Cash for Keys

General Landlording & Rental Properties
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Cash for Keys

Mark N.A
Real Estate Investor · North Carolina · Member since 2008 · 1k+ posts · 483 votes

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.

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  • Christian Malesic
    Real Estate Investor · Harrisburg, PA · Member since 2008 · 716 posts · 41 votes
    18y

    Again, FSJR9, I have not found that to be the case.

    We have never needed the "benefits" that an MTM would have offered, but have used the "benefits" of an annual lease as described above.

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  • Michael Rossi
    Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
    18y

    I totally disagree with Heathen. We do MTM leases for all low income tenants and usually year leases for all middle class tenants. I have found great benefit in being able to terminate their lease with a 30 day notice and even more benefit in being able to THREATEN to do so. Of course, if I threaten to do something, I ALWAYS follow through if the tenant doesn't comply with my demands.

    There is absolutely no advantage to giving a low income tenant a year lease. You can not enforce it - what are you going to do - sue them? They don't have anything. On the other hand, with a year lease, a low income tenant can really make a landlord's life miserable. They have the advantage.

    Mike

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  • Christian Malesic
    Real Estate Investor · Harrisburg, PA · Member since 2008 · 716 posts · 41 votes
    18y
    Originally posted by "MikeOH":
    There is absolutely no advantage to giving a low income tenant a year lease.

    So I guess we are going to reopen this debate.

    Mike... you know you and I usually agree, but you are just plain not being fair here. To say in such strong words "absolutely no advantage" is operating with blinders on.

    Go back to my last post of page 1. Money. Money is the advantage. Marketing is another. Now, if you weigh the pros and cons of MTM vs Annual and choose MTM for some and Annual for others, that is fine. I have no problem with you coming down on a side and debating that side.

    But to post that one side has no Pros at all and the other has no Cons is being unfair to those who read these forums for guidance from more accomplished folks like you and I.

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  • Michael Rossi
    Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
    18y

    Heathen,

    Maybe the problem here is the definition of "low income" tenants. When I say low income tenants I mean apartment dwellers who live paycheck to paycheck, if they work at all (most don't). They often get welfare or SSDI. These people almost without exception have HORRIBLE credit and pay for everything with cash. Most don't have checkbooks. They cash their paycheck at the "Cash Advance" place. They consistently make the wrong choices in life and will never attain anything more than they have now. They are an eviction away from being homeless.

    There is absolutely no advantage to putting this type of low income tenant on a year lease. They can not pay 2 months rent to get out of the lease, most can barely pay the rent. I don't understand what you mean by "marketing" being an advantage.

    As I said, I put my middle class (lower middle class) tenants that are in SFHs on one year leases, because there are consequences for them if they don't follow the lease. As you said, they can pay extra if they want to break the lease and they may actually care about their credit rating. I believe these are the tenants you are speaking of and I agree with you that there is a good reason to put them on year long leases.

    Mike

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  • Aly W.
    Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes
    18y

    If a low income tenant is Section 8, it's my understanding there must be a year's lease to get the HUD contract, correct?

    If a low income tenant that's not Section 8 has a job but could potentially be one paycheck away from homeless, is it considered discriminatory to only offer them a month to month?

    Thanks

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  • Michael Rossi
    Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
    18y

    I don't know what the "right" answer is, but I have done month to month leases with Section 8 tenants. I don't do that alot, but I do when I am iffy about a Section 8 tenant. For example, I had one applicant that had one marijuana possession misdemeanor charge on his record, but nothing else. I normally won't take anyone with any drug charges in the past 3 years. However, this applicant had an excellent record in every way and the local Section 8 office really wanted to place him. I agreed to take him but only if they would allow a month to month lease, which they did. They made him commit to a year from Section 8's standpoint, but the lease was month to month.

    He ended up staying well over a year and was a model tenant.

    "Close to homeless" is not a protected class federally or in Ohio. That could be different in lefto land. You definitely need to know your state's law and your local city law. I'm sure that your city has an equal opportunity/fair housing office. You might want to stop by and pick up whatever materials they have relating to discrimination. You could probably ask the fair housing person any questions they have.

    It's always good to have a relationship with these government people BEFORE there is a problem. If they know you're trying to do things right, that can go a long way to keeping you out of trouble.

    Mike

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  • C. Anthony Hughes
    Member since 2008 · 2 posts · 0 votes
    18y

    I am an Attorney practicing in this field and I advise clients to try to avoid evictions. In CA evictions (unlawful detainers) are expensive ($195 filing fee, $15 for the writ, $125 for the sheriff, and $200-$500 in attorney fees). If you can get a tenant out with $250 and have them leave the property in decent shape, then you are golden. If you do evict the tenant, CA allows you to get the reasonable rental value as a judgment and the costs, but that opens up the issue of "what is reasonable rental value", and most clients would rather just get possession to keep the issue narrow in foreclosure situations.

    Although, I don't mind the extra business when someone does decide to evict ;)

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  • Michael Rossi
    Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
    18y

    Why would a tenant take $250 to leave when they're getting to live in the rental for free? I'm assuming that most rents in California are higher than $250!

    IF they do agree to leave, how many days would you give them? Since they've already PROVEN to be untrustworthy by breaking the lease (not paying the rent), why would you trust their word now? What happens when the day comes for the tenant to be out and they tell you that they just found a place to rent and they'll be out NEXT WEEK? Since you're advising to avoid evictions, surely another week is ok if the landlord can avoid eviction. At what point does the lost rent playing these silly games offset any benefit you would get from having a tenant actually leave once in a blue moon.

    Finally, and most importantly, tenants know each other. What are the ramifications of the tenants you pay to leave telling every other tenant in the building (and across town) that you're a weak landlord? The answer is that you will attract deadbeats for tenants. The answer is that all of your tenants will know that if they want to leave, they can simply stop paying and you'll pay them to cheat you. I've see this all the time in failed landlords. NO THANKS!

    Mike

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  • Account Closed
    OR · Member since 2008 · 1k+ posts · 845 votes
    18y

    FSJR:

    [[[[........but have you actually had to give a reason as to why you were giving them 30 days? Does it need to be justified reason?....]]]]

    You are in NJ, so you can only give 30 day notice for a few select reasons, and you would have to present that reason. NJ isn't exactly Landlord friendly.

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  • C. Anthony Hughes
    Member since 2008 · 2 posts · 0 votes
    18y

    I agree with the points you made mike.

    The decision has to be made on a case by case basis. For foreclosures, cash for keys is best because you have to give the tenant notice before filing the unlawful detainer anyways, so you might as well present the offer when the 3 notice is given. If they don't follow through with the offer, then you can proceed with the lawsuit without further notice.

    In CA, you don't need a reason to end a month to month tenancy if proper notice is given (30 days, or 60 days if the tenant has been there for over a year).

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  • Michael Rossi
    Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
    18y

    Anthony,

    I agree with you that cash for keys can be appropriate anytime the investor is in a one-time situation. Foreclosure is a good example. Another is a failing landlord who is trying to get the tenant out of his only property so that he can sell the property. My objection to cash for keys lies in the precedent that is set if a person is in the rental business, and it also bothers me morally to pay some scumbag for stealing!!! I genuinely don't like deadbeats!

    Mike

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