Imagine a resident asks you to consider renting one of your DC rentals to them for the next year—and they can prepay the entire term. That means no worries about missing payments, no knocking on doors to find out what’s going on, and no stress about eviction notices due to nonpayment for a full year! Should you do it?
It is easy to appreciate renters like this, but your single-family or multi-family investment property could be at risk if you don’t do your 'homework' first! Before you dive into such a venture, we highly recommend considering our insight as an expert DC property management company. You may save yourself from a dire mistake.
Note: This blog post does not act as a substitute for legal counsel. When in doubt, consult with your trusted attorney or Renters Warehouse DC/NOVA for real-time assistance concerning your DC-area real estate!
The Lease (and Lease Term) Matters
Before making any decisions about renting, you need to consider your potential lease agreement with this prospect—just like you would with a typical leasing and management lifecycle for rental real estate. Know the terms and restrictions in conjunction with rental housing law in the district! This includes:
- Employment requirements
- The minimum income your renter needs
- How long evictions take to process in the DC area
- The minimum and maximum length of lease term you can offer
- How much of a security deposit you can request from future prospects.
The above are crucial as you move into the tenant screening process, especially if they can't offer the entire year in advance, and you're considering a six to nine-month lease with an additional deposit on top. We highly recommend that you work with professional property management in Washington, DC, to review rental law before you proceed in that direction.
Additionally, once you screen the prospect, do they meet your screening criteria on top of these considerations? If not, even if they prepay rent, you could be putting your residential property at risk. Instead of being blindsided by a 'Professional Tenant' because you were distracted by dollar signs, here are some things to think about in these situations to ensure you are making the right decisions for your DC-area investment property.
Will They Have Future Income?
Some people moving to the area may be looking at DC rentals without current employment lined up. This can be a harmless situation: perhaps they were gifted a moving stipend by their employer, or they may be able to land a job in a week and alleviate this concern for you.
However, what if they cannot—or they do not—seek employment? While this isn't necessarily a dealbreaker depending on the lease terms you draw up, it is worth considering within the scope of DC rental law and security deposit usage.
What Does Their Rental and Credit History Look Like?
While bad credit is not necessarily a dealbreaker either for your DC rentals when someone wants to pay in advance, it's worth digging deeper to see if this might indicate other red flags. Not everyone is excellent at balancing their budget, and not having to worry about rent payments could motivate an upfront payment. This could still be a high-quality renter.
However, the alternative (from the perspective of an expert DC property management team) is that you actually have a glitzy Professional Tenant on your hands. Talk to references and former property owners where they have lived, perform background checks and credit checks, and look for a history of evictions just as you would with any other potential renter.
Your screening process is your investment property's first line of defense, and it should never be sidelined—even with a 'cash advance' dangled in front of property owners. Trust your gut: If you do not feel comfortable in a situation like this, realize you do not have to allow it to happen.
Work With Your Team to Determine the Best Course of Action
Working with a skilled property management team means you'll have access to support, guidance, and resources as you consider this decision.
The DC rental market is rife with renters operating under unique circumstances because our labor market is heavily influenced by government and military spending. They may need to find housing fast and have the funds to make upfront payments. If you have DC rentals and you are not working with property management services, you’ll ultimately need to make a decision based on what you believe are the best interests for your investment.
Alternatively, you can find the right property management group to meet your needs in the district! As your experts in DC property management, Renters Warehouse DC/NOVA can provide you with the kind of insight and screening processes you need to place the right renters. Plus, we guarantee our tenant placements with our Certified Tenant Match & Warranty Process! It's just one way we help you grow your portfolio with long-term returns in mind.
Do you want to grow your portfolio in the DC rental market? A great place to get started learning more is by downloading our free resource, Real Estate Investing: Grow Your Portfolio!