Being a real estate investor comes with tremendous perks: earning a far greater return on the initial investment, tax benefits, and more. But it also comes with it’s fair share of challenges, especially when dealing with tenants.
What if you have a tenant who won’t leave the property?
Legal eviction is often the first option that a new homeowner considers, but this can be a long and costly process.
It can be even worse when the previous owner is in fact willing to leave, but their financial situation makes it impossible for them to relocate.
In this scenario, there’s another option that landlords can utilize: cash for keys.
In this article, we will explore:
- What cash for keys is and how it works
- Cash for keys templates
- Frequently asked questions surrounding a cash for keys
- And more
If you’re ready to learn how to use a cash for keys, let’s get started!
What is a Cash For Keys?
Cash for keys is strategy for getting a tenant to vacate a property without the hassle and expense of a legal eviction.
In this type of agreement, the property owner offers the tenant a lump sum of money if they vacate the property before an agreed-upon time and to leave the premises in acceptable condition.
How Does a Cash for Keys Strategy Work?
With a cash for keys strategy, a landlord should first serve the tenant with an eviction notice on solid legal grounds.
Next, they can inform the tenant that they would prefer to offer cash for keys to keep the process out of the courts.
For this type of agreement to work, it’s best to draft a cash for keys letter, outlining:
- the amount that the tenant will be paid
- how the payments will be made
- a deadline for acceptance
- and what condition the property must be left in
If the tenant agrees, you can meet them on moving day after they’ve cleared their belongings out.
You should both walk through the premises to assess any damage.
Then you can remit payment to close the deal as agreed.
Cash for Keys Advantages and Disadvantages
A cash for keys letter is usually the fastest solution when you want to get a tenant out from your property. It is likely the least expensive option, too.
Nobody likes legal eviction — it’s long and expensive for property owners, stressful for tenants, and annoying for the courts.
Cash for keys keeps both parties out of the courtroom altogether. It can also lessen the chances that a foreclosed or evicted tenant will cause “revenge damage” to the property.
There are some potential disadvantages, however.
Owners that own multiple properties and routinely offer cash for keys may develop a reputation for being soft, enabling tenants to exploit and take advantage of them.
Conversely, the amount that an owner offers may not be enough to pay for all of the tenant’s moving expenses.
And if the owner makes too many mistakes in the process, he or she could expose themselves to legal issues that could compromise the agreement.
5 Tips for a Successful Cash for Keys Process
While a cash for keys strategy isn’t right for every landlord, there are some things that you can do to make the process a little easier.
Be Open, Forthcoming, and Clear
State your intentions plainly, but also encourage the tenant to discuss the situation calmly and openly.
This kind of approach can make it easier — and faster — to reach an agreement.
Frame Cash for Keys as the Best Solution
You’ll have to pay them, but you’d have to pay court fees for an eviction anyway — and with cash for keys, you could settle up with your tenant for far less money.
Negotiate Fairly, But Firmly
The tenant may want to negotiate after receiving your cash for keys deal — and you should consider their counter-offer.
If it’s reasonable, it may be advantageous to accept it.
If it isn’t, stay firm.
Remain cordial as the process plays out.
Never threaten or harass the tenant.
Remain compliant with local laws governing owners and tenants.
Execute Quickly After the Tenant Leaves
The moment the tenant vacates the property, change all of the locks and revisit any security measures in place (garage codes, for example).
Cash for Keys Templates
Now that we’ve discussed what cash for keys is, let’s look at a cash for keys template.
A cash for keys template should contain the following information:
- The property address
- The list of occupants
- A statement that the tenant is unlawfully occupying the property
- The amount the property owner will pay the tenant to leave
- Condition that the property should be in when the tenant vacates
- A statement that the agreement is null and void if conditions aren't met
Here are a few cash for keys templates that can help you to get started:
Keep in mind that these cash for keys templates are not one size fits all. Cash for keys templates can be great tools when you want to develop a basic outline for your agreement, so ensure that your agreement is specifically tailored to your situation.
Cash for Keys FAQs
Next, we’ll explore a few of the most common cash for keys frequently asked questions.
Q. Is Cash for Keys Legal?
Yes, it is currently legal to do so in all 50 states.
Q. How Much is Offered in a Cash for Keys Deal?
There's no prescribed amount for a cash for keys deal.
One common formula is to offer the tenant what you would have to pay in court fees to enforce an eviction.
For rental properties, you might offer:
- half of one month's rent
- plus relocation expenses
- plus the security deposit on a new place
Q. How Much Time Can Cash for Keys Save over Legal Eviction?
It depends on the situation and state law.
Legal eviction can take as little as a few weeks or as long as a few months — even years.
Cash for keys letters are legally binding agreements that can effectively eliminate long wait times.
Q. How Much Money Can Cash for Keys Save over Legal Eviction?
It hinges on the facts of the situation. But legal eviction typically includes:
- retaining an attorney
- paying court costs
- losing rent money as legal proceedings stretch out
- incurring other property-related fees
The average legal eviction costs around $3,500; Cash for keys agreements can cost considerably less.
Cash for Keys: A Fair Compromise
Cash for keys agreements can help real estate owners save money, access their property, and start rehabilitating it to turn it into a profitable investment or rental.
It also gives the previous owner a chance to start over with dignity, without legal encumbrances.
With the right approach and a solid cash for keys template, it can be a truly effective way to avoid an extended, painful battle.