In property management, one term that has gained traction recently is “cash for keys.” This strategy has become increasingly popular among landlords seeking a smoother transition regarding tenant evictions.
But what exactly is cash for keys, and what should landlords know about it?
In this comprehensive guide, I will explore the ins and outs of cash for keys agreements, their benefits, the process involved, and essential tips for landlords considering this approach.
What is cash for keys?
Cash for keys is a mutually beneficial arrangement between a landlord and a tenant facing eviction.
Instead of going through the lengthy and often contentious legal eviction process, the landlord offers the tenant a financial incentive to vacate the property voluntarily and promptly.
In essence, the landlord pays the tenant a specified amount of cash in exchange for surrendering possession of the rental unit and returning the keys.
Options for landlords: What to do if the tenant doesn’t pay rent?
The benefits of cash for key offer
Expedited vacancy
One of the primary advantages of cash for keys is its ability to expedite the tenant turnover process. By offering a financial incentive, landlords can motivate tenants to move out quickly, allowing them to regain possession and place a new tenant.
Related: Can a landlord show an apartment while occupied?
Cost savings
Cash for keys agreements can also lead to significant cost savings for landlords.
Offering a cash incentive upfront is more economical in the long run than the expenses associated with legal evictions, including court fees, attorney costs, and potential property damage.
Read also: What is the owner statement of a rental property?
Reduced conflict
Evictions can be emotionally charged and contentious affairs, often resulting in strained relationships between landlords and tenants. Cash for keys offers a more amicable solution, minimizing conflict and preserving the landlord-tenant relationship to some extent.
Read also: What is a good return (ROI) on a rental property?
The Cash-for-Key process
Send an eviction notice
Before initiating the cash-for-keys process, landlords must follow the appropriate legal procedures for eviction in their jurisdiction. It’s a formal eviction notice and giving them a specified period to vacate the premises.
Read also: How to clean a rental property before showing it to tenants?
Verbally offer cash for keys
Once the eviction notice has been served, the landlord can approach the tenant with a verbal offer of cash for keys. This initial conversation allows both parties to gauge interest and negotiate terms before formalizing the agreement.
Create a written cash-for-keys agreement
To ensure clarity and avoid misunderstandings, it’s essential to document the cash for keys agreement in writing. The agreement should outline the terms and conditions, including the amount of money offered, the deadline for vacating the property, and any other relevant provisions.
Related: How to clean a rental property before showing it to tenants?
Schedule a signing date
Once both parties have agreed to the terms, they should schedule a signing date to execute the cash-for-keys agreement formally. It provides an opportunity to review the document, address any questions or concerns, and obtain signatures from all parties involved.
Read also: The most common landlord-tenancy problems and their solutions
Conduct a move-out inspection
Before disbursing the cash payment, landlords should conduct a thorough move-out inspection of the rental unit. Landlords assess property condition and identify any damages or cleaning issues that may need to be addressed before re-renting the unit.
Read also: How to find out who is renting a property?
Cash for Keys vs. Evictions
The average cost of an eviction
The cost of a legal eviction varies on location, complexity of the case, and legal fees.
On average, however, landlords can expect to spend anywhere between $700 to $1500 on court costs, attorney fees, and throughout the eviction process.
Read also: What rights do tenants have without a lease?
Time for a legal eviction
Legal evictions can also be time-consuming, often taking several weeks or months to complete. Delays in court proceedings, tenant appeals, and other factors can prolong the process, resulting in lost rental income and additional stress for landlords.
Read also: Main reasons to evict a tenant
Are cash-for-key deals legal?
Yes, cash-for-keys agreements are legal. However, landlords should execute them by following landlord-tenant laws and local regulations. Landlords must familiarize themselves with the legal requirements in their jurisdiction.
As a landlord, you must ensure the terms are fair and honest.
Read also: Essential insides of managing rental properties for landlords
How much money should you offer in this type of agreement?
Determining the appropriate amount to offer in a cash-for-keys agreement can be challenging. It may vary depending on various factors, including rental market conditions, the tenant’s financial situation, and the landlord’s preferences.
In some cases, landlords may offer a lump sum payment, while others may opt for a combination of cash and assistance with relocation expenses.
Read also: Landlord Vs. Tenant: Who is responsible for what?
Cash for keys agreement tips
- Be Clear and Transparent: Communicate the terms of the cash-for-keys agreement to the tenant, including the amount of cash offered, the deadline for vacating the property, and any other relevant provisions.
- Get It in Writing: Document the agreement in writing to avoid misunderstandings or disputes. Make sure both parties review and sign the agreement before proceeding.
- Follow Through: Once the deal has been executed, honor your commitments and promptly disburse the agreed-upon payment to the tenant.
Read also: Renting vs. Selling your home: a comprehensive guide to making the right decision
Common cash for keys agreement mistakes
- Failure to Document the Agreement: Failing to document the cash-for-keys agreement in writing can lead to misunderstandings and disputes later.
- Not Conducting a Move-Out Inspection: Skipping the move-out inspection can result in disputes over damages or cleaning issues that arise after the tenant has vacated the property.
- Underestimating Costs: When determining the amount to offer in the cash-for-keys agreement, be sure to account for all relevant expenses, including relocation costs and potential property repairs.
Read also: What to do if a tenant destroys property: A comprehensive guide for landlords
What happens if the tenant doesn’t move out after getting the cash?
Sometimes, tenants may fail to vacate the property as agreed, even after accepting a cash-for-keys offer. If this occurs, landlords may need to pursue legal remedies, such as filing for eviction through the courts.
It’s essential to consult a qualified attorney to understand the options and proceed by the law.
Read also: Understanding lease violations: What you need to know
Conclusion
Navigating the complexities of property management can be daunting, especially when it comes to tenant evictions.
However, landlords can minimize stress and maximize investment returns with the right strategies and resources. Cash for keys is one of the handy strategies if you use it right.
No landlords expect or like evictions. This is not just because of the lengthy process and huge expenses; there are many other problems that become barriers and prevent you from focusing on the actual business. The ‘Cash for Keys’ strategy allows you to vacant your rental unit and place a new tenant quickly.
We specialize in helping landlords achieve their real estate goals. Whether you’re a seasoned investor or a first-time landlord, we’re here to help you earn rental income without the headaches. Contact us today to learn more!
