Cash for keys is a common practice in the property management world to avoid evicting a tenant. Learn more about what cash for keys means, the pros and cons of it as well as other eviction methods/mistakes below.
What is Cash for Keys?
As previously mentioned, cash for keys is a practice within the Harford County property management industry to encourage a tenant to move-out without an eviction. This may seem counter-intuitive as the tenant is likely already behind on rent payments. Offering cash for keys doesn’t only benefit the tenant by encouraging them to move, but is good for landlords as it typically costs less than eviction.
Cash for keys is the landlord given a written offer of cash for a tenants’ return of keys. There will be a move-out time frame and if the keys are returned, the tenant will accept the cash and move on. With keys returned, the landlord is free to change the locks. They can complete any additional turn over tasks as well as begin marketing. Generally, the point of offering this is to cover the moving expenses and ease the burden for the tenant.
- Helps tenants going through a hard time: Not only will it help the tenant with moving costs but also spare them from having an eviction on their record.
- Costs less than eviction court: Even the higher range of cash for keys offers are cheaper than eviction. An eviction will cost court fees, lawyer fees, etc. and those tend to be more expensive than what you offer to get the tenant to move-out.
- Generally easier process than eviction: Eviction is a process. It can take quite a bit of time. It also doesn’t guarantee the tenant will follow the court order. Many times even after a court eviction tenants still squat and refuse to move. At this point, the landlord has to get the sheriff involved.
- Faster possession: Offering cash for keys could get the unit in your possession almost immediately vs. waiting for court.
- Still may have to go through eviction: This doesn’t work with everyone! Often, the stress of moving right away will encourage a tenant to refuse your offer. Thus, continuing to live on the property without paying. At that point, you will still need to go through the costly and long eviction process.
- Reputation for “rewarding bad behavior”: Offer cash for keys can give you the reputation as a landlord as a pushover or one that rewards bad behavior. One bad tenant can attract others and then cash for keys becomes a regular practice vs. an as-needed emergency case.
- Some may argue money isn’t enough for moving costs: Tenants may argue that the money is not enough to cover their moving expenses and try to negotiate. If negotiating isn’t possible, they may flat out refuse your offer. This is when the first con listed of still proceeding with eviction occurs.
- Mistakes can be made: We will go into details about the common mistakes below. However, it is important to note, this is a huge con if things are done incorrectly. You could cause yourself legal trouble as opposed to the tenant.
How Much to Offer for Cash for Keys?
The money you provide in exchange for keys depends on what budget you have. It also depends on how quickly you want them to move and how much you are willing to pay! Below are examples of how much cash to offer for keys:
- On the lower end of the spectrum, $500 tends to be the smallest number in the industry that landlords may offer. However, as this would be enough to cover a moving truck, many tenants may not accept this offer.
- According to Rent Direct, the most a landlord should offer is $5000, any more is as expensive as eviction and not worth the cost.
- Some landlords offer the equivalent to one month’s rent costs or 1.5 months’ rent. This is a fair way to negotiate and also plenty of money for a tenant to cover moving costs and a deposit elsewhere.
Cash for Keys Mistakes
As we mentioned in the cons section, there are plenty of mistakes that can be made when offering cash for keys and you do not want to make any of them. These are some of the most common cash for keys mistakes a landlord makes:
- Harassment: Harassing a tenant to move-out and using cash, not as an incentive but a bribe can cause more troubles on your end legally. Always be professional when offering cash for keys and do not harass, bully or discriminate.
- Self-help Evictions: Self-help evictions are illegal. Although cash for keys is not considered one, it could be if done incorrectly. A self-help eviction means the landlord evicts without court by doing something such as changing locks or removing the tenant’s items without permission. Keep this in mind when offering cash for keys. Cash for keys is not illegal, but changing the locks before offering and/or the deal going through makes it a self-help eviction.
- Negotiation: You can leave a little room for negotiation, but don’t leave much. The reason is negotiations will drag on the process and also give the tenant the upper hand. You can always start with a higher number or start with a close number to what you are willing to give and then negotiate only up to that number. For example, offer $1920 instead of $2000. That leaves the tenant with some wiggle room to negotiate, but you already know that $2000 is the place you are comfortable being.
- Not Getting Proof of Transaction: Always get proof of the transaction by writing the offer and having the tenant sign it. Also, have the tenant sign off that they turned in the keys and received money, and give some sort of receipt (keep a copy). Not doing so could lead to the tenant taking money and then squatting in the unit. This gives you no upper hand as the transaction wasn’t recorded.
Tips for Bringing up Cash for Keys to a Tenant
In order to do cash for keys and protect you as the landlord, follow these tips:
- Explain the eviction process and what will occur: Always confront the tenant respectfully but explain the situation and the seriousness of it. You can explain that offering cash for keys will be best for them because if not, you will have to evict them. Make sure they understand the consequences of having an eviction on their rental and credit history. This usually will encourage them to take the offer without much pullback.
- Always get it in writing: There are plenty of templates online to use for this purpose. You can also consult a property management company and/or real estate lawyer to be sure the letter is legally binding. Never negotiate and make a verbal deal only.
- Know the largest amount you can offer and still obtain ROI: Do the math and know the right amount to offer. Don’t just pick a number because you think it will work. Try to still get ROI (return on investment) for this unit. Also, try to make an offer that gets the tenant out quicker allowing you to turn the unit and begin showings. Doing so will get it rented sooner and save your investment. Long sitting vacancies are the worst thing for a landlord financially.
Ask a Professional Harford County Property Manager!
Not sure if cash for keys is right for your particular situation? Reach out to a local property management company. A property management company can not only advise you on what step to take but how much money to offer. All while providing a legally binding letter to the tenant for them to sign. If you must proceed with an eviction, a property management company has the tools to help win the case in court and be sure the eviction is legal.
Looking for a property management company for your Harford County rental property? Contact Bay Property Management Group Harford County for professional advice on evictions, cash for keys and all your Harford County property management needs.