Investor · Los Angeles County, CA · Member since 2012 · 962 posts · 279 votes
Hi so some background-- I'm looking at a 3-4 unit auction in Los Angeles city. It's under rent control.
Is anyone familiar with purchasing small multifamilies under rent control?
I have familiarity with the city as far as RSO and the LAHD for properties we own under rent control. The city is strict and you cannot evict to raise rents.
I'm not sure what to do as far as determining current rents or dealing with evictions not knowing the current rent. The previous owner might occupy one of the units as well but may be unwilling to cooperate being he's going through the foreclosure.
Just to clarify...you cannot force the tenants to agree to relocate if they provide a valid lease, proof of rent payments, etc. there are prescribed and limited reasons why a landlord can evict a rent controlled tenant in LA. Those will be outlined here:
However, if the existing tenants voluntarily agree to relocate b/c you've paid them relocation assistance, my experience has been that after tenants voluntarily vacate you can re-establish market rents.
Investor · Los Angeles County, CA · Member since 2012 · 962 posts · 279 votes
11y
Thanks Allan.
My main questions are what to do about determining current rents in a foreclosure auction. If we cannot determine them and what to do about the "foreclosee" if they do not cooperate. I assume I would have to figure out foreclosure laws and rights of foreclosee (if this is the right word)
( I'm pretty familiar with the RSO Relocation Assistance costs. We own a few rentals within under RSO. It's about $8k-19k per unit to evict depending on many factors--income, qualification, age etc.)
I was typing this from my phone so I think it came out unclear.
Problems may arise with figuring out actual current rents, also we may need to evict the current owner who is foreclosing. I mean, he's not paying any rent currently since he's the owner, but how would we evict him or collect rent from him under RSO?
"I'm not sure what to do as far as determining current rents or dealing with evictions not knowing the current rent. The previous owner might occupy one of the units as well but may be unwilling to cooperate being he's going through the foreclosure."
Does anyone have experience in the above examples where the foreclosee does not cooperate, current rents cannot be determined (or are cash/verbal), and the units are in LA RSO?
The foreclosed owner does not have any tenants rights and their eviction would not be restricted under rent control. If you decide for some reason to keep them as a tenant and create new lease, then they would become rent controlled tenants (from that point forward), assuming the building falls under the rent control ordinance. He may also fight an eviction and require you to take it all the way to a Sherriff lockout, so build in that extra cost and time into your proforma.
The other tenants will have to prove a prior rental arrangement in order to be protected. If they are actually paying below market, they make every effort to show a rental agreement, cancelled checks, receipts from a landlord, cashiers check receipts, etc. If they can't then, my understanding is that you can re-establish rent a current market and require they sign a new lease agreement.
You seem to realize your risk here is the landlord. If he's losing the house and wants to undermine the bank, new owners, or just wants to help the tenants, he could sign low value rental agreements prior to foreclosure. If he does, it could protect those tenants at that agreed rent amount.
Most of us who buy at foreclosure auctions or from lenders without tenant information will assume that we will want to relocate the tenants and build in worst case scenario relocation costs.
...or the more industrious investors will find a way to contact tenants prior to spending our money at auction.
a final note to remember, don't assume they'll tell you the truth even if you're able to get information prior to the sale. Plan for the worst case scenario.
Most of us who buy at foreclosure auctions or from lenders without tenant information will assume that we will want to relocate the tenants and build in worst case scenario relocation costs.
...or the more industrious investors will find a way to contact tenants prior to spending our money at auction.
a final note to remember, don't assume they'll tell you the truth even if you're able to get information prior to the sale. Plan for the worst case scenario.
Great advice.
So for relocating tenants / building-- after relocating tenants how much could we raise rents after renovating? (I was under the impression that even after renovating we could not raise rents ) I do remember reading something about raising rents after major renovations, but I believe it was only a percentage of the total current rents.
Just to clarify...you cannot force the tenants to agree to relocate if they provide a valid lease, proof of rent payments, etc. there are prescribed and limited reasons why a landlord can evict a rent controlled tenant in LA. Those will be outlined here:
However, if the existing tenants voluntarily agree to relocate b/c you've paid them relocation assistance, my experience has been that after tenants voluntarily vacate you can re-establish market rents.