Some agree that Cash for Keys can be a good option to use. Others however argue that it is the stupidest thing they have ever heard and something they would never consider doing. Do these dissenters have a point? Yes, they do. In this post I want to look at Cash for Keys in a bit more detail.
First off, I want to make sure everyone understands what Cash for Keys is. I have written on it before. In a nutshell, if you have a tenant that you need to go away, instead of evicting them you pay them to give you the keys and leave.
A key point made by several who were against using Cash for Keys is the use of strict tenant screening procedures and a tough stance when it comes to your lease, rules and policies should preclude the need for such a thing. I could not agree more. Proper tenant screening will eliminate most of your problems. Being firm and strict when it comes to your house rules will help even more.
However, even the best tenant screening and the strictest landlord will not always prevent the need to get rid of a tenant. This does not mean that the landlord was duped or scammed by the tenant. It more often means that sometimes bad things happen to otherwise decent people.
What Bad Things?
Have you ever had a tenant fail to pay you because they were diagnosed with cancer and exhausted their resources? I have. Have you ever had a tenant fail to pay you because they were involved in a horrific accident that was not their fault and made them unable to work? I have.
When these bad things happen, these otherwise good people can put their head in the sand in hopes that the problem you present will go away. Unfortunately, I cannot be a charity. After all, the bank is not allowing me to stop my payments to them. I can however cut these folks some slack. I do not have to pile add an eviction to their list of problems but I do need them to realize the situation and make arrangements to move on.
Sometimes all that takes is a little cash for a moving truck. Other times it could be a little cash for a deposit at a less expensive rental or to move in with someone. I am going to have to spend something to get them out of the place, why not nudge instead of force. Force can lead to some negative consequences.
It Is About Incentives
Another argument against Cash for Keys comes down to incentives. Many argue that Cash for Keys rewards bad behavior. Landlords should instead “Teach these people a lesson!” I understand all of that and generally agree. I am all about incentives. My house rules and strictness from the outset are designed to incentivize good behavior. Again things happen. But, if a tenant wrongs or takes advantage of me, then I have and will go after them with an eviction. They know that on the front end.
I understand that larger companies those with larger apartment complexes may not want to use this tool. Word can get around and tenants “learn” very quickly. Cash for Keys may not be a reasonable tool to use in those situations. But for me and my business it is a tool that sometimes comes in very handy.
And that is really what it comes down to. What is the right thing for you and your business. There is no one way to be a real estate investor. You have to choose what works for you based on your particular circumstances and sometimes Cash for Keys, despite the negative aspects, is right for me.
