There is a concept real estate investors refer to as “Cash for Keys”, the underlying theory of which suggests there are times when it is better to give a problem tenant a monetary incentive to depart instead of evicting them. Yes, we know this sounds very backwards. After all, you want them to go because they’re costing you money—or are about to cost you money—right? However, eviction can be a long, drawn-out process, with additional expenditures attached.
On the other hand, some see Cash for Keys as rewarding negative behavior.
So, should you pay a tenant to move?
Many experts say, “Yes, you should.” Getting tenants to depart voluntarily is much simpler and less costly than invoking the legal system to move them against their will.
Time Is Money
With an eviction, you must provide proper notice and allow them a set number of days to pay or quit (this varies from state to state, but is typically 14 to 30 days). Once the notice period passes, you can then terminate the lease if they haven’t complied. But if they refuse to go, you’ll have to file a complaint with the courts. This will incur filing fees and you’ll have to wait until the case comes before a judge, which can be another 30 days. (All while the tenant is not paying rent.)
If you win the judgment (taking a day to go to court, and incurring the opportunity costs of that time away from your business dealings), the judge will order them to leave, but they’ll still get a grace period of another 14 days or so. You can also use a real estate management service, they will be able to handle everything.
"On average, evictions nowadays take 45 to 60 days to complete. This is after the 3 day notice, court grants the eviction, and sheriff serves the notice."
- Onerent Property Management's Broker of Record, Fred Glick.
This is assuming everything goes just as planned during the eviction. If there is a hiccup during the eviction, the duration may take longer.
Consider Their Effect on Your Other Tenants
Rather than nonpayment of rent, let’s say the eviction proceedings are taking place because the tenant in question repeatedly violates other tenants’ peaceful cohabitation of the property. This person is still being a nuisance while you slog through the eviction process (in fact, with eviction coming, they’re probably even more disruptive).
Speaking from a historical perspective, the amount of evictions filed in San Francisco from 1997 to 2017 have been up and down. Most recently, it's been down. Landlords are noticing that evictions are costly and time consuming, therefore they are looking for other solutions.
If your other tenants decide enough is enough and move, dragging the bad tenant through the eviction process could cost you a number of good ones.
Security Deposits Won’t Save You
Meanwhile, this now agitated individual has full access to your property and no real incentive to care for it. They could well decide to trash your place as one last act of defiance and there’s not a whole lot you can do about it, other than take them to court—again.
Yes, you do have the security deposit they paid to get into the place, but in many cases it will only make a slight dent in the cost of putting the apartment right for the next tenant. It’s far better to pay them $500 or $600 to move instead of incurring a minimum of two months of lost rents, along with the potential loss of solid-paying tenants and property damage. Sometimes depending on rent control, you might not even have means to take away security deposit. Brush up on your security deposit laws through our Rent Control Cheat Sheet downloadable for free.
If things have progressed to where you’re considering eviction, you should absolutely offer to pay a tenant to move. Ultimately, “Cash for Keys” gives undesirable tenants money to use to find another place and gets them out more quickly than you could through the legal system, which opens the unit to a better quality tenant much sooner.