- What is happening YouTube,
today's conversation is all about cash for keys.
This is a very, very relevant conversation because of COVID,
but also relevant conversation for any landlord out there
that has tenants that are for one reason or another,
not paying your rent.
With all the craziness going on in the world,
there needs to be other means
to get a tenant to move on from a property,
and cash for keys is one of them.
Check out this video in full,
and we'll take you over to the whiteboard.
But before we go to the whiteboard,
do not forget to take a minute
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of all the great things that we're up to
on the YouTube channel.
Now let's head to the whiteboard.
Unfortunately, 'cause the COVID
and because people are not able to pay their rent,
because of all kinds of issues,
there are tenants that are
in their units without paying rent.
And this applies to times before COVID and after COVID.
Now as a landlord, most of the time,
you have access to the eviction process
to execute the lease,
get a court to mandate that the tenant needs to move out,
and have a sheriff come out and perform a lockout.
Off you go with an eviction.
If they are breaking their lease through
noise violations or breaking the law.
Some states will allow you to evict for other causes.
Some states will even allow you to evict
if they can't show that they're not able
to pay the rent because of COVID.
If all of those things don't work,
you're gonna get your really alternative,
cash for keys is basically giving the tenant money
for the keys to the unit and saying, "Okay, tenant,
I understand that you haven't paid your rent
and I need you to vacate this unit
'cause I need it back so I can get somebody else in here."
Then cash for keys works at a negotiation
of dollars in exchange for them turning over that unit.
Before you guys throw rocks at me
in your comment section on YouTube and say,
"Wait a minute, why should I have to pay this tenant?
It's my apartment, it's my building."
Here's the way that that works.
Let's say a tenant doesn't pay you one month's rent, okay?
(marker tapping)
That's one month equals $800 that's the rent,
$800 dollars a month.
Some may say, "They owe me that and I'm going to hold
on until they're able to pay me that amount of money."
Fair enough.
But if you were to negotiate a cash for keys arrangement,
rent, then the security deposit that come into the equation.
Now, in New Jersey, the deposit,
(marker tapping)
one and a half times that, which is $1200.
Two things come into consideration
at a cash for keys negotiation.
How much rent there is per month
and how much the security deposit is.
But let's say it's March 1st and the eviction
moratorium's just been extended until June 30th.
That's three months or that's $2,400.
If the tenant doesn't pay you
then you've got this money to play with.
In New Jersey, that's how much it is.
In other states, your deposit may only be one month's rent.
This is how much money you've got to play
with in cash for keys
because you could forgive a month's rent
and you could give a security deposit,
which hopefully, if you're a good landlord,
you did the right thing and you didn't
just put that money in your pocket,
you actually put it in an interest bearing
or in a non-interest bearing account,
so you have access to those funds.
The cash for keys arrangements typically look like,
"Okay, tenant, I'll give you a month's rent
to get out of the unit."
All right, guys, so here's the summary
of the cash for keys conversation
that you guys need to remember, just bring it home.
Number one, consider the cost of the tenant
staying in a unit, whatever it may be,
there a major cost to them staying there
and that is dollars per month for however long
they get to stay.
Really, really factor that in.
You got to take your emotions out of it.
Look at cash for keys as a business decision.
You've gotta do what's right for the cash for your property.
Number two, you certainly have the security deposit
to play with.
And don't forget that you've got
at least one month's rent that you want
to at least leverage as a token,
as an offer to the tenant,
so you could really go one month's rent
and security deposit as the bottom line offer.
The first offer you want to give.
The next thing is,
make sure the tenant gives the property back
broom clean to you.
You can put a cash for keys agreement in writing.
Just a little one pager that says,
"I'm going to give you this, if you give me back the keys
to my property with nominal damage aside
from a little bit of wear and tear.
And I'd take a little bit of wear and tear in exchange
for losing a month's rent."
This goes for all you nice guys and gals out
there that want to just see the good things in people.
It's okay to see the good things in people
but you also don't want to give them any money up front.
As much as it might be tempting
to as an incentive to the tenant
for them to get out there and find a new place.
You don't want to get yourself
in the trap of giving the tenant money
before they have given you the keys
and the property back broom clean
and met every step of that agreement you laid out for them.
Those are the parameters to cash for keys.
It is something that you got
to just separate your emotions from, you can make it work.
I hope this is of value to you guys.
Make sure you leave your comments in the section down below.
We'd love to hear your thoughts
or your experiences on cash for keys as well.
And as always, if you like what we do
make sure you smash and subscribe that button
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And you guys can hear about all the kinds
of videos we have coming down the pipeline too.
Thanks for watching guys have a great profitable week.