What do you do when a normal check-out scenario clearly won’t work with your current tenant? Maybe they’re months behind on rent, you are going through the eviction process, or there is animosity so great that the best course of action is to get the tenant moved out ASAP no matter the current state of the unit. You may want to utilize a technique called “Cash for Keys.” With Cash for Keys, the tenant simply agrees to leave the property within an agreed-upon time frame, giving the keys to the owner or property manager in exchange for a small sum of money. Here’s some tips to successfully use the Cash for Keys method.
1. Lessen tension
While the cash amount and time frame may differ depending on each situation, the end goal is to lessen the tension between you and the tenant and get them moved out of your property without any major damage occurring along the way. This may help them to stop seeing you as the enemy or by enabling them to move on to a different living situation, they may give up their “beef” with you because their need is satisfied. Some may feel like Cash for Keys is giving in to a bad tenant, but it can often keep worse damage from happening to your property. You may still have a messy clean-up, but that is better than your property being burnt down by an angry former tenant.
2. Make a Cash for Keys agreement
If you execute a Cash for Keys agreement, make sure they agree in writing to leave the property in a “broom-clean” condition. Some investors require the tenant to leave the property in move-in-ready condition and require them to make any necessary repairs. Go ahead and have them sign a Pay or Vacate Notice as well. That way, if they don’t leave, you won’t lose much time for initiating a formal eviction process.
3. Don’t give any money until you have all the keys
As part of your agreement, give the tenant a specific date by which they need to move out. Agree on a time to meet the tenant at the unit to verify the unit is in good condition. If the unit is still not in good shape, show the tenant what needs to be done and let them have another shot at passing your inspection in a couple of hours.
Never give the tenant money until they are completely out and have turned over all keys. Bear in mind that you are likely dealing with someone who has hostility toward you, so don’t compromise your safety during this exchange. Having them sign a simple document that relinquishes their tenancy can also protect you in the event they accuse you of changing the locks on them at a later date.
4. Watch closely after move-out
After the tenant has held up their end of the agreement, get them paid and thank them for a positive transaction. After they vacate, change the locks immediately! Secure all doors and windows and monitor the property more closely in the few weeks following. We have seen occurrences where tenants move out only to break in and cause damage (think stealing all appliances, furnaces, copper water lines, and electrical) a week or so later because their belongings are now out.
Benefits of using the Cash for Keys method
- Cheaper than paying an attorney for an eviction: an average eviction may cost you $5000, while Cash for Keys may only cost you $500, for example.
- Creates a quicker clean-up and turn-around for re-renting. Damage left by an evicted tenant is often much more severe than wear-and-tear left in an amicable resolution to the tenant/landlord relationship.
- Can keep you from losing additional rent as this method gets a non-paying tenant out of the unit quickly. Often within a week or so as compared to months.
- Helps you avoid damage, ranging anywhere from the thousands to a complete loss, that is usually not covered by insurance.
Sure, it may seem at first that the “bad guy” is getting away without any repercussions, but in the end, you are greatly reducing your risk for a catastrophic loss that may cost you your investment.