What is rent in advance?

The term 'rent in advance' has caused more confusion than any other real estate term in history!

For a long time, there's been a wives tale going around that rent in advance is a payment that is made by tenants before they move into a property as a sort of additional buffer payment in case they miss a rent payment. A payment on top of normal rent.

Actually, this is false (and illegal).

Rent in advance is actually nothing more than the first rent payment. It covers the period from the lease start date to the next rent due date.

The reason it is referred to as rent in advance is really only because it is generally paid before it is due - in advance. 

Example

Lisa is approved for a property and the lease starts in 4 weeks on the 1st January 2018. 

Lisa's first rent period is the 01/01/18 - 31/01/18 as she's paying $1000 monthly.

However, when Lisa signs the lease today the first rent payment will start processing.

Even though Lisa has paid this rent 4 weeks early, it still covers the first rent period from 01/01/18-31/01/18.

Lisa will not be due to pay rent again until the 01/02/18.