Renting out my house looking for multiple months rent in advance

bmwguy

Not sure if this is a crazy and ridiculous idea or not but here goes! Or if it is even legal! I want to start a business and need a lump sum to do so. Not huge but just enough to get me started. Cant access credit for business start up. What i'm thinking i could do is rent out my house but ask for rent upfront for a period of 6 or 12 months, obviously at a discount to the renter on normal rates. I could get 1000 a month for my house in normal rental market, but would let my house for say 5000 for 6 months or 9500 for 12 months, payable upfront. Renter would save 2.5 grand a year, and I would get my capital. I have somewhere else to live free after this, to be honest I want to move anyway back to my home town, and still have my secure job to pay mortgage. Let me know what you think of this idea, I really do need to get this business going and its the best way I can think of doing it

silja

It's very unusual, people may be suspicious.
Unless you have a prime property, the people looking to rent your sort of home may not have the liquid assets/ cash to do what you want.
Would 5000 really be enough to start your business?
You'd be stuck with he tenant, as you cannot afford to pay the money back if they turned out bad and you wanted to evict them.

bmwguy

Its a standard 3 bed semi in normal area that has good rental market, I realise it wouldnt be for everyone but someone with cash might be interested in the possible savings available over the year. I wonder would any letting agents be interested in doing this for me paying me upfront and pocketing profits well above what they would normally make on a single property in a year then i wouldnt be worried about managing tenants.

djimi

I cant see any tenant going for this if Im honest. From a tenants point of view I am not going to hand over a years worth of rent to a landlord that I do not know. Ordinarily speaking if I move into a place that turns out to be a disaster then the most Im risking is my deposit of a few hundred or a grand at most. In the situation you are proposing the risk is massively higher, with thousands on the line, and honestly I cant see many, if any, tenants wanting to part with that kind of money up front.

That said, by all means give it a go; you never know who might respond!

bmwguy

I think the only way would be if I got a letting agency to pay it upfront to me, as they should have cash available, then collect the rent for themselves, making a tidy profit in the process. I wouldnt do it as a tenant myself either to be honest. I would be tied into letting it for a year either way whether rent was paid upfront or monthly. I presume letting agents read boards, so if anyone wants to let me know if this is a runner or not then just let me know

RATM

OP I had the same idea as yourself about a year ago. I had about €6k sitting around and was looking to move. I asked a letting agent would the landlord consider being paid €6k upfront for a property that would normally gross him €7.5k. Letting agent told me that this would be most unusual and that I might raise suspicions that I was running a brothel or something.

Anyway I left it as the landlord wouldn't go for it. But if I had of met you last year in the right location then sure, we could have done business. That said, (as a tenant) I would be wanting you to not only sign into a lease but also a cast iron contract which guarantees me tenure for a year which in turn is secured on one of your assets. For handing over €6k in advance I would want a route to legal recourse if you didn't deliver your side of the deal.

Unusual certainly, but not impossible.

smellslikeshoes

There aren't many people who would be willing to do this so you could possibly be trying to find a tenant for several months, several months that you could have been getting rent for.

The_Conductor

How about taking out a personal loan, as opposed to a small business loan- or depending on the status of the mortgage on the property, seeing whether a mortgage topup might be something your primary lender might consider. It is a long shot- given the state the economy is in etc- but if you're not in negative equity- there is a small chance that they might go for it (as it would then be a secured loan).

You really need to seek independent financial advice though- it sounds like you are scraping the bottom of the barrel to get this business of the ground- what happens if it fails, where are you supposed to live if you're renting out your PPR, etc etc

If you have a strong viable business plan- there is finance out there- including finance from lenders you might not consider (there are still small business startup grants, and if the proposition is interesting, the IDA are mandated to buy shares in indigenous startups).

Explore what your options are- frankly I think if your business model is reliant on you renting out your home for an upfront lumpsum, you've either not explored the other options out there, or your business model is too risky for a traditional lender to take a punt on.......

Victor

From a tenant's point of view, what if the place floods, burns down or similarly become unavailable?

djimi

Another thing to consider with this is that with your plan for the money, what happens if something happens and you have to return the rent to the tenant? Its already been pumped into something else and you wouldnt have it to give back.

the_syco

What happens if the tenant turns out to a complete f**ktard that has parties every night, lots of complaints by the neighbours, etc.

Would you be able to give the money back to the tenant to get them out?

modmuffin

bmwguy wrote: »

Not sure if this is a crazy and ridiculous idea or not but here goes! Or if it is even legal! I want to start a business and need a lump sum to do so. Not huge but just enough to get me started. Cant access credit for business start up. What i'm thinking i could do is rent out my house but ask for rent upfront for a period of 6 or 12 months, obviously at a discount to the renter on normal rates. I could get 1000 a month for my house in normal rental market, but would let my house for say 5000 for 6 months or 9500 for 12 months, payable upfront. Renter would save 2.5 grand a year, and I would get my capital. I have somewhere else to live free after this, to be honest I want to move anyway back to my home town, and still have my secure job to pay mortgage. Let me know what you think of this idea, I really do need to get this business going and its the best way I can think of doing it

Why not move home and rent it out for 1k per month, save the 1k each month and start working on your business slowly.it will help avoid unnecessary expenditure and you'll have the 5k after 5 months?

ProudDUB

bmwguy wrote: »

Its a standard 3 bed semi in normal area that has good rental market, I realise it wouldnt be for everyone but someone with cash might be interested in the possible savings available over the year. I wonder would any letting agents be interested in doing this for me paying me upfront and pocketing profits well above what they would normally make on a single property in a year then i wouldnt be worried about managing tenants.

The letting agent would not be making a profit well above what they would normally make. They would be making less. Letting agents make their money by taking a slice of the rent, normally its a percentage of it. If you are going to give your tenant a big discount on the rent, that cuts into the letting agencies ability to make a profit too. I don't see why they would be willing to take this on when they would have to do the same amount of work to manage the property as they do with their other clients, but for a lot less money.

djimi

ProudDUB wrote: »

The letting agent would not be making a profit well above what they would normally make. They would be making less. Letting agents make their money by taking a slice of the rent, normally its a percentage of it. If you are going to give your tenant a big discount on the rent, that cuts into the letting agencies ability to make a profit too. I don't see why they would be willing to take this on when they would have to do the same amount of work to manage the property as they do with their other clients, but for a lot less money.

I think he means that say if the property is worth €1000 a month that he would let it to the agent for a lump sum of say €9000 for the year, and the agent would then collect the €1000 a month from the tenant. Its a nice idea in theory but, as with the tenants, I cant see any agent wanting to take such a gamble with a huge sum of money like that; especially when they dont know you from Adam (might be different if you had been dealing with them for years and you had built up a high level of trust with them).

Solair

There's nothing in this for the person renting the house. I mean, you'd have to give them a huge discount or something to make it worthwhile.

I mean, imagine if eircom let you pay 12 months phone bills in advance. You'd want a pretty hearty discount to make it worth your money!

The discounts would need to be greater than the opportunity cost of having that money on deposit / invested somewhere else.

Also, not many people would have those kinds of lump sum amounts available these days.