Overcoming Rent Control

[Ilva Kibare]

I am looking in to small multifamily units in promising areas in Los Angeles, but the rent control is really tampering with my projections.

My latest interest a 4-plex near USC ~$450/month /unit in the area where market rents are $1400 for refurbished unit or ~$800-900 for one with similar conditions. This kills my numbers considering rent control issues.

What tactics have proven most profitable out there to overcome rent control obstacles besides annual rent increase of mandated 3% or so max.

[Jonathan Twombly]

Originally posted by @Ilva Kibare:

But there is a bidding war for rentcontrolled units, like the one I described. The buyers must have something in mind? 

Here in New York, a lot of developers bid on rent controlled apartments because they think that if they can de-control the apartments, they will make a lot of money.  There is a legal way to do it, but many people cut corners and do it improperly.  I had coffee yesterday with a friend who manages the portfolio of a wealth family that recently had an exit of $700 million and is looking to buy more assets with the money.  He said they have been seeing a lot of assets that were de-controlled but lack the proper documentation of how it was done.  The operators had cut corners.  Because they did not want to buy lawsuits, they passed on these assets.  The last thing they want is to buy an asset based on the assumption that they will get market rents, only to have the city come in and re-control the rents at the old below-market prices, because the de-control was done improperly the first time around