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My Cash For Keys Mistake That Cost Me $2,500

My Cash For Keys Mistake That Cost Me $2,500

Mistakes will be made. That’s just a fact of being a business owner, real estate investor, or even both. No matter how careful you are, you’ll make a multitude of mistakes over the years. Some mistakes will be larger than others; some will barely register on your oh-shit-meter. But some mistakes will be so bad that you may never share them out of pure embarrassment. 

This is one of those pure embarrassment stories. I’ve kept it to myself for many years and I might not have ever shared it. But, with the long eviction process, crazy moratoriums in recent years, and landlords seeing Cash for Keys as a viable option, I felt like I finally had to share it. It’s still embarrassing, but I hope that sharing my $2,500 mistake story can prevent others from making the same mistake I did. 

What is Cash For Keys?

Southside Chicago Property Management

Picture it: January 2018. GC Realty & Development has just taken over property management of a two-flat building in southside Chicago.

It was a block in Auburn Gresham and across from a church, so we had a good feeling about the management opportunity for the building in the long run. 

One catch: along with the building, we also inherited a non-paying tenant on the first floor and a vacant unit on the second floor. 

Nonpaying Residents Holding Landlords Hostage

The tenant on the first floor blamed the previous management company for not remedying issues they’d raised. They said that was their reason for non-payment of rent. We asked the tenant to provide us with a list of items that needed repair. We quickly got to work addressing the legitimate concerns. 

Chicago Eviction Judges

In my experience as a Chicago property manager, it’s best to remedy any issues a tenant raises, or explain why you can’t/won’t, in writing. This way, they can’t justifiably have a reason for not paying their rent or try to hold you hostage with that.

Also, if this does end up in front of a judge, the tenants have one less excuse they can give for non-payment. Being new to the property and thinking the best of people, we’d tried to save the arrangement.

Unfortunately, in this case, the tenant had no intention of ever paying their rent. As the first few weeks passed, we came to realize some additional issues with the tenant. 

Concurrently, we were in the midst of rehabbing the vacant second floor flat to be marketed for rent. I knew we’d have leasing issues if I didn’t remove the first floor tenant immediately. Because of the lengthy (and expensive) process in Chicago, filing for an eviction is never a first choice for us. 

Negotiating A Cash For Keys Offer

So, instead of filing for eviction, I quickly moved to negotiate Cash for Keys with this tenant. In about two weeks’ time, I was able to negotiate and strike a $2,500 deal. Easy peasy, right? Oh, not so fast.

Hot tip for Cash for Keys participants: most of the time, tenants will not take the first offer you present them. Oftentimes, the money has to be increased and strict follow-up is required. By strict follow-up, I mean that you need to make sure the tenant is thinking about you multiple times per day, every day, because eventually the money will become all they think about.

In this negotiation, I started at $1,000 and ended up at $2,500 after 10 days of negotiations. The agreement came with a quick move-out date: February 13th (my birthday). When doing Cash for Keys, a quick move-out is just as important as the amount to a landlord. I’m willing to pay the tenant more if they can be out the following day versus an entire week from now. 

For all the sales people out there, you know that time kills deals and it’s not any different when negotiating Cash for Keys. A tenant can agree to terms today and change their mind at any moment so the goal is to get those keys in your hand as quickly as possible.

Cash for Keys Exchange

Due to the timing of the exchange, I was unable to make the appointment myself and had to rely solely on the vendor to execute the exchange. We recommend you always have someone with you on site that can change the locks, secure access, and most importantly, serve as a witness. 

The exchange of Cash for Keys was made at 2:30 p.m. that day. My trusted vendor began the process of changing the locks, securing the yard in the back, and installing a board across the back door. (In certain areas, we often take extreme measures to prevent break-ins at night, which is common if you fail to secure the building properly.) 

Part of the vendor’s scope of work, following the collection of keys, was to remove any items the tenants had left behind. In these scenarios, oftentimes a tenant will leave items of nonvalue for us to dispose of, their parting gift, if you will. That my vendor found left-behind items was not a red flag.  

My Cash for Keys Fumble

At exactly 3:15 p.m., a woman approached my vendor, visibly upset, saying that he was breaking in and stealing her personal items. She immediately called the police and within 10 minutes, I had a large problem on my hands. 

It turned out that this woman was the actual tenant on the lease, and it was her belonging in the apartment. The person now in front of us claimed she did not agree to Cash for Keys and that she’d lost her phone a week prior. 

It just so happened that the week prior was when we’d struck an alleged deal with this tenant. It ended up that the tenant on the lease had a sister who was around the house a lot, and the sister had stolen the real tenant’s phone and her identification. It became apparent that I’d negotiated the deal with the sister.  

So, to take stock of the situation: I’d handed someone not on the lease a $2,500 certified check who was now long gone. The real (and still non-paying) tenant, who still needed to vacate the unit, was now watching us trash out her apartment. The police on the scene were saying we needed to give the keys back to the tenant or we could go to jail. 

Everything happened so quickly. Over the course of the following 15 minutes, I spoke to the actual tenant and convinced her to accept another $2,500 to vacate the unit. In those few minutes, I had to make a decision that would affect my client, our company, and my wallet. 

By 4:15 p.m., after my vendor made a trip to the bank, I had the cash in hand, presented it to the actual tenant, and had a new agreement signed. The police helped facilitate the process and stuck around, which helped the process run smoothly. Note: I would never advise to give actual cash (despite the Cash For Keys name), but my back was against the wall that day.  

Lessons Learned

At 4:30 p.m., it was over and I felt defeated. I was shocked at how badly I’d just been burned. At that time, I’d been an investor and property manager for 15 years. How could I let this happen? 

Then I reflected on the previous two hours’ chaos. When I thought of other potential costs this tenant may have caused, I realized that I really didn’t have any other choice but to pay out of my pocket again. 

As the weeks passed, I replayed the scenario over and over again in my mind. I realized that maybe both of the sisters had been in on it and, had I not missed one important step, all this could have been prevented. 

When you give Cash For Keys to someone and they sign the agreement, you need to always ask for their identification in the form of a driver's license or state-issued ID to prove who they are. 

My missed step was I’d neglected to relay this to my vendor that day. The two sisters looked nothing alike and had I just remembered this step from my own checklist, all of this could have been prevented. My mistake cost me $2,500.  

My anger made me file a police report, but nothing came of it. To be honest, I didn’t think anything would. I had some other options of recourse on the sisters, but the more I thought about it, the more I realized it just wasn’t worth it. I needed to let this go. This was my lesson learned.

If you ever have questions on the Cash For Keys process, please feel free to reach out anytime or check out our other resources you may benefit from as a landlord. It could save you a lot more than $2,500.


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