Cash for Keys to break tenants lease early?

Question

A partner and I will be closing on a 4-plex in Nevada early next month, which we will fully remodeled using a construction loan. Three of the tenants are on month to month leases, however one set of tenants have a lease ending on May 31st. We'd like to get these tenants out as soon as possible to be able to fully begin the remodeling process-does anyone have recommendations for a cash for keys letter or approach in a non eviction situation?

Nathan Gesner · Answer

Why are people so quick to give away money? Why not try talking to them first?

They may be motivated to leave early with no prompting. Explain to them that you intend to renovate and need the unit vacant, either now or later. They will have to move sooner or later so offer to let them move at any time during the first 60 days without penalty so they have flexibility to find another place. Tell them you want it in "good repair" but they don't have to bother with any cleaning. Offer to hand them their security deposit refund as soon as they hand you the keys and you verify they didn't destroy the place.

That's typically enough for any tenant. If they insist on staying until the end of the lease, consider offering them an incentive or just renovate the other three units first and then do that one last. There's great benefit to having someone living in a unit and paying rent while the other three are vacant.

April Vogt · Answer

@Dennis

@Dennis M. Thanks for your intput! All current tenants are $300-$600 UNDER market rents for the area, and the remodel will involve everything down to the studs, so its in our nest interest to get everyone out and under construction quickly. The 3 months of $400 rent just isn't worth it.

Theresa Harris · Answer

@April Vogt  Are you going to be able to reno all 4 units at the same time?  I'd start by giving those on month to month leases notice that you will be doing major renovations.  If they are good tenants, you can give them right of first refusal once the renos are done-letting them know what the rents will be.

Erik W. · Answer

@April Vogt, since you asked for a letter and no one has provided one yet, I'll address that.

Basically, you don't need a letter.  All you need is a simple offer, just like you would write up to make a purchase.  Make sure to have both your name and all tenant(s) names on it, the address of the property, what you are offering (i.e. dollar amount), and what they must do to receive the payment.

Example.  April (New Owner) offers Bob and Sally (Current Tenants) $1500 to move out and return full possession of the unit located at 123 Anywhere Ave in Anytown, USA on or before March 30th, 2020.  Payment will be made (by cash or by check) on the date and time New Owner and Current Tenants meet to hand over keys and certify that all personal belongings have been removed from the unit.  Unit must be completely vacated by all parties along with all personal property removed, all keys handed over, or payment will be delayed until such time as these condition(s) are met.  It is understood by the signers of this offer that the money paid is to voluntarily terminate the lease currently in effect before its original ending date.

___________________________           ________________

April                                                   Date

___________________________           ________________

Bob and Sally                                      Date

But yes, if you can get them to move for free, go for it.

Max T. · Answer

@April Vogt

I would first start by offering to let them leave so that they can avoid the renovation process and constant disruptions that will be annoying to them if they stay. Maybe offer to assist with a moving truck or something.

They may accept a more modest offer first!

Anthony Dooley · Answer

@April Vogt there are other ways to persuade a tenant to move without offering them money. If the tenants are not already violating the existing lease agreement, such as a pet or smoking, there is a good chance that they will violate it over the next few months. Get familiar with the landlord tenant laws of your state. I would also give them notice that the lease will not be renewed and I wouldn't repair anything between now and the renovation.

Nicole A. · Answer

May I ask why you are doing such a heavy renovation "down to the studs" on a property that I assume must already be in good enough condition to live?

April Vogt · Answer

Thanks @Nathan G. for the sound advice-we definitely won't be offering them money right away and intend to speak to them first, before giving away anything we might not need to. However due to the nature of the remodel, as I previously mentioned, we need these tenants vacated. So in this case I am hoping to find any advice for a form letter or starting point to offer them cash for keys to (hopefully) easily incentivize them to break their lease early

Nicole A. · Answer

Just ensure you aren't renovating beyond the market so that you make money from these renovations rather than be in the negative. Best of luck!

April Vogt · Answer

@Erik Whiting, thanks this is super helpful and a good starting point for my partner & I.

@Karen Bickford you are correct. The current rents are very low, but the place is being managed by someone without much regard for their tenants well-being, or the property's. While there are tenants in place, I wouldn't consider these units liveable . We'll fully renovate up to market rents and to our standards @Nicole A.

Cash for Keys to break tenants lease early?

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