I am looking at MFH opportunity in San Francisco... everything looks great except for the fact that there are 2 protected tenants in the building... Both moved in back in 1970s, so they are probably in their 70s of age now...
Now, I understand that these tenants are "untouchable" in San Francisco, and your only hope is to wait until their pass (sorry to say that).. Given that, I love to hear from you if you had any experience in this space, and what is your recommendation... Thank you
Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes
8y
Yes, they have rent controlled tenants here in NYC, and our family invested in San Francisco as well, got a 3 family with a "protected tenant", and there's nothing we could do. The only thing was, got a break from the seller when on purchase, prices went up like crazy, so after 15 years, 1031 the property into another.
Talking about tenants in their 70's, I looked at a property here some years back, rent controlled, tenant is paying $98.00/month on a unit where the market rent was $800.00, and the tenant at the time was 90. Seller told me he bought the building 10 years back from a seller who also had it for 10 years. So 20 years before, when the tenant was 70, some guy bought it, expecting the tenant will drop dead soon, not such luck, sold it to the next guy who had it for 10 years, and then he got tired of waiting as well. So I told the seller, I got a bad vibe from this, sounds like this lady is going to live to a hundred, and rent control laws, as well as laws protecting tenants over 62 here in NYC make it impossible to get rid of her. At $98.00/month rent, would you move?
Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes
8y
Yes, they have rent controlled tenants here in NYC, and our family invested in San Francisco as well, got a 3 family with a "protected tenant", and there's nothing we could do. The only thing was, got a break from the seller when on purchase, prices went up like crazy, so after 15 years, 1031 the property into another.
Talking about tenants in their 70's, I looked at a property here some years back, rent controlled, tenant is paying $98.00/month on a unit where the market rent was $800.00, and the tenant at the time was 90. Seller told me he bought the building 10 years back from a seller who also had it for 10 years. So 20 years before, when the tenant was 70, some guy bought it, expecting the tenant will drop dead soon, not such luck, sold it to the next guy who had it for 10 years, and then he got tired of waiting as well. So I told the seller, I got a bad vibe from this, sounds like this lady is going to live to a hundred, and rent control laws, as well as laws protecting tenants over 62 here in NYC make it impossible to get rid of her. At $98.00/month rent, would you move?
San Francisco, CA · Member since 2018 · 19 posts · 2 votes
2y
If it's a single family home in San Francisco, with someone who has been living there for 15+ years (single women, likely in her 60s who happens to be a realtor and knows a lot about real estate law, etc.), would you take the risk to buy it with under market price (knowing that the existing tenant can live there for another 20+ years?), and how would you deal with such situation (calculate the risk, etc.)? An example like this is https://www.zillow.com/homedetails/1377-14th-Ave-San-Francis...
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
2y
Is there anyway their hairs, sons/daughters, 20 y/o “husband” can become protected tenants upon their passing? Could you offer them $20k? $40k? To move out?
ps. I assume you’re checking to make sure they literally still live there. Not subletting it out or their children aren’t staying there instead.
Investor · Bay Area, CA · Member since 2014 · 165 posts · 45 votes
2y
To start, I'd do a Discounted cash flow analysis and cap it like a regular income producing rental....do you know the rent the tenants were paying in the two sales you showed?
San Francisco, CA · Member since 2018 · 19 posts · 2 votes
2y
@David S. Yes. For the first house 1377 14th Ave SF CA 94122, the rest was increased for 9.2% from $1619.13 to 1768.08, on 10/1/2023. The tenant is over 60 years old and is the sole occupant of the house.
For the 2nd one (1949 23rd Ave, SF, CA 94116), I don't know the current rent. Only know that the tenant has been living there for over 10+ years.