Rental Property Investor · Bellingham, WA · Member since 2018 · 26 posts · 2 votes
I recently saw another BP member post about House Bill 2779 in Washington State. Sounds like they were planning to completely get out of the WA market due to the upcoming changes. It looks to me like HB 2779 is state wide rent control. What do you all think? If you are here, are you getting out? I'm. Just getting started, but thinking I really, absolutely need to look out of state for all my rentals now. Looking forward to discussion.
Architect · Wenatchee, WA · Member since 2018 · 843 posts · 907 votes
6y
First off I'll say that no landlord is going to like this bill and it will make things harder for sure. But we should really not freak out like the rental market is just going to drop out from under everyone's feet. There is still going to be a huge demand for rentals and that means there needs to be a huge supply. Washington is only following what California and Oregon have done for a while now. I still see lots of people buying rentals in those states. I still see lots of new rental developments being built. Investors are still making money in those states. So just relax a little.
I'm not saying we shouldnt fight the bill btw. Its a load of crap for sure. If it does pass (or at least part of it) it will make our lives more difficult for sure and that in turn will make other states seem more enticing to invest in for sure. I know I will still continue to invest in WA even if this passes. I will just have to be much more selective in what I invest in and where exactly. It also will make sure I diversify my investments in other states as well. Which is always a good thing.
Laws and codes have always been ever-changing and always will be. Those that succeed the most are the ones that figure out how to work within those laws and to change with them not those that run away to find the easest possible money whenever there is a roadblock that they come across. If investing was easy everyone would do it.
Architect · Wenatchee, WA · Member since 2018 · 843 posts · 907 votes
6y
First off I'll say that no landlord is going to like this bill and it will make things harder for sure. But we should really not freak out like the rental market is just going to drop out from under everyone's feet. There is still going to be a huge demand for rentals and that means there needs to be a huge supply. Washington is only following what California and Oregon have done for a while now. I still see lots of people buying rentals in those states. I still see lots of new rental developments being built. Investors are still making money in those states. So just relax a little.
I'm not saying we shouldnt fight the bill btw. Its a load of crap for sure. If it does pass (or at least part of it) it will make our lives more difficult for sure and that in turn will make other states seem more enticing to invest in for sure. I know I will still continue to invest in WA even if this passes. I will just have to be much more selective in what I invest in and where exactly. It also will make sure I diversify my investments in other states as well. Which is always a good thing.
Laws and codes have always been ever-changing and always will be. Those that succeed the most are the ones that figure out how to work within those laws and to change with them not those that run away to find the easest possible money whenever there is a roadblock that they come across. If investing was easy everyone would do it.
Seattle, WA · Member since 2017 · 275 posts · 223 votes
6y
If we get rent control similar to the HB2779 proposal or OR or CA then the biggest risk will be to people who work to reposition properties - major rehab that requires possibly asking many or all tenants to move, and substantial increase in rents to cover the reno costs, or to anybody who recently purchased a property based on its proforma numbers instead of on its actuals.
I have been more or less expecting a rent control proposal like 2779. I'm actually more worried right now about the 2453 just cause bill eliminating term leases. This will lock in any tenant as long as they want to stay, unless they engage in egregious (and proveable) acts of nonpayment or behavior problems.
Properties that are in need of major renovation that cannot be rehabbed gradually will end up trading at a substantial discount, having to account for costs of the rehab, more of that cost needing to be paid up front ahead of increased returns, much longer period for rents to catch up to market, and more costs regarding permitting, tenant relocation, etc. not previously as prevalent.
My model so far has been to buy under-maintained and under-managed properties and gradually improve them. The last building I bought was a 4-plex in Burien (in 2015) with the rents at the time between $600 and $700. I increased rents 15% the first year and about 10% the next 2 years. I gave the tenants a schedule in advance of all of that. I also reinvested every dollar in gross rent for the first couple years in repairs.
Under rent control such as proposed that building in that condition/state would have had to sell for about 75% of what I paid for it (and I paid the same amount as the prior owner - 10 years before) since it would have had to cash flow decently on day one. I was willing to take negative cash flow because I knew that even without getting all the way to market rates immediately I could turn things around and not force out the retiree tenants in some units.
Those units are still a bit behind market, but not dangerously so. I still have the retirees.
If this rent control rule does pass, I probably will be taking the maximum increase yearly until I start seeing turnover on each unit every 3-4 years.