YOU SHOULD PAY $ TO YOUR WORST TENANT

General Landlording & Rental Properties
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YOU SHOULD PAY $ TO YOUR WORST TENANT

Tom V.
San Francisco, CA · Member since 2014 · 345 posts · 281 votes

Have you had that point yet where you are ready to evict someone? They are late with the rent, they owe you a ton of money? They play loud music, smoke weed and their dog craps on your lawn? Call the lawyer!?!?!?!?!?!

No.....

It's time to pay the tenant some money to leave.

Why should I be paying money to these people who are hurting my business?

One of the best pieces of advice I got when I started landlording was from a more experienced guy. I asked how many people he had to evict per year from his 110 unit complex. He said, "None. I pay 'em." This is a tough concept to get your head around when you have fought and scrimped and saved for your property.

If you are going to evict someone, you will wind up paying someone (a lawyer, your mortgage company, your lost rent). Sit down and do the math.

Almost always, someone who isn't paying the rent simply doesn't have the money. If I am renting a 2BR for $800 and I have a problem, $3-400 cash for keys will nearly always make someone go away and quickly. You get a signed letter of receipt ("I have received $300 from [landlord] and I terminate my lease signe XYZ date at ABC adress), formal termination of tenancy, and your unit back. An eviction starts (for me in N. Cal at $750 legal and 6 weeks minimum court time.)

You or your property manager may have dropped the ball on screening the tenant. Whatever. The past is the past.

Do you want to be "right" or do you want to make money?

If you are a new landlord, you're probably pissed off. Don't be mad. Be smart. Think long term. Is it fair? No. Who told you life is fair. The court system is set up to protect the little man. In a landlord-tenant relationship, the tenant is always the little man.

Maybe it is important to you to 'prove a point' to that tenant. To 'teach them a lesson.' More power to you. You are morally correct. But is that why you became a landlord? To enforce right and wrong with people who are financial schmucks?

Avoid court.

Pay your tenants to leave.

Screen your tenants carefully and don't let it happen again.

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Andrew S.
Investor · Raleigh, NC · Member since 2013 · 1k+ posts · 708 votes
12y

@Tom V.

I totally get your math and all else equal, you are making the best business decision - in the short term. If enough landlords follow your logic, eventually we will educate a whole generation of tenants who know that all they have to do is stop paying rent and they will get out of any contract whenever they want. Better still, they actually get paid to do so!

It is the same argument that is causing deep-pocketed companies to roll over at any threat of product liability litigation against them, and we have thousands of litigation lawyers and a clogged up court system to prove it.

Again, I get that you have to balance your short-term picture, but don't ignore the potential long-term impact.

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  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    12y

    Generally I agree with your point but before you start offering cash for keys there are a few things to consider.

    It really depends on where you are. I see you are in the wonderful tenant friendly state of CA, so the cost of eviction is higher and it takes longer. I can do evictions here much cheaper/quicker than in CA. It takes less time and non-payment of rent is a slam dunk for a win. It also depends on what class of tenant you are dealing with. Someone who has credit and dreams of buying a home or renting another place that isn't in a war zone will often move without payment when I paint a picture of the long term costs. No need for cash for keys. Just a simple "Move or you will trash your credit", Most get it.

    If you run a tight ship, "no pay no stay" then people don't get too far behind and most situations can be resolved without eviction or even cash for keys.

    3Reply
  • Account Closed
    Investor · Baltimore, MD · Member since 2014 · 1k+ posts · 688 votes
    12y
    Becomes a tricky situation. Giving cash upfront = hey might not still leave. Giving cash upon leaving= they dont trust they will get it
    0Reply
  • Patrick L.
    Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 1k+ posts · 951 votes
    12y

    I can have them out in 3-4 weeks here. I'll let them take the hit for the eviction on their record rather than giving them cash for screwing me over, I'm not going to reward that. It might cost me a little more to evict rather than doing cash for keys but unless they're willing to move out in 24 hours they can just use your offer to string you out longer and set your eviction back.

    2Reply
  • Tom V.
    OP
    San Francisco, CA · Member since 2014 · 345 posts · 281 votes
    12y

    @Account Closed You hand them a written offer a week before you hope they get out. You turn over the money in exchange for the lease termination when the apartment is empty. They have your offer in writing, but you are not out of pocket until they have vacated and hand you the keys. A week is the most I would give someone to prepare for this offer.

    @Patrick L. How much does it cost you in $ of legal fees to get a tenant out in 3-4 weeks? How much is one month's rent? How much more is "a little more" that an eviction costs?

    0Reply
  • Patrick L.
    Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 1k+ posts · 951 votes
    12y
    Originally posted by @Tom V.:

    @Patrick L. How much does it cost you in $ of legal fees to get a tenant out in 3-4 weeks? How much is one month's rent? How much more is "a little more" that an eviction costs?

    Filing fee is $200, another $30 per tenant to a process server. I do it myself but an attorney would cost another $300 for uncontested (I've never had one contested, they have to file an answer and deposit their rent with the court to get a hearing). How long do you give them to get out with cash for keys? Even if they sign the agreement you still have to evict when they don't leave. If they aren't paying then I'm not going to keep playing games with them.

    If an eviction took me months to complete then I'd consider it but I really have no desire to reward when I should be punishing. If I evict them then they will carry that forever and any smart landlord will not rent to them again. If I give them cash then they'll just use that to screw someone else over too.

    1Reply
  • Tom V.
    OP
    San Francisco, CA · Member since 2014 · 345 posts · 281 votes
    12y

    @Patrick L. It sounds like your judicial process in Florida is better than mine in California. Even if I win an unlawful detainer case (3 weeks to get on the docket, can be contested for another 3-4 weeks) I still have to wait for a sheriff's writ after (another 2-3 weeks). At best I get a money judgement against the tenant and great, then I have an IOU from a deadbeat.

    If tenants had to deposit rent up front to contest the unlawful detainer suit, that would make evictions an easier choice.

    You are right that 'giving time' to a tenant who might play games, is problematic, but when it works it is much faster and less headache than court. I would offer 5-7 days to vacate. You can also write up your unlawful detainer filing to show them at the same time (but not file it to save you the fees of course). Then it becomes, 'We can do this the easy way where I pay you $200 or the hard way where you get an eviction on your record that will haunt you for years.'

    0Reply
  • Patrick L.
    Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 1k+ posts · 951 votes
    12y

    @Tom V. The process here is I file the suit and get the tenant served (usually the same day, no later than the next day). The tenant has 7 days to file a response and deposit the rent with the court. If the tenant doesn't do both of these things I can file a motion for default which just needs the clerk's signature (or a judge's if they file an answer without a deposit). Once that's signed then the writ of possession is sent over to the Sheriff for service and the tenant is removed a few days later. The whole process has never been more than 4 weeks for me.

    I know some of the tenant friendly states are far different and if I had to invest there I would probably handle it differently.

    0Reply
  • Andrew S.
    Investor · Raleigh, NC · Member since 2013 · 1k+ posts · 708 votes
    12y

    @Tom V.

    I totally get your math and all else equal, you are making the best business decision - in the short term. If enough landlords follow your logic, eventually we will educate a whole generation of tenants who know that all they have to do is stop paying rent and they will get out of any contract whenever they want. Better still, they actually get paid to do so!

    It is the same argument that is causing deep-pocketed companies to roll over at any threat of product liability litigation against them, and we have thousands of litigation lawyers and a clogged up court system to prove it.

    Again, I get that you have to balance your short-term picture, but don't ignore the potential long-term impact.

    4Reply
  • Tom V.
    OP
    San Francisco, CA · Member since 2014 · 345 posts · 281 votes
    12y

    @Andrew S. - I understand your point about future behavior from renters, but I have effectively "smaller fish to fry" in my business dealings than second or third order behavior effects from my ex-tenants.

    This discussion is a useful reminder of how much worse I as a California landlord have it than other parts of the country. I don't landlord in San Francisco but currently my city's supervisors are working on legislation that would require landlords to pay tenants the difference between their long-held rent control rate and the market rent of the same apartment times 24 months in the event that the landlord chooses to go out of business and stop renting the the units in his building.

    Does that sound insane? It really is as crazy as I have written it. On the other hand, this kind of legislation is what, perversely, keeps rents ridiculously high in the SF bay area.

    0Reply
  • J. MartinPro Member
    Rental Property Investor · Oakland, CA · Member since 2011 · 3k+ posts · 2k+ votes
    12y

    @Tom V. ,

    I'm totally with you, especially in CA, and especially in the Bay.. I tell people over and over.. There's what you can legally do. And there's what makes the most sense.. As long as the existing and future tenants don't know each other, you shouldn't have to worry about tenants trying to solicit or pry it out of you..

    And it can help the whole thing go more smoothly. And prevent damage. And hassle. And other money, etc.. I agree with @Bill

    @Bill S. if they have good credit - try to explain the consequences first. Or that eviction will leave them with a very difficult time to rent in future.. I have had one tenant who just couldn't keep up on rent. But didn't evict or cash. Just gave back full deposit and let them out of lease, after they cleaned up..

    0Reply
  • Andrea M.
    Real Estate Investor · Hampton, VA · Member since 2012 · 562 posts · 109 votes
    12y

    In my area, court cost average $58-$72.00 depending on the # of people on the lease, and average time from filing unlawful detainer to gaining possession approximately 30-45 days. I don't do cash for keys.

    0Reply
  • Tom V.
    OP
    San Francisco, CA · Member since 2014 · 345 posts · 281 votes
    12y

    @Andrea M. That's great! I don't think I would do cash for keys either if I could spend $75 and a month and get my place back.

    0Reply
  • Kenneth Huddleston
    Real Estate Investor · Troutdale, OR · Member since 2013 · 92 posts · 22 votes
    12y

    Tom V.

    I get what you are saying and in some ways it economically makes the most sense, but i don't think i could ever do it. The idea of paying someone for screwing me doesn't sit well with me. If its a good tenant who just can't afford rent i shouldn't have an issue getting rid of them, the problem is squatters who just won't leave. Although economically it would make most sense to just pay them to leave, i tend to go by the philosophy that if you don't let people give you crap they won't in the future. Keep going about it as from a business standpoint its probably correct in your circumstance, but from a personal point i could never do it.

    1Reply
  • George P.
    Property Manager · Livonia, MI · Member since 2011 · 4k+ posts · 1k+ votes
    12y

    i really, really like this idea. i hope i never, ever have to use it. but i will definetely apply it if i have to.

    the only downside is that you can't put a "black mark" on their credit..

    0Reply
  • Patrick L.
    Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 1k+ posts · 951 votes
    12y

    Keep in mind if it's a multifamily property that tenants do talk to each other.

    If they find out that you're giving out free cash for not paying your rent and not filing an eviction (so no consequences to the tenant at all) then anybody that's considering moving out is going to stop paying their rent in order to cash in on your free money for deadbeats program.

    2Reply
  • Javier Marchena
    Investor · Winter Springs, FL · Member since 2010 · 165 posts · 68 votes
    12y

    I believe it depends on the area you are working on. I just had to evict a tenant from one of my properties and it only cost me $400.- between court and sheriff costs. It did not take more than 20 days.

    This situation is not good for anybody. They don't want to leave, they don't want pay, you don't want them living for free, you don't want to spend any more money.

    1Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    12y

    Yes the area the property is located in is critical.

    You have eviction costs and then the actual timelines to evict. Even in a landlord friendly state they might be backed up with volume and what should take 4 weeks takes 12.

    Tenants do talk when at an apartment building. The key is how you pay to get them out versus what time of the month it is. If you get them out at a certain time you lose another months rent anyways as the new tenants are already placed by that month by the time you can get your unit ready for occupancy.

    I would argue that many tenants not paying the rent are savvy. If they know they can milk 2 to 3 months free rent before eviction and would normally pay 1,000 a month in rent then that is 3,000 they save versus taking your 400 bucks.

    Actually they save more than that because the new place will want a deposit, likely first and last, and they will have moving expenses. So they will spend thousands and thousands to move and 400 isn't going to cut it unless moving in with friends.

    This is like what banks do on foreclosures for cash for keys. After they foreclose depending on the state it can take a long time to get the former owners out of the property. So the broker/agent is instructed offer a minimal cash for keys amount. Most of the time the holdover tenants never take it. Then broker/agent is instructed to go higher in amount until a cut off point where the bank will pay no more. Savvy tenants will just take the free months.

    You have to size up the tenant on a case by case basis and see how much they know when doing workouts and their intentions.

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    1Reply
  • Tom V.
    OP
    San Francisco, CA · Member since 2014 · 345 posts · 281 votes
    12y

    The observation that tenants may speak to one another is fair, though it's not something I worry that much about - offering cash-for-keys to one tenant in no way obliges me to offer the same deal to another tenant.

    Also, this isn't a problem I have encountered more than a few times, and always when there has been a substantial change (job loss etc.) in my tenant's life.

    At the end of the day, every profitable business solves problems. The question is merely what is the best way to solve the problem of a tenant you want to get rid of. Again, this discussion a great illustration of the landlord challenges in California vs. other redder states. My tactic is more applicable to my situation than for those in Florida and Virginia it seems.

    0Reply
  • Jarrett Harris
    Calumet City, IL · Member since 2014 · 312 posts · 49 votes
    12y

    @Tom V.

    I just went through a long expensive eviction with tenants who were supposed to pay $800/month. They started paying slow and then not at all. I offered $250 for them to leave. I guess that was not enough because they stuck around another 2 months. I wonder if I should have offered them more $ Like say $500 or even one months rent.

    0Reply
  • Kenneth Huddleston
    Real Estate Investor · Troutdale, OR · Member since 2013 · 92 posts · 22 votes
    12y

    No, that's when you should have started filing for eviction. By offering more you will appear to be weak and that is not a good idea. I remember reading that you should prepare to file for eviction the second the tenant starts giving you problems and no later, and i strongly agree. If you had started evicting at first sign, even in a state like california you would have had them out in a month.

    1Reply
  • Dustin DuFault
    Investor · Fernandina Beach, FL · Member since 2012 · 95 posts · 14 votes
    12y

    I saw a post on BP one time about offering a nominal payment to the tenant AFTER an eviction if they left the property in reasonable shape - and *before* accounting for all the other costs that go on in the aftermath. Just cash on move out day.

    It's a pretty good idea (I think) and a reminder not to let the sunk costs affect your decision making going forward.

    0Reply
  • AJ S.
    Investor · Columbus, OH · Member since 2015 · 99 posts · 35 votes
    11y

    I had same problem in CA, tenants had not paid rent, the resolution was simple, the tenant was using drugs I caught his buddies in the garage smoking something colorful, I called cops, they were gone, issue resolved.  Check if there is something police or law enforcement can do to get rid of problem tenant, usually they are doing some illegal. 

    1Reply
  • John Hamilton
    Real Estate Transaction Engineer · Jacksonville, FL · Member since 2014 · 271 posts · 74 votes
    11y

    @Tom V.

      Tell them, if they agree, CASH will be available AFTER ALL your items are removed and YOU hand the keys over. Not a minute before.

    Make sure you document everything as a recourse in case you do have to evict. It shows you went above and beyond your contractual agreement to resolve the situation by taking on all the costs and then some.

    I'd think of some other options first, like contract breech (no rent paid, etc) or criminal behavior (drug dealing, drug use). these should be grounds for immediate removal of the trash. 

    Discuss this with your attorney, too. Also, go to the appropriate state or county agency for some advise. It may not be what you want to hear, but it may be cheaper that evicting or paying cash for keys. 

    I hope no one else (deadbeat tenants) read this post thread as it could start a vicious trend. "Hey, I heard if you don't pay your rent, your landlord will pay you to leave.". Don't do it! 

    1Reply
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