Cash for Keys vs. Eviction: Which Is the Lesser of Two Evils?
If you are in the landlording business long enough, you will eventually have to get rid of a tenant. When that time comes, you will have two choices.
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One, you can go through the legal maze and evict. Two, you can try to persuade your tenant to leave on their own by offering some type of incentive. The latter option is often called “cash for keys.”
I hate to have to use either one. Getting rid of a tenant is not fun, and both of these methods cost money. The situation is full of potential problems, and it also means I probably messed up the screening process.
Understanding Cash for Keys vs. Eviction
Given the choice in a problematic tenant scenario, I would choose the persuasion and incentive route over eviction every time. This route involves less hassle and is less expensive. It often causes less damage and is less time consuming, as well. All make this the better path to take.
Before I explain more, let me make sure everyone is on the same page. In brief, eviction requires you sue the tenant, go to court, and (hopefully) regain possession of your property through a judgment.
Cash for keys, on the other hand, avoids all of this. Instead of going through the legal system and forcing a tenant to leave, you pay him or her to voluntarily leave. You hand them cash; they hand you the keys, sign a release, remove their stuff, and go on their way.
Removing Bad Tenants Quickly & Easily
No, it’s not ideal. It can be painful to hand a tenant cash. But in my opinion, it is less painful than eviction. Here’s why.
1. Less Hassle
Evictions are a hassle. Going to court, hiring process servers and set out crews, and littering your front yard with junk is no fun. Paying a tenant to take their stuff and move on an agreed upon date is not much fun either, but it is definitely less hassle.
There is no court, no process servers, no deputies, no set out crews, etc. However, the result is the same. You get your property back, and soon enough, it will cash flow again.
2. Less Expensive
Because my properties are owned by an LLC, I personally cannot represent the LLC myself in eviction court. If I did, the bar would consider that practicing law since I would technically be representing another entity (my LLC).
Thus, I must hire an attorney. Attorneys cost money. Courts have fees. Process servers cost money. Writs cost money, and set out crews do not work for free. All of that adds up!
Since I am going to have to spend this money anyway, why not negotiate a less expensive cash for keys deal? This is what I often do.
3. Less Damaging
Your landlord-tenant relationship has already taken a nosedive if you are at the point of considering eviction. All parties are likely upset; it’s best not to fan the flames.
After all, the tenant still lives in the property. How would you feel about the walls getting punched in or concrete poured down the toilet?
Personally, I just want my property back in the best condition I can get it. By negotiating a cash for keys deal, I’m usually pleased with the way the property is returned, since part of the deal is that the tenant takes their stuff and broom sweeps the unit clean.
Alternatively, by hauling someone into court and applying force, you just never quite know what the end result will be.
4. Less Time Consuming
A cash for keys deal usually takes a couple of meetings: one meeting to negotiate the deal and one to collect the keys. I do not have to go to my attorney’s office. I do not have to go to the courthouse downtown.
A cash for keys deal is simply less time consuming. The whole process may only take a week, instead of several—or worse.
The Bottom Line
The most important lesson to learn, of course, is to not let yourself get in this landlord-tenant situation in the first place through proper screening. Unfortunately, no matter how good your screening process is, you will eventually come to the point of having to get rid of a renter.
There will be times you are forced to evict; other times you will want to, in order to get it on their record. Most of the time, however, something bad (such as job loss or illness) has happened to the tenant. They are between a rock and a hard place, and I do not need to pile an eviction on them. I just need them to go, because I cannot operate as a charity either.
For these reasons, cash for keys is just the way to go. Sure, I hate it. But I hate evictions even more.
Would you ever go the cash for keys route? Have you used any other strategies to remove tenants without evicting?
Share in a comment below!