What does Cash For Keys mean for Rental Properties?
Eviction is never a fun prospect to have to face as a rental property owner. Maybe it’s a problem with a renter who doesn’t follow the terms of their contract. Maybe they have a record of late rent payments. Regardless, evicting troublesome tenants is an unavoidable element of ensuring landlords and rental property owners make money on their assets. Offering tenants a cash for keys solution is an option. This is for landlords and rental property owners looking for an alternative to the lengthy and often expensive eviction process. Albeit unconventional, there are lots of advantages to using a cash for keys agreement.
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What is Cash for Keys?
“Cash for keys” is the legally binding agreement between a landlord and their or (rental property owners) and their tenants. This is to persuade renters to vacate their property in exchange for a cash payment. In a cash for keys agreement, the landlord (or bank in a foreclosure) agrees to pay the renter an agreed-upon monetary amount in exchange for the tenant’s agreement to vacate the property. Eviction is a time-consuming, costly, and frustrating process for all parties involved. A cash for keys agreement avoids all this, speeding up the process of evicting a tenant and vacating the property.
This agreement can also help tenants avoid having an eviction show up on subsequent background checks. This allows landlords to quickly replace tenants as well.
How does a Cash For Keys Agreement work?
Vacating Former Homeowners Still Living in a Real Estate Owned Property After Going into Foreclosure
A cash for keys offer is a terrific choice when a former homeowner remains in a real estate-owned property post-foreclosure. The bank or lender may try to recoup their losses through this deal if a homeowner has missed mortgage payments but still lives on the property. The home will be easier to show and sell once the homeowner has vacated the premises.
Vacating Tenants from a Real Estate Owned Property
Tenants who have a current lease or a month-to-month arrangement may still live on the premises once the foreclosure process begins. A lender or bank may provide this deal so that the property is unoccupied and the listing process can begin.
Vacating Renters from Rental Property You Own
Difficult tenants are not uncommon for real estate investors with a lot of rental property expertise. It’s also quite typical to buy a rental home that already has tenants living in it. A cash for keys offer might be used to evict/replace tenants without going through the eviction process.
You must always avoid squatting renters if you want to maximize your rental property earnings. Squatters are never good news. This is especially for a foreclosed property that has been unoccupied for a long time. These people who have naturally moved in should be removed as soon as feasible. Formal evictions can be pricey but paying cash for keys can save you money in the long run.
Tips for Offering a Cash for Keys Agreement
Here are some tips for this kind of agreement to work:
Healthy communication between all sides is required. This guarantees that tenants and landlords are both on the same page. Communication is a legal necessity for every action that would influence a tenant’s living condition, especially if the tenant is eligible for eviction. Explain to tenants that they will be evicted. Include the circumstances, prospective expenses, and impact on their ability to locate a home in the future. Finish by introducing this type of arrangement as an alternative.
Answer the Question “What is Cash for Keys?”
Banks and landlords may comprehend the concept of a cash-for-keys offer. Tenants might not. Answer any queries about how this agreement works after explaining that the renter is facing eviction, which may be time-consuming and costly. Cash for keys is lawful in all 50 states, and courts frequently encourage it to aid landlords in resolving issues outside of the courtroom, benefiting all parties involved.
Arrange a Written Agreement
Having everything in writing is STRONGLY recommended in any real estate or rental property circumstance. Cash for keys is just a slang term for a private written agreement between tenants and landlords, and the contract isn’t legally binding until both parties sign it. It’s crucial to have a written cash for keys agreement to protect yourself from potential legal concerns and to ensure that renters are on the same page regarding payment amounts and move-out expectations.
Follow Up on Moving Day
The goal of a cash-for-keys agreement is to ensure that tenants leave the property. After all, you’re only willing to spend if you can start the turnover process sooner. The tenant’s move-out day is the most critical day in this type of arrangement, so make sure to check in and make sure renters have left on time.
Act as if Property is Already Vacant
There is no need for the rental property owner to delay starting the turnover procedure beyond the agreed-upon move-out date after the private cash for keys agreement has been signed by both sides. A cash for keys agreement allows landlords to treat the property as if it were already unoccupied, which means they can change the locks and start turnover service on the date and time the tenant indicated they would be gone.
Cash-for-Keys Agreement Form
Using a cash-for-keys agreement form, also known as a cash-for-keys letter, to ensure everything is in writing is perhaps the most important aspect of this kind of arrangement. The eviction conditions, the amount of money the tenant will receive for vacating, how the tenant may expect to receive the payment, and the tenant’s move-out date will all be listed on the agreement form. Rental property owners will frequently include a clause stating that both the landlord and the tenant must be present on moving day in order to assess any potential damages that may affect the payment amount.
Cash for Keys Payment Amounts
The amount a tenant receives under this agreement is significantly dependent on the rental property and the tenant’s unique circumstances. In terms of lost rent payments, court/attorney fees, and potential damages, the average tenant eviction process costs roughly $3,500. The purpose of a cash-for-keys offer is to avoid these high costs by delivering a smaller cash amount in exchange.
In general, landlords should start low and openly negotiate a greater sum if necessary to obtain keys from tenants. Some people may consider $500 to be a good beginning point, while others will offer half a month’s rent as well. Landlords can be flexible with this offer in order to present tenants with an incentive that is more profitable in the long run for the rental property owner.
Cash for Keys Mistakes
While these deals might be beneficial for landlords and rental property owners who want to avoid the eviction process and speed up tenant turnover, there are a number of pitfalls to be aware of when pursuing this option. The following are some of the most typical blunders landlords make when providing payment for keys to evicted tenants.
- Self eviction. Landlords who take matters into their own hands by messing with tenants’ utilities or locking them out can find themselves in serious legal danger. Harassment will not be tolerated in an eviction proceeding. Regardless of whether you have a cash for keys arrangement or not, keep emotions out of the eviction process.
- Too much negotiating. While landlords should be flexible when discussing financial offers, they should never lose sight of who should be the captain of the ship. To avoid over-negotiating, make sure you have a maximum amount set.
- Financial mess. Make a record of all payments made and received. Despite what the name indicates, landlords will frequently pay using a check rather than cash to keep an accurate record. Ensure that all parties receive a payment receipt. Reimburse all security deposits if the property wasn’t damaged beyond repair.
Sell Your House Fast! A Team Marketing Buys Rental Properties
Consider selling your rental home if you’ve reached any stage of the cash for keys process. We can buy your rental property with the tenants still in it. This will eliminate the need to evict them or come to a cash-for-keys agreement. We specialize in purchasing rental properties and placing you in a position to optimize your rental property investment, with vast expertise with troublesome tenants and neglected maintenance. Sell Your House Fast and call us today at 855-66A-TEAM or by clicking here.