t they will just spend it and it will be gone; I’ve had tenants tell me that in the past. If they prepay the rent with it, it is the same thing as just spending it. There may be a limit on how much you can take as a deposit, but if there is not, off them to put it down as a security deposit that they can put towards the purchase of the home when rent credits are enough to make up the difference.
On most of my homes, the amount that they would prepay on home+lot rent would most likely be 2-12 months. >$6,000 …Much more than that and I would be talking to them about a cash deal. SCREEN SCREEN SCREEN! I don’t remember the last time I had to kick someone out after a only a few months. I guess 12 years of experience has something to do with that. …If your worried at all about needing to kick someone out soon after you rent to them, don’t give them the keys in the first place.
Just a quick point – check your loan documents. Ours (which I believe are typical) say we cannot accept more than 1 month of rent paid in advance.This is probably because if you default on your loan, the bank will swoop in and claim the park. They do not want to have you give the keys back only to discover the next day that all of the tenants are prepaid for several months (or years) in advance and do not legally owe the landlord any rent for a long, long time.Therefore, this rent-savings account could definitely trigger a default on your mortgage if the bank knows about it (& cares). I don’t know if they would find out or care if they did, but keep it in mind – you have some risk there.Brandon@Sandell
Thanks, Everyone! I will check my loan docs, Brandon.