If you need to remove tenants from your rental property, cash for keys is often a cost-effective and practical method. How can you use cash for keys to get a tenant to vacate a property?
Cash for keys is often less expensive and less stressful than the eviction process. In short, the process involves starting the eviction process (if applicable,) coming to a verbal agreement with the tenant, putting the agreement in writing in a legally binding document, and conducting a move-out inspection on the agreed-upon date. If the tenant holds up their end of the bargain, the landlord will hand over cash in exchange for the keys.
There are a number of different reasons that a landlord might choose to offer a tenant cash for keys. One common motivation is an effort to avoid the eviction process.
Four primary reasons why you might need to evict a tenant are:
Cash for keys is a legal method for getting a tenant to vacate a property that avoids the headache of going to court and dealing with the lengthy eviction process.
This approach can also be used if a landlord wants to sell a property and needs to fix it up before the sale. If there are tenants in the property, but they’d rather start renovating the property right away rather than wait until the end of the lease term, for example, a landlord could choose to offer cash for keys to incentivize them to move out early.
When you have a problematic tenant that has violated the lease or one that is remaining on the property after the lease has expired without your permission, you have a number of options. It’s essential to have a thorough understanding of landlord-tenant law in your state and local area to make sure that any steps you take are legal.
Eviction is the legal process for removing a tenant from a property, depending on where you are and the specifics of the case, eviction can take anywhere from a few weeks to several months.
Going through the court system to remove a tenant can be expensive and stressful. For many landlords with problematic tenants, this is an unideal option for a number of reasons, including the fact that the tenants are able to remain in the property for an extended period of time until the eviction process is complete.
The average cost of evicting a tenant, according to American Tenant Screen, is often several thousand dollars. This is the sum of legal fees, lost rental income, storage expenses, clean-out expenses, and more. Even if a landlord wins an eviction case, they can still be left empty-handed in terms of past-due rent and other expenses.
Cash for keys can be more straightforward, less expensive, and less emotionally taxing than eviction. This process involves offering a tenant a cash incentive in exchange for moving out of the property.
When a landlord has a tenant that is delinquent on the rent or a holdover tenant, it can seem pretty unjust to have to pay them to leave. However, it’s important to carefully consider which options are best for your financial health and overall well-being– you might find that forking over some cash is well worth it.
Move along to step number two if your tenant isn’t in danger of being evicted and your purpose in offering cash for keys is other than a lease violation, delinquent rent, or other evictable offense.
However, if your tenant is late on rent, violating the lease, or staying on the property without your permission after the lease ends, the first step is to serve a Notice to Pay or Quit.
This is a notice that tells the tenant that they need to pay the past due rent by a specific date or vacate the property. State laws vary in regard to whether you need to give tenants a chance to pay the rent they owe.
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Now you can approach your tenants to see if they are willing to make a cash-for-keys deal. Eviction can impact the rental history and credit report of a tenant so the cash-for-keys solution can be beneficial to both parties.
If a tenant isn’t at risk of eviction and you want them to vacate the property, you’ll likely need to offer a compelling amount of money for them to leave.
You’ll want to consider what the maximum amount of money you want to offer is and start with a lower offer to leave room for negotiation if necessary. You will want to be specific about the details, including the date they need to vacate, how much cash you’ll give them, and the required property condition to receive the full security deposit.
Once you and your tenants have worked out the details verbally, it’s time to put it in writing. This document needs to be fully compliant with state law; otherwise, it won’t be a legally binding agreement. It’s a good idea to consult with a landlord-tenant attorney to draft a binding and enforceable cash-for-keys agreement.
You will want to schedule a day and time to sign the cash for keys written agreement as soon as you have reached a verbal agreement. When you are meeting with the tenant, go over the terms of the agreement, including the move-out date, the cash payment, and the property condition you expect the rental to be in.
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On the day that the landlord and the tenant agree upon the move-out date, an inspection will be conducted with the tenant present. The landlord can then determine whether any damage has been caused by the tenant beyond normal wear and tear.
The landlord then provides a copy of the inspection report and pays the tenant the agreed-upon amount. Some landlords choose to pay the tenant when they sign the agreement, but it’s generally recommended to wait until the tenant has removed their belongings from the property and upheld their end of the bargain.
After the tenant moves out, you will want to change the locks as one of the first orders of business.
If you're thinking about offering cash for keys, one of the biggest questions in your mind is likely how much money you should offer your tenant.
There is no set rule about how much money tenants should receive when a landlord is trying to incentivize them to leave the property.
Here are some general guidelines you can use to try and figure out how much cash to offer:
When a tenant isn't paying rent, it can feel absurd to pay them to leave. However, it's important to remember to keep a level head and do the math on what is most financially beneficial to you. There's a good chance your best option is forking over some cash, fixing the place up, and finding better tenants.
Is it time for you to take a long, hard look at how the numbers stack up for your rental property? Be sure to check out our rental property calculators.