Salutations,
I'm curious if anyone is crushing it in a rent control market with MFU (duplex, triplex, quadplex, etc). Rent caps and just cause ordinances make it intimidating to enter markets where these restrictions make it challenging to be a landlord. The SF and San Jose markets are great examples of this. In fact, there is a great concern with the California Assembly looking to make SFUs subject to rent control too. This will be reviewed within the next two years.
Is it worthwhile to even consider a MFU in a rent control market, or potentially state?
Karen
I operate in a rent control market and there is no way rents keep up with costs. The bane of the business is long term tenants. Contrary to the norm, under rent control, you do not want long term tenants. You will fall behind ever year and will hope and pray that tenant do not stay any longer than 3 years otherwise you begin to lose money rapidly.
Tenant turn over is essential for success in a rent controlled market coupled with a business plan to insure quick turn around of units.
The bigger issue is that in a rent controlled markets the courts will be extremely pro tenant. Rent control is only the beginning of your problems. Your tenants will be in control of your investment for the most part.
I operate in a rent control market and there is no way rents keep up with costs. The bane of the business is long term tenants. Contrary to the norm, under rent control, you do not want long term tenants. You will fall behind ever year and will hope and pray that tenant do not stay any longer than 3 years otherwise you begin to lose money rapidly.
Tenant turn over is essential for success in a rent controlled market coupled with a business plan to insure quick turn around of units.
The bigger issue is that in a rent controlled markets the courts will be extremely pro tenant. Rent control is only the beginning of your problems. Your tenants will be in control of your investment for the most part.
You can make money and improve neighborhoods in rent controlled markets. It just ads a big issue to 1 having enough for repairs, expenses 2 currently it's difficult to pay off a big bank loan while doing all these expenses
If you factor the cap on rents into your net you should be OK.
The thing is we need to be active for property and home owner rights. Join your local apartment association and learn local laws and current changes. If you're active in local politics it helps a lot too. Get together with local landlords and investors like meetups etc.
It is definitely hard to operate and keep up with costs as @Thomas S.
Dear Assemblymember,
AB1506 is a mistake !!!
I oppose AB 1506 because it will DEVASTATE HOUSING in California!
AB1506 will make us the real estate industry in California back 20 years ago, the situation when the law is a city of rent management, regardless of the new, condo, SFR independent housing, building, Parker, regardless of the guest moved out of the move, can not add rent. Few people invest in industry. At the end. Less cover new park or cross the building.
Later, in 1995, the California Costa-Hawkins Act, the new houses, condo, SFR detached houses and residents rent control voluntarily removed, the owners can decide the rent and City began to fight the phenomenon of robbery.
Costa- Hawkins provides essential protection to independent rental owners and ensures fairness.
Costa-Hawkins has helped ensure Mom and Pop landlords can continue to operate housing!
AB 1506 will deter Investment in rental housing at exactly the wrong time. It will lower investment in housing and will place tens of thousands of future construction jobs in jeopardy. Workers in the housing industry to have JOBS to help SUPPORT many families.
It will lead to even LESS SUPPLY of housing!
Owners who plan to collaborate with new initiatives for supportive housing will lose their fervor in helping to solve homeless issues and will become less likely to participate in local government initiatives.
This will destroy retirees sole source of income!
We need to encourage private rental housing!
When the property taxes & license fees of rental properties keep going up, AB 1506 will put small property owners OUT of Business.
When a tenant voluntarily moves out, Owners should be allowed to adjust to market rent after years of subsidizing tenants.
We need MORE housing. AB1506 will put developers out of business!
Please say NO to AB1506 !!!
I had the same question, so far from reading the responses, no one has definitively been able to offer any advice on how to stay cash flow positive where the government has mandated a rent freeze. I am busting my chops here trying to figure out what to do with my properties
Salutations,
I'm curious if anyone is crushing it in a rent control market with MFU (duplex, triplex, quadplex, etc). Rent caps and just cause ordinances make it intimidating to enter markets where these restrictions make it challenging to be a landlord. The SF and San Jose markets are great examples of this. In fact, there is a great concern with the California Assembly looking to make SFUs subject to rent control too. This will be reviewed within the next two years.
Is it worthwhile to even consider a MFU in a rent control market, or potentially state?
Karen
I've heard good things about Section 8 as an end-run around rent control, specifically in the City of Oakland. This was actually a revelation to me a few months ago, that's been confirmed by other investors since. The City's agenda is obviously to get more landlords to sign up for Section 8, and they do so by being open/liberal about landlords justifying increasing rent to current market. The tenant of course might only be coming out of pocket for 20% of their rent, so a $500 rent hike is only $100/mo out of pocket for them.
And of course the more well known end-run is furnished rentals. Homesuite (which gets around the anti-airbnb legislation by being 30+ days only), airbnb, etc.
Salutations,
I'm curious if anyone is crushing it in a rent control market with MFU (duplex, triplex, quadplex, etc). Rent caps and just cause ordinances make it intimidating to enter markets where these restrictions make it challenging to be a landlord. The SF and San Jose markets are great examples of this. In fact, there is a great concern with the California Assembly looking to make SFUs subject to rent control too. This will be reviewed within the next two years.
Is it worthwhile to even consider a MFU in a rent control market, or potentially state?
Karen
I've heard good things about Section 8 as an end-run around rent control, specifically in the City of Oakland. This was actually a revelation to me a few months ago, that's been confirmed by other investors since. The City's agenda is obviously to get more landlords to sign up for Section 8, and they do so by being open/liberal about landlords justifying increasing rent to current market. The tenant of course might only be coming out of pocket for 20% of their rent, so a $500 rent hike is only $100/mo out of pocket for them.
And of course the more well known end-run is furnished rentals. Homesuite (which gets around the anti-airbnb legislation by being 30+ days only), airbnb, etc.
Chris, I've tried to have some of my long term rent controlled tenants apply for Section 8. They claimed that Section 8 new applicants are all closed because there are too many applicants. Is there a way to have your own tenants apply for your own rental and have them bumped to the top of the waiting list. Any Section 8 specialists out there? I have shied away from Section 8 due to the gov scrutiny.
I'll tell you this. I've invested in rent controlled cities, and I never will again unless. I'm the type of landlord that likes to improve a property and the surrounding neighborhood. I spend a lot on landscaping, exterior improvements, curb appeal, and investing time and money into a neighborhood as a whole. Also evicting drug dealers, gang members etc. It just doesn't work in Rent Controlled cities. This is why they end up being blighted or messed up high crime. The rents will often not cover expenses.
@thomas s
so true man
I operate in a rent control market which is phasing out on vacancy. Right now I have 4 rent controlled units- and yes it can be just fine. I went in on buildings which needed a bit of work, but they were turning a profit on purchase. I purchased and a year later there was a push to de-regulate, and that is just what they did.
Talk about building equity! Buy in a rent control where there is not even a hint of deregulation and get it removed a year later! Wow!
They also changed the formula from the 70's slightly- it was 90% of CPI now it is 100% and the last couple years has seen 2-2.5% increase in CPI + tax increase.
I looked to see if there were ways to cut costs (yes) and if there where capital improvements which could be passed on (yes).
I operate in a rent control market and there is no way rents keep up with costs. The bane of the business is long term tenants. Contrary to the norm, under rent control, you do not want long term tenants. You will fall behind ever year and will hope and pray that tenant do not stay any longer than 3 years otherwise you begin to lose money rapidly.
Tenant turn over is essential for success in a rent controlled market coupled with a business plan to insure quick turn around of units.
Thomas, does that mean you only renew 1 year leases twice (for a total of a three year tenancy) or do you allow tenants to stay longer and just eat the losses?
Are you even allowed not to renew a lease (AKA "no fault evictions") in your rent controlled area?
What are your specific business strategies for dealing with want-to-be long term tenants?