Performing Cash For Keys

Cash For Keys can be a simple way to get very solid deals when a landlord has a “problem tenant” that theyve just never had an adult conversation with. Little nuances can make a huge difference in the success of Cash for Keys conversations

Process

  1. If the lease ends prior to closing, cash for keys is not needed. You can simply execute the lease end.
  2. Before attempting to do Cash for Keys, make sure that you have a guaranteed closing lined up in case things go awry.
  3. Approach the tenant with kindness and be clear about the fact that they will be required to leave the property and have a few options:
    1. If they agree to leave before the end of their lease, you are willing to work with them and provide them compensation and potentially moving assistance.
    2. If they refuse to discuss, you must honor their lease. If the lease end date is a distance out, it can make closing challenging. If the lease ends soon, simply let them know if they leave sooner you’ll pay them, otherwise theyll still have to leave and get nothing.
  4. When offering cash for keys, you can generally pay far less than you think. I recommend you start with about 75% of a normal months rent in your market and increase from there.
  5. If the tenant agrees to your terms, get it in writing. Create an agreement and have them sign it. Understand this agreement is not enforceable at all, but the act of making them sign makes it much more likely that they wont get difficult at the last second.
  6. When going to give money for cash for keys, meet them AT the property and do a walk through with the tenant. Ensure that the property has not been majorly damaged and there isnt an entire house of stuff left once they have left. If there is minor trash or clutter, dont fret.
  7. Give them the money in cash, and ensure that you have a locksmith or handyman on standby THAT DAY to change the locks. If in a rough part of town we recommend boarding the house up if theres any concern of potential squatters.
  8. Try to perform the actual cash for keys as close to closing as possible. That way if things go south, you can push back on the seller, and then if things go well, you dont have a risk of squatters or other challenges before the buyer closes.
  9. If you are unable to get a tenant out before closing but have a closing deadline (Foreclosure or something) here are strategies that can help get things moving or secure your deal for a buyer.
    1. If wholesaling, have your assignment fee held in escrow until you get the tenant out. This can show good faith to your buyer.
    2. Issue legal notices to vacate and begin the eviction process (if allowed IE if the tenants lease doesnt have substantial time left)
    3. Perform an extended closing with the buyer, time closing for when the lease ends. Increase Earnest money to a reasonable amount and make sure it is PAID so your contract is legitimate.
    4. Have the sellers funds with held until the tenant is out, this is most common if there is a timeline where a sale is mandatory and the landlord has a personal connection to the tenant (family member, ect….)
  10. Dont be afraid to have these discussions. They are challenging but you can literally make hundreds of thousands of dollars by being the one willing to have these challenging conversations.