SS98: What is Cash for Keys?

SS98 What is Cash for Keys

Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing What is Cash for Keys.

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Transcript:

Charles:
Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing what is cash for keys.

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Charles:
It is advised to always speak to attorney before evicting a tenant or performing a cash for keys procedure. Cash for keys is the method for a landlord or bank if they are foreclosing to persuade a tenant to vacate a property and exchange for a set amount of money that both parties have agreed upon. Now, this is normally where I lose most non landlords or landlords that have never had to evict a tenant. They want to get paid and it makes no sense for landlords who are owed money to pay someone that owes them. On the other hand, a seasoned landlord will be nodding their head during this explanation since they understand how expensive and painstaking is to evict a non-paying tenant. Cash for keys is common in situations where the tenant is unable to afford the rental unit anymore. The landlord wants to avoid an eviction, avoid the unit being damaged and get the unit rerent as soon as possible. Other situations might include that the property is being sold, the unit needs to be empty during this or the property was just sold and the new ones want the property empty.

Charles:
The tenant could be violating other terms at lease or receiving complaints from other tenants. So how the cash for keys process actually works. Now, some landlords will file an eviction first, and I feel this is incorrect in most cash. For keys situations, you really wanna avoid an eviction altogether. That’s a whole point of cash for keys. Now the first step is to speak to the tenant face to face if possible. You know, I would avoid emails or texts. If you cannot speak face to face with them, give ’em a call. But every time I’ve performed a cash for keys, I did it face to face. Make sure all the decision makers are present and see what they say or how they react to your proposal. Explain to them that they do not accept this. You’ll be starting an eviction that will stay on the record for seven years in most situations.

Charles:
Explain the benefits to them and make it a win-win. And on the second step is deciding what is the cash amount you’ll be offering. You know, ask them what they will need to leave and then stop talking. And if they say something under a thousand dollars, I would say I would wait a moment and I’d say yes. But if the unit is in good condition and if they move out by say X date, I will also walk the unit prior to formally agreeing. Normally you’ll walk the unit quickly, right? Then just make sure there is no major damage to the, the unit or appliances like you’re not doing a full inspection on the property. You’re literally going in and making sure that there’s no major problems that are gonna have to be repaired. Stuff that’s painting, small repairs, cleaning, these are just minor things.

Charles:
You want possession of the unit back so you can clean it, do some small repairs and rent it. Also, if you do not do a preliminary inspection now and you go through the process and the unit has major damages on move out date, I mean what are you really gonna do? You can restart the process of cash for keys. You can start an eviction process. You can try to negotiate again. Or are you just going to pay the amount that you already agreed upon and eat the repairs? Either way, it’s a lose lose and for you, because the reason why you’re doing this is to get them out as soon as possible and rerent the unit. And I mean honestly getting the unit back, even if there are major repairs or major damages is number one. I’d rather have the unit back right away than have someone sitting there for months with, with or without the major repairs.

Charles:
The major damages. And I’d get it back, I’d fix it and get it, rere it and be done with it. You don’t want them just sitting in there cuz you can’t come to a thing. Some agreement you want them out and you want to have it re rented. Now the preliminary walkthrough gives you an idea the unit condition. So in move out date, you can make sure it is the same and you are all set. Again. It’s gonna be a quick walkthrough, literally less than a minute. You go through the rooms, go through the bathrooms, you know, make sure it’s not like missing appliances or there’s something crazy wrong. And then once it’s done, you can go forward with the cash for keys. If they’re delinquent and they’re asking for an amount over one month of rent, I would push back, you know, they’re taking advantage.

Charles:
Try to get them to one month or tell them, you know, you’re gonna start the eviction. If you’re moving out a good tenant, you need to offer them more money and give them several weeks to find a new place and move out. That’s how I would do it. That’s how I’ve done it in the past. And I would even have assist with moving, not maybe personally, but you can give them money for movers or stuff like this. Next, once you’ve agreed to the price, you want to find a date to have them move out by the sooner the better. Maybe adding a bonus that they’re out sooner than later. For example, a thousand dollars and two weeks or $1,200 next week. And that’s gonna give ’em, motivate them a little more for you to get control and possession back of the unit and be done with this after you repair it.

Charles:
Nexus signing a cash for keys agreement. You know, I used to keep blank rental applications and cash for keys agreement with me When I self manage properties. You should bring two blank cash for keys agreements with you. Once you agree, complete them with the 10 information, the amount and the date. Each party signs two companies and each party will receive a fully executed agreement. If you need a boiler plate cash for keys agreement, sign up for our [email protected] and we’ll automatically send you a link where you can download all of our free resources, including a cash for keys agreement. The final step is move out, but before we get to that, it’s gonna be like the process up to move out and I would call and text the tenant a few days before and then the day before to make sure you were still on track.

Charles:
If they’re delinquent tenants, they have broken agreements before and you need to keep following up on move out date. Show up once they have moved out with cash a receipt book, the agreement and the new keys. Once they’re out, inspect the unit quickly as we spoke about before, give them the cash and have them sign a receipt, acknowledging that they receive the cash and change the locks. You can now repair, clean and rerun the unit. The security deposit is another point we should touch on and the security deposit is a separate transaction from cash for keys. But you know, if you’re planning on doing cash for keys, the tenant is most likely already delinquent. Most landlords will let the tenant slide much longer than they should, and most instances it’s gonna be over a month. And most security deposits are usually one month. So usually they’ve really eaten up their security deposits.

Charles:
But you still have to formally following the your laws, your state laws, you have to let them know what’s going on with your security deposit. If it’s not being returned or you’re not giving it back in full, you have to document this. The return of the deposit is separate for cash, for keys. It can’t be all together. A couple tips for cash for keys, the agreement should always be in writing. The agreement needs to provide protections from future lawsuits against the landlord. You wanna have proof of transaction. So if you’re giving them cash, you wanna have them sign a receipt that says they’ve received that set amount in cash that was on the agreement. Minimal negotiations with a tenant. I mean, this is really a gift you are offering the tenant, if they want a crazy amount of money, like $5,000 for a thousand dollars a month apartment, you know, tell ’em you’re gonna start the eviction and give them, tell ’em what your limit is like thousand dollars.

Charles:
That’s your limit. That’s all you can do. And cuz they’re just unreasonable, you’re, it’s gonna be even cheaper for you just hopefully to do the eviction and hopefully they’ll go out sooner than later. I mean, have a more stringent tenant screening process in the future and that will avoid you having to go through this again. What to avoid when doing cash for keys. So when you’re explaining what cash for keys is and you’re proposing this and don’t harass a tenant or bully them into accepting, they might not accept right there on the first time. You know what I mean? It might be something that you call them back a day or two later, or you text them, Hey, did you speak to you know your spouse about is this, I mean, what are we gonna do? I need to have an answer by this.

Charles:
I mean, this is kinda how you wanna leave it when you don’t wanna leave it wide open. You wanna give ’em a deadline of this is when you’re going to accept them. Now with cash for keys or with any non-paying tenant or any tenant issues, you never, never change locks. You never disconnect utilities. You never like remove a door. All these different like horror stories you hear landlords do. That’s, this is all illegal. You cannot, cannot do it. If you ever do an eviction or anything like that, they’re definitely gonna side with a tenant. It’s better just to follow the law. If you have any questions on what the laws speak to an attorney in closing. Cash for Keys is a great option for landlords that I’ve used several times myself when I used to self-manage my properties. I suggest landlords in all states utilize cash for keys and especially in non landlord friendly cities and states, you’re going to minimize your loss of rental income, save time and save money, both legal fees and repair costs. So I hope you enjoyed. Please remember a rate review, subscribe, submit comments and potential show topics at globalinvestorspodcast.com. Look forward to more episodes next week. See you then.

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Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar, LLC, exclusively.

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