How to rent for 5 years and then reclaim property

Question

I live in CA and am considering purchasing a Bay Area home to move into in 5 years, and renting it out until that time. My concern is whether or not I would have trouble getting the tenants to move out when the time comes. Does anyone have any experience with this--is it possible to put something in the lease or other document that states upfront that the property is only available to rent until a certain date, that the tenants sign before moving in? Would this make any potential eviction easier, and would relocation fees still apply? Thanks for any insight on this scenario.

Andrew Syrios · Answer

5 years is a long time. Honestly, it's unlikely the tenant will even stay that long. And normal residential leases go from year to year so both the tenant or you can choose not renew the lease. Just know that in California, if the tenant doesn't want to leave, it could take a long time to evict them. Although it's unlikely they will force you to that. (Usually those long eviction processes happen in case of non-payment.)

I also think in California if the landlord decides not to renew the lease, they have to pay moving expenses and maybe a bit more. Check your local laws on that. But I know California is not a landlord-friendly state and San Francisco is not a landlord-friendly city.

Colleen F. · Answer

@Casey Bec not sure what your rental strategy would be and the laws in California favor tenants. I would advise you don't look for someone long term if your worry is they won't leave. And definitely don't offer a 5 year lease.  You want someone who isn't going to settle in. Someone military, insurance placements or someone who will grow out of your home and buy their own. You will have more turnover but saying upfront it is a 5 year commitment the people you will get are long term renters.

Colleen F. · Answer

@Casey Bec You could do month to month or list on one of the targeted websites toward your desired population. I believe there is one for military, insurance solutions have them.  If this will be your home you likely don't want undergrad students and at least in our area student units are typically furnished except grad students where they look for year round unfurnished (but that may just be unique here).

Noah Laker · Answer

Hey Casey, I'm a broker and property manager here in Norcal (100+ listings mostly STR)

Usually if a homeowner is planning to move into their property, or let a close family member move in, then you have grounds to terminate a lease and get the tenant out, even in a tenant-friendly area like San Francisco / Bay Area.

Also be sure to communicate your intentions up front with any would-be tenants to avoid confusion and acrimony.

I am not a lawyer this is just from my experience. I see someone else mentioned the so-called Tenant Protection Act which may shed more light on the details.

Chad Hale · Answer

@Casey Bec Five years is a long time.  Do leases one year at a time.  Check out rent control laws for the specific cities you are interested in.  There is statewide rent control TPA (Tenant Protection Act) also known as AB1482.  Read this to understand which properties are exempt.  If your property is exempt, be sure to give the correct notice to the tenant.  Failing to do so and your property will not be exempt.

Casey Bec · Answer

Thanks, this makes sense. I wasn’t thinking of offering a 5 year lease, but rather just letting them know upfront (maybe in the ad?) that the 1-year lease would only be renewable until a certain date. I hoped maybe this would discourage any renters who were looking for a place to settle into for the long term.When it comes to tenant selection—how picky can I be without violating any discrimination policies? I wasn’t sure if I can hold out for military, students, etc?

Osazee Edebiri · Answer

Hey Casey,

There are quite a few things that go into play with what you are asking. Your realtor if they are experienced with investing in the Bay should be able to help you with these questions, but I will give you some info to help you with your decision.

Basically there is no way to guarantee the tenant will move when you say times up, I want my house back, but there are ways to make the odds higher.

In generally like @Andrew Syrios said it is unlikely you will right off the bat get a tenant who will stay for five years. If you want someone like this you will need to put in some work to try to find someone who is looking to do that. Most of the time a tenant will tell you that type plan or you will find a family member or friend who wants to make that arrangement.

Certain Bay Area cities are easier to deal with, so which city are you planning to purchase in?

The most important thing is getting the best tenant you can in terms of doing your due diligence vetting them. I help my clients with tips and tricks for this since I worked in property management at a 2800 unit property in San Jose, prior to becoming a realtor.

Lastly, cities have rules about protected tenants, so you would want to look into that. Normally you are supposed to be able to move into your Single Family home or even a duplex, in general if the owner wishes to move in.  Almost all cases of issues in SFH will be poor renter selection.

I have talked to plenty of people who were potential renters moving because their previous place the owner was selling or moving in. They left amicably. But again, no way to guarantee you won't have any issue.

Casey Bec · Answer

Thanks, yes, I'm hoping if the tenant knows years in advance upfront that the home is only available for lease renewals until a certain date (maybe if that is even in the ad) that we could hope for a tenant that leaves when the time is up. But definitely feeling nervous knowing that CA is not a landlord-friendly state.

How to rent for 5 years and then reclaim property

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