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My Cash For Keys Mistake That Cost Me $2500.00

My Cash For Keys Mistake That Cost Me $2500.00

As a business owner, real estate investor, or even both, there will be a multitude of mistakes that you will make over the years. Some mistakes will be larger than others, and some mistakes will be so bad that you may never share them out of pure embarrassment. This story I am about to share is one that I have kept to myself for the last three years. With the current eviction moratorium, and Cash for Keys being a viable option for many Landlords, I felt like there was no better time to finally share my story. I hope that my $2,500 mistake can prevent others from making the same misstep that I did. 

The Story

In January of 2018, we took over Property Management on a two flat on the south side of Chicago. Along with the building, we inherited a non-paying tenant on the first floor, and a vacant unit on the second floor. The tenant on the first floor blamed the Landlord for not remedying issues that were brought to his attention, and stated that this was the reason for the non-payment of rent. We asked the tenant to provide us with a list of items that needed repair, and we quickly got to work addressing the legitimate concerns. In my experience, it is best to remedy any issues that a tenant may have an issue with so that they can not justifiably have a reason for not paying their rent.

In this case, the tenant had no intention of ever paying their rent and 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 second floor to be marketed for rent and I knew that we would have leasing issues if I did not remove the first floor tenant immediately.  

In Chicago, filing for eviction is never the first choice for us, so 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.  As a tip here to Cash for Keys participants, tenants most of the time will not take the first offer that you present to them. Oftentimes, the money has to be increased and strict follow up is required. By that 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 of.

The Negotiation

In this negotiation, I started at $1,000 and ended up at $2,500 after ten days of negotiations.  It came with a quick move out date which was February 13th, my birthday.  When doing cash for keys, a quick move out is just as important as the amount to a Landlord.  I am 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 is not any different when negotiating Cash for Keys.  A tenant can agree to terms today and change their mind at any moment so getting those keys in your hand as quickly as possible is the goal.

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.  It is recommended that you always have someone with you on site that can change the locks, secure access, and most importantly, serve as a witness. 

At 2:30 pm the exchange of Cash for Keys was made. The vendor began the process of changing the locks, securing the yard in the back, and installing a board across the back door.  This is the south side so extreme measures are often taken to prevent break-ins at night, which is common if you do not secure the building properly.  Part of the vendor’s scope of work, following the collection of keys, was to remove the tenants items that had been left behind. Oftentimes in these scenarios, a tenant will leave items of non value for us to dispose of, so this was not a red flag.  

At exactly 3;15 pm a woman approaches my vendor, visibly upset, saying that he was breaking in and stealing her personal items. She immediately called the police and within ten minutes, I had a large problem on my hands. This woman was the actual tenant on the lease and this was her apartment that was rented...this person now in front of us claims she did not agree to cash for keys and that she lost her phone a week prior.  It just so happened that a week prior is when we had struck an alleged deal with this tenant. It had ended up the tenant on the lease had a sister that was around the house a lot and the sister had stolen the phone and her ID.  I had negotiated the deal with the sister.  

The Outcome

We had a problem here...I handed someone not on the lease a $2,500 certified check that was long gone.  The real tenant I needed to vacate the unit had showed up and is now watching us trash out her apartment.  The police are saying we need to give the keys back to the tenant or we can go to jail.  

Everything happened so quickly, but over the course of the following 15 minutes, I was able to speak with the actual tenant and convince 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, after a trip to the bank by my vendor, I had the cash in hand, presented it to the actual tenant, and had a new agreement signed. The police assisted in facilitating with the process and also stuck around which helped the process run smoothly. I would always advise to never give cash despite the Cash For Keys name, but my back was up against the wall that day.  

At 4:30 pm, I had been defeated and I reflected on the last two hours and the chaos that had ensued. When I thought of other potential costs this tenant may have caused me, I realized that I really didn’t have any other choice but to pay out of my pocket again. In 2018, I had been an investor and property manager for 15 years, so there was still a high level of shock at how badly I had just been burned.   

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

Missing Step

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. That day, I had neglected to relay this to my vendor. 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 that 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. 

If you ever have further 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.

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