[quote=EconProf]Long time landlord here. You’re screwed.
By letting them get weeks behind in paying rent, they now have even less incentive to pay up. If you give them a break with a rent reduction, you are showing weakness, and they will soon be back to you for more favors. The time to negotiate was as soon as their rent did not come within the (presumably) five-day grace period. At that time you could have traded, say, a 7-day move out period for some cash immediately & a release from the remaining time in the lease (or month, in the case of month-to-month rental). Just get it in writing and this will suffice to modify your existing rental agreement. Then no need to serve a 3-day notice, just go right to unlawful detainer at end of 7 days. Warn them on day 6 you are going to do this.
Every time I’ve shown mercy in the past, I’ve regretted it. But I’ll probably do it again because I’m a slow learner.[/quote]

I think that just taking a tough line because you don’t want to show weakness is not a strategy to maximize your cash flow.

Payment Suggestion:
Probably doing a temporary payment modification (which is effectively what you have been doing) would make more sense. You should require the normal modification things. Eg: a household budget, terms for what happens with the unpaid amount (does it go away? do they pay later?), a letter of termination, a plan for the future, a new payment at or below 33% of income, etc.

Changing tenants:
If it appears that the modified amount is below market, you could test this hypothesis by running a craigslist ad asking for more than you are collecting now. See what kind of response you get. If it seems like flipping tenants will be more rewarding, then issue them a notice to vacate.

Eviction/unlawful detainer:
You don’t need to evict them unless they resist just moving out. Most people don’t. If they resist, you can usually, just restate what the choice is. Its a bit like requesting a resignation. Most people will resign when asked.

Bottom line:
This really has to be about what generates the best return. Best return is not always highest return. A large component of return is stability and predictability. Try to be compassionate but to keep the conversation and analysis as rational and logical as possible. Fighting is almost always less productive and less beneficial.