With many of my clients and investors we are often faced with many decisions when buying a property that is tenant occupied. It is very difficult to move tenants out due to rent control, tenant advocacy groups and other variables but the best case scenario is that both parties agree to something mutually beneficial. I have been running into issues primarily in San Francisco and Oakland, both of which are rent controlled, primarily because the tenants do not want to give up their below market rents. One of the solutions is to offer "Cash For Keys" or effectively a buyout of the tenant in exchange for a vacancy. This way the new owner can move into the property, rent it at market value, or begin renovations. Not all cash for keys scenarios are necessarily rent controlled tenants. I am working with a few situations now where we are discussing paying tenants to leave that are already facing eviction. This is because it will expedite the move out timeline for them to move out comfortably and into their next living situation. Another reason to end things on good terms is so the unit will stay well maintained, no trash will be left behind, or in the worst case scenario avoid damage to the property. For many outsiders looking in they are appalled by the thought of paying additional cash out of pocket for a cash for keys scenario, especially after paying for the purchase of the property. In the Bay Area these are the limitations that have to be considered going into a deal and in many cases the net benefit is significant. If you could buy a property for below market value knowing you could arrange a cash for keys scenario, then the outcome could be very beneficial. I have some clients right now purchasing great multifamily rental properties at a deep discount because we were able to calculate the numbers when considering these arrangements. Have you ever had to pay cash for keys to move a tenant out? Would you consider buying a rent controlled property knowing this could be what you are facing? I would love to hear your story!
Keller Williams Realty Danville
CA DRE # 02108792