Rent controlled rentals

5 Replies

Does anyone own a rental in a rent controlled state? I am thinking of buying in DC, which I just discovered is rent controlled. 

My plan would be to buy a property with a conventional loan, live in it for one year, then rent it out at the end of that year. There are no restrictions as to the rent I can charge when I first rent the property, right? Only to the increases I can make for an existing tenant thereafter? 

It seems like DC’s rent control ordinance allows for minimal increases justified by increased CPI (Consumer Price Index). Although those increases are slight, you can still increase the rent by up to 10% in some cases annually. 

Let me know if anyone has any advice about investing in a rent controlled area before I dive in head first. 

Thanks!

@John Paul Whaley -  Unfortunately my portfolio is located in a State that just decided to start being rent controlled (New York). I don't want to speak for your situation specifically, because all states are different.  However, in New York, you're not allowed to raise rents by more than 2%.  

If I were you, I'd get with a local attorney and become extremely knowledgeable in the field before doing so.  These rent control laws are extremely favorable to the tenant, and a professional tenant can sink your asset relatively easily by just knowing a few magic phrases to say in court.

Originally posted by @Michael Ablan :

@John Paul Whaley -  Unfortunately my portfolio is located in a State that just decided to start being rent controlled (New York). I don't want to speak for your situation specifically, because all states are different.  However, in New York, you're not allowed to raise rents by more than 2%.  

If I were you, I'd get with a local attorney and become extremely knowledgeable in the field before doing so.  These rent control laws are extremely favorable to the tenant, and a professional tenant can sink your asset relatively easily by just knowing a few magic phrases to say in court.

Michael, the 2% increases only apply to rent controlled product, not all rental stock.  For example, a condo in NYC can be rented for whatever the prevailing market rate is, without subject to the 2% increase.

John, I'd assume that DC has similar rules, and an individual unit (condo, SFH) can be rented at the market rate. That being said, I'd check with a local attorney or investor familiar with the local laws.

states with rent control also tend to be landlord un-friendly. Harder to evict a bad /non paying tenant.