Owning a Rent Controlled or RSO Property in Los Angeles

5 Replies

I am looking at purchasing a property in the Los Angeles area that happens to be rent controlled. The property will be purchased vacant where I would live in one unit and do some value add updates and have my choice of tenant for the other unit where I can charge market rent from the beginning.

Does anyone have advice or pointers from owning a rent controlled property? 

See if you are able to raise rent to market while it is vacant.  Be aggressive with your vacant rent raises.   Often the rent control only takes place once you have a tenant in place, and you are limited to a certain percentage in increases in rent upon lease renewal.  If you are not aggressively pricing your units at turnover, you will end up locked into below market rents with long term tenants.

@Josh Wallace

You're in a good position since it's already vacant. I agree with @Bettina F. that you should be very aggressive in setting that market rent. You need to start high because once someone is in you can only raise the rent 3% per year. You also need to watch out for tenants rights in LA. It can be impossible get rid of people even when they are not paying. So do a ton of due diligence on the people you rent to. 

@Josh Wallace that's interesting it will be delivered vacant as I don't usually see that in rent control Multis for sale in L.A

How about renting the unit out short term on Airbnb or VBRO etc and not dealing with rent controlled tenants ?

@Lee Ripma yeah the situation in L.A is definitely in favor of the tenant versus landlord . The Mayor of L.A recently stated he would like rent control to apply to newer units too .

He also recently expanded RSO with more "protections " for tenants .

https://www.lamayor.org/mayor-garcetti-continues-tackle-housing-crisis-new-law-strengthening-rent-stabilization-ordinance

It seems everytime a landlord wants to develop their property the tenants are now suing.. even with the relocation payouts being $6,000 plus per tenant .

Owning rentals in L.A and dealing with that drama doesn't seem to attractive especially at current cap rates .

6k would be a bargin! My landlord in LA has a tenant he has offered 75k to leave, guy won't do it! 

I rent in LA and invest out of state. I would never be a landlord here! 

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