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Cash for Keys

37 posts by 11 users

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Real Estate Investor · North Carolina


Around here the banks offer $500 “Cash for Keys” to foreclosees if they will vacate quickly and leave the premises “broom clean”.

How about you landlords out there? Do you give any monetary incentives to avoid formal evictions and rid yourself of non-paying tenants faster? If so, how do you handle it and how much do you pay?

Several months ago I offered a tenant $250 if she would leave by the end of the weekend which she did, and she left the place pretty clean, too. My main savings was on time, since in NC it can take almost a month for the eviction process to unwind. Then again, I also saved $130 in fees.

I’m not doing that with my latest eviction because this tenant knows the game and intends on staying until the sheriff escorts her out. I would not have rented to her in the first place if she had had a previous eviction, so my gift to future landlords is placing one on her record.

Anyway, I’m interested in reading how other landlords handle these situations.

Thanks to all who respond.



· Loveland, CO


because this tenant knows the game and intends on staying until the sheriff escorts her out

I used to have a few clauses in my lease that were clearly out of bounds. I had them highlighted and had a blank line for the tenant's initials. Anytime they came up with the line about, " that's against section so and so of the TX property code" , or " the people's lawyer on Channel 2 says you can't do that" , I decided that, " the other guy that I told you about who had also applied had good credit too, and he was here first so I rented to him.

all cash



Real Estate Investor · Ohio


Typerider,

I NEVER pay someone to steal from me! NEVER! If someone broke into my house, I would not pay them to steal from me and I won't pay some non-paying deadbeat tenant to steal from me either.

In addition, tenants know each other. Once you pay one deadbeat to leave, why shouldn't any tenant that wants to leave simply stop paying rent? They beat you out of a month's rent and you'll pay them to do it! Also, if you're not enforcing the lease on the rent issue, why should the tenant expect you to enforce any other part of the lease. If you pay tenants to leave, you've already proven to be a weak landlord, and tenants will exploit that!

Finally, once you start paying the deadbeats, you could easily be charged with discrimination when you decide that you're not paying another deadbeat tenant to leave. If the person you don't pay is black; is a woman; is handicapped in any way; etc, then you are treating them differently than others because you are discriminating. I don't discriminate - if a tenant doesn't pay the rent on time, I give them a 3-day notice the next morning. I treat all deadbeats the same - by giving them the (legal) boot!

Mike



Real Estate Investor · North Carolina


Excellent post, MikeOH, and I agree with you 110% - it galls me to no end to pay someone who's stealing from me. Yet from a purely business aspect getting them out quickly and effortlessly saves money and time. Here in NC we have a ten day pay or quit time frame, followed by ten or more days till court, followed by another ten days until I can file a writ of possession, followed BY ANOTHER SEVEN DAYS till the sheriff physically kicks them out.

The 'discrimination' part of your post is just way too amusing and way too terrifying -- mainly because I'M SURE IT COULD HAPPEN.

Thanks for your input.



Property Manager · Honolulu, HI


I Second MikeOH's post in its entirety.

I will ADD, same applies to subsidized tenants not paying their portion, no matter how small.



Real Estate Coach · Oakton, Virginia


Cash for keys is a great idea and usually works. Individuals need to start thinking like business people and leaving their emotions behind. If you can pay someone $500 to vacate and save yourself $1,500 in the long run then it is certainly worth it. If the numbers are in my favor I will pay folks all day long.



Real Estate Investor · Ohio


Cash for keys is a great idea and usually works. Individuals need to start thinking like business people and leaving their emotions behind. If you can pay someone $500 to vacate and save yourself $1,500 in the long run then it is certainly worth it.

Ridiculous! Once the tenants realize that you are a weak landlord and you pay people to steal from you, any savings you will have from that initial cash for keys will be dwarfed by the losses in the future. Weak landlords don't survive in this business.

I screen them like everyone else does. I also give them a very " firm" talk about how I have a zero-tolerance policy for non-payment of rent.

So, let me get this straight. You give the tenants a very " firm" talk about your zero-tolerance policy for non-payment of rent, but then when they don't pay the rent, you reward them buy paying them to violate your lease and your zero-tolerance policy? What does that do to your credibility with the rest of the tenants? Why should any tenant follow any of your lease terms? If they violate the lease, you'll pay them!

Good Plan!

Mike



Real Estate Investor · Harrisburg, Pennsylvania


Originally posted by "Typerider":
Here in NC we have a ten day pay or quit time frame, followed by ten or more days till court, followed by another ten days until I can file a writ of possession, followed BY ANOTHER SEVEN DAYS till the sheriff physically kicks them out.

Check with your lawyer...

We have a similar pay rent or quit clause in the PA Landlord Tenant Act (of some crazy number: like 30 days), but it is amendable via contractual language down to 3 days as per court precedent.

Our other time frames are similar to yours, though slightly different.



Real Estate Investor · North Carolina


Heathen -

In my lease the wording is such that rent not paid by the first constitutes a 'breach' of the lease, and so technically I could file for eviction on the second based on that breach. I have not tested this in court, choosing to go the 'safe' route with the 10-day-pay-or-quit.

But you are correct about consulting an attorney, and if I can find a shorter method any savings in time will be worth it.

Unlike the past, my current leases with low-income tenants, though written, are now all month-to-month because that requires NO reason on my part to stop doing business with troublesome tenants.

But still, if they know the system they know how to play it to the hilt.

Thanks for your input.



· OR


It depends.

I can think of a couple of reasons why I would give cash for vacating.

New purchase. When I haven't accumulated any dealings with the deadbeat myself, I might take the easy route and pay him to leave. This would be if there was a lease and the violations were intolerable and hard to evict for. Or even on a month to month where I really wanted the inherited tenant out fast.

Sale of a house I own. If the buyer wants the house vacant, and I am getting a good price for the house, it might be wrth paying the tenant to leave without a fuss.

Other than that, if a tenant violates the rules to the point where I have to file for eviction and go to court, I am out for blood.

I can afford a little vengance occassionally, but beyond that, I consider a completed eviction to be good business.

Once you start paying, the world gets around. It's like paying the taggers to not spray paint your building. Pay 2-3 of them and you wake up the next morning with dozens of kids with cans of spray paint standing on your sidewak with their hands out.

On the other hand, shoot those first 2 with a shotgun and hang their bodies on the fence, and the rest of them don't come back.

There is also the concept of pay it foreward. I put an eviction on their record to warn future landlords and hope they will do the same for me.



Real Estate Investor · Corinth, Texas


I just got rid of tenant two weeks ago using this method. I waited until they were 7 days late and exercised a clause in my lease to have them vacate the property. at first I got a hard time but I mentioned that if they were out within a week and if the house was left in the same condition they received it that I would only deduct the due rent (12 days) from their deposit and refund the rest. It worked like a charm. house was spotless and rented it this weekend. Saved me all the attorney and fees and probably repairs. I will definitely do it again. What low income folk need is money, I don't see it as a tremendous loss to offer them part of their deposit to leave the place in good shape and get out. I lost 1 weeks worth of rent plus a little paint. good to go for another year now.



Real Estate Investor · Harrisburg, Pennsylvania


Originally posted by "Typerider":
Unlike the past, my current leases with low-income tenants, though written, are now all month-to-month because that requires NO reason on my part to stop doing business with troublesome tenants.

This does not add up to me. Help me out.

Whether you have a day to day, month to month, year to year, or eternal lease - if a tenant does not pay and does not move out, your only recourse is eviction.

Are you saying something different here?



Real Estate Investor · Ohio


Christian,

I don't think he's talking about a non-paying tenant. He's saying that a month to month lease allows you to give the tenant notice if you don't like what they're doing (for example using drugs) instead of waiting for the one year lease to expire or trying to evict for something other than non-payment.

I agree with him 100% on this issue. There is absolutely no point in giving a low income tenant a one year lease. You have absolutely no leverage over them (what are you going to do, sue them?). They, on the other hand, have a lot of leverage over you with a year lease (they can sue you and collect).

Mike



Real Estate Investor · North Carolina


Christian:

MikeOH explained the MTM lease reasoning better than I did. Thanks for clarifying, Mike.

However, with my college student rentals it's different and I DO require a year-long lease. Reason for that is twofold: 1) most students are bright enough not to want any sort of credit ding on their record; and 2) I also get their parents to guarantee the lease providing another party to involve.

But I doubt I would ever offer 'Cash for Keys' to any recalcitrant college student. I'd get a judgement, wait a few years 'till the kid got some assets, and then 'surprise' him with his debt plus interest......



Real Estate Investor · Harrisburg, Pennsylvania


I am now more clear on your point, but I still do not 100% follow your logic.

Let me try it this way:

Hypothetically...

If I offer a low-income tenant a yearly lease

And you offer a tenant next door a month to month lease.

Both tenants throw big drug-infested parties and do other unsavory things. Let us say, for sake of conversation, that they DO PAY THEIR RENT, just to take that out of the equation.

What makes you think that your MTM lease will get them out faster than my yearly lease? If they say they are staying, both of us still need to go before the judge to get them out (same judge in my hypo example). I have a great lease that says no drugs and lists out other unacceptable unsavory behavior. At that point, your MTM lease will have expired. Either way we both go through the eviction process and both likely WIN just to get them to vacate our premises.



Real Estate Investor · Ohio


Christian,

It can be VERY difficult to evict for things other than non-payment of rent.

In your example, I can simply give the tenant a 30 day notice that their lease is being terminated because I'm on a MTM lease. Then, when they don't leave, I can evict them and I will win.

With a year lease, you can try to evict them for the rowdy parties, etc, but you will need PROOF. When you go before the judge and request an eviction because they are having drug parties, where is the PROOF? Were they arrested? That's not proof. Have they been convicted? Everyone is presumed innocent until found gulity. How long will it take for a drug case to get to court - your year lease could easily be over before the case is heard.

Furthermore, how will you enforce a year lease with a low income tenant? What are you going to do - sue them? My grandma used to say " you can't get blood out of a turnip" . So, since you can't enforce the year lease, why give them one? The only one to benefit from a year lease with a low income tenant is the low income tenant.

Mike



· OR


Christian, I can give 30 day notice and then evict for overstay.

There is no answering the charge. Either the tenant is out or he isn't. If he isn't, the judge orders him out

Your guy, on the other hand, says to the judge he is so sorry. They had out of town relatives. It only happened once. It will never happen again. The drug charges are all lies told by their racist neighbors.. The landlord is tryig to evict them becasue they complauined about faulty plumbing. They have small children who would be harmed by the move.

The judge decides that one party isn't grounds to evict, so he lets them stay and says they don't have to pay any more rent until you fix the plumbing (which has nothing worng with it.)

Ot's more likely that you are going to want to eivct for additional persons moved in than for wild drug parties. The tenant lies and denies it. Then you have to prove it. I don't; I just give 30 day notice.

Or you see too many short visits and decide there is drug dealing. The tenant denies it. You have to prove it. I don't, I just give 30 day notice.

Your tenant moves in a pitbull. Everytime you try to get them out, they move the dog out for 2 days. You take them to court. They swear to the judge the dog was just visiting and doesn't belong to them. You have to prove the dog lives there, I don't; I just give 30 day notice.

Your tenants park on the lawns or piles trash pn the porch. The judge doesn't thank that is reason for the tenant to lose his home. I don't have a problem; I just give 30 day notice.

Your tenant is a complainer and fights with the neighbors, driving your other tenants out. Good luck with that one. I just give 30 day notice.

If I had college rentals, I would do a lease. Students drop out of school and it's hard to find new students in the middle of the year, and no sane adult will rent an apartment in a student complex. It would be very hard to fill that vacancy. Parent co-signers are on the hook. It's not like they are low income and untouchable. You can make the parents pay.



Real Estate Investor · Harrisburg, Pennsylvania


You are debating oranges and I am debating apples.

I like your points a lot MikeOH and PNW. I will need to ponder.

What I am saying is that in either case, we need to follow the eviction rules and wait the required days, see a judge, wait some more, etc. to get them physically out. All of that is exactly the same in either case. If I am reading you right, you are narrowing it down to winning the case in court by making it crystal clear and requiring easy to obtain proof (are they still there?)



· OR


You are right, Christian. We both have the same eviction process. The difference is that I don't have to prove anything, except to present a copy of the 30 day notice I gave them, and then 100% of the time, the judge will grant the eviction.

There is a more subtle difference. Tenants know that judges sometimes won't grant an eviction on the grounds of lease violation if it doesn't involve non-payment. Therefore, they are more willing to stay and fight the eviction and drag it out.

(Touch wood) I've never gotten as far as the eviction court. The month to month tenant knows that 100% of the time, the judge is going to throw them out. So they go at the end of their 30 day notice.

Like you, I file an non-payment eviction as soon as the rent is not paid on time. For non-payment, I don't give a 30 day notice, except that if they force me to give them a pay or quit a second time, they will get their 30 day notice to vacate even if they pay to stop the eviction.

I would have to file eviction for lease vilation only if I couldn't allow the violation to go on for more than 72 hours. But again, because the tenants know beyond a shadow of a doubt that I can get them out, so far they have always complied with notices.

On the plus side for leases, it cuts down on the applicants who already know that they have no intention of staying. A lease won't hold a tenant in place once they decide to move, but usually if they know they only want a place for 2-3 months, they don't want to sign a lease..



Real Estate Investor · Harrisburg, Pennsylvania


Now that we have that settled…. (thanks for the back and forth so far, but I am not done yet).

We have never had the situation you describe; meaning, where we wanted to get rid of a tenant who has violated other than the payment clauses of the lease. I can visualize it. It is not far fetched mind you – it just has not happened to us. So far, every tenant with those ‘other’ problems also has payment problems.

Now, let me give you the other side of the coin in favor of a yearly lease.

We HAVE HAD 2 tenants who wanted to get out of their lease early (before the year was up) and paid to do so. We have a 60 day notice clause. I do not remember the particulars, but in both cases they paid ‘early out’ fees of approx. 2 months rent, plus all of the rent they owed. We made out like a bandit! That goes away if you have a MTM lease.

Additionally, we are aware of at least 4 tenants who called to attempt to get out of the lease early and after having the lease re-explained to them, particularly the above referenced clause, they stayed through the whole lease and left after the full year was up.

In each of the 6 cases mentioned above, these were ‘good’ tenants with little to no payment issues before the above happened and through the process of the above.





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