Cash for Keys or Go to Court or BOTH? How This Tenant Lived Free for Months!

Offering a tenant Cash for Keys is supposed to be a way to avoid going to court. The owner of the house wins by not having a nonpaying tenant in their house months on end while waiting on the courts who are now slower than ever. The tenant wins because they now have cash to put down on their next rental. It should work! It usually does work. But it did not work for us on this one!

I sent out letters targeting “tired landlords” in Detroit and I offered to buy their houses. The owner of this triplex said he had one vacancy, one paying tenant, and another tenant not paying and the house needs a whole new roof job and some windows. He sold us the property for a good price in May.

We were able to keep the paying tenant. I raised her rent from $400/month to $600/month. We cleaned out the vacant unit and she moved over to it. We then cleaned out her unit and I was able to find someone with Section 8 for $700/month rent.

Here is the video of the upper front unit that our $600/month person moved into:

As we cleaned out both upper units, replaced the roof and did a lot of other repairs, I marketed the house for sale and found a buyer from Peru. Now we just need it to appraise for the $150k. Detroit appraisals are all over the place. Appraisers use distressed properties as comparables because they cannot get into all the other sold properties to see if they really compare. Photos online are pretty limited. I’m feeling like it’s 50/50 if it will appraise at $150,000. But we can’t even get the appraisal until that lower unit is vacant and renovated.

Upon the purchase date of the property, I sent out my New Owner Package. This is the letter I wrote to the nonpaying tenant in the large 3-bedroom unit on the first floor.

I found this fun tool online that gives average and median rental prices. The first five searches are free. But we bought so many houses like this that I had to pay for the site so I could send this out in my new owner package to back up what I feel the rent should be.

In the New Owner Package I also sent a rental application and a 30-day notice. The 30-day notice is the eviction notice that says I’m not asking for money, I just am not renewing her lease. I never had a lease to renew anyway.

The previous owner had struggles with his property manager. He wasn’t even able to get security deposit money back from them to give to me. I had to put the security deposit funds in the closing so we had the money. Security deposits belong to the tenants and they are supposed to be kept in a separate bank account for when the tenant moves. We have done a cash for keys on other properties and if they left the house in perfect condition, we have given them back their security deposits too.

My Best Laid Plans Didn’t Work!

The tenant, Niesha, contacted me I thought to discuss her new rental amount or plans to move. Nope! It was to complain about our roofers using cuss words.

When I pointed out to her that her rent is due or is she moving, she was flabbergasted that I was asking for rent. She said, “There ain’t no way this here place is worth no $900 a month. I ain’t paying that never!”

I asked her if she planned on moving then and taking us up on our $1,000 Cash for Keys.

“No. I don’t have to move. CERA is paying my rent now due to the pandemic.”

The State of Michigan had a fund that supposedly dried up at the end of June called COVID Emergency Rental Assistance. The tenant and the owner have to apply together online. It can take over a year for the rental assistance to come unless there is an eviction pending. I explained to Niesha that I did not apply for that so if there is any CERA money that is coming, it is on her to find it and give it to me. She owes me rent, not the State of Michigan. If her old property manager received the CERA funds, it’s the responsibility of the tenant to get my portion of it to me.

She said I’ll have to evict her then and good luck to me because she knows damn well that rent is paid by the State of Michigan these days and not her, the tenant.

I had to wait until that 30 days was up. I waited and sent the 30-day notice to my lawyer. It takes a month once the 30-day notice date is up to even get a court date. The courts are just really backlogged now since the pandemic apparently. At least in Detroit they are.

July Court Case #1

Every Landlord Tenant court case appears before the judge only to be automatically adjourned so the tenant can be assigned a “free” lawyer. 36th District Court in Detroit hired a bunch of lawyers to represent tenants who are living for free off their landlords who are still paying for taxes and insurance and upkeep. But the landlords absolutely do not get a free lawyer. That wouldn’t be equitable.

August Court Case #2

These cases are all on Zoom and I let my attorney handle them. There is no need for me to be there. If anything comes up, he will call. And call he did! He let me know that the tenant had applied for CERA money and her attorney had the check sitting right there on her desk. The attorney couldn’t say how much the check was for, but there it is on her desk so how about we take that money and keep this woman housed?

At first my reaction was NO WAY! Niesha already refused to pay $900 rent which is already below market. She also is in our house so it’s nearly impossible to renovate a house when someone is in there living in it. Just look at my video of how filthy she lives. How could I sell a house with that kind of tenant in it? I cannot. I will not.

Then I started wondering how much money it is. Just the months I had her as a tenant is more than the $1,000 Cash for Keys I offered her. I could let Niesha have use of that rental money, as it was intended to help tenants, and pay myself back for the missing months of rent and offer her a better Cash for Keys price to move and have money for her next rental. Win-Win, right? So I said we’d take the money.

September — No CERA Money Arrives

In September that wonderful CERA money didn’t arrive. Meanwhile, my buyer was about to lose his locked-in rate for his mortgage as the mortgage interest rates were shooting up.

My attorney meanwhile was trying to get the check off the “free” lawyer’s desk. She wouldn’t answer his phone calls or his emails. My attorney let me know that any other of those “free” lawyers would have had it to us in a week, no issue. They have that ability. But this particular “free” lawyer was probably busy getting ready for her new job. She just won unopposed as a judge in Lansing.

My lawyer called for another court case.

October Court Case

This time I attended the Zoom hearing. Niesha’s free lawyer seemed very confused. What check? What client? What are we discussing here? She and my attorney went into a separate Zoom room and came back to me with this.

The “free” attorney knows nothing about a check on her desk. But because I said I would take that CERA money, that means I cannot call a bailiff in to evict the tenant. If I want to be rid of her, I will have to start the case all over again. Send her a 30-day notice. Wait another 30 days to get a court case. Then that case adjourns. Then there’s another court case after another month in which I say I’m not accepting the new State rental relief funds to keep her. Then I wait another month for the bailiff to remove her. By then we’re pushing a full year of this woman living for free in our property. Who knows how many months she lived for free before we bought the house?

So what did they decide? How about I just give the tenant that $1,000 I said back in May? Then she has to move out by October 14th. Give her half a month. She needs time, you know. I agreed. What else could I do?

But Niesha’s “free” attorney wouldn’t sign it. She went missing again. She was probably out shopping for judge robes. And my attorney had a box checked on there stating if Niesha wouldn’t move by the 14th that I actually could get a bailiff. My attorney knows the “free” attorney’s supervisor. So the supervisor signed it. It may not have been signed if the “free” attorney hadn’t done such a terrible job.

That’s why I ended up paying a deadbeat tenant $1,000 to move after living for free off us for the last five months.

The Moral of the Story

Buy houses in Detroit with a vetted tenant who isn’t using the government money to pay rent. I believe Niesha honestly thought she could live for free from now on. She even had a job and she wasn’t paying rent.

We sell houses to you AFTER we’ve been through this mess. When my Peru buyer gets this house, it will be with three paying tenants, two of whom are receiving rent from Section 8. That means the house will have had two Section 8 inspections as well. He will have a vetted property manager in place too. It’s a true turnkey when you buy a property from us.

Check out what I have for sale now: