Rental Property Investor · Sacramento, CA · Member since 2016 · 93 posts · 85 votes
Why is no-none talking about this? It will cap increases to 5% plus inflation and you can no longer evict at no fault after the lease is up. This is a big deal
It is a big deal but it is like pissing in the wind - nothing anyone can do about this.
AB 1482 (what you are talking about) coupled with the 2020 ballot measure to roll back prop 13 for commercial properties is a no-win for property investors and landlords in California. I am in the process of liquidating all my California holdings.
In reality, your property taxes and could annually go up over the 5% rent cap and expenses will go far beyond that. Your ROI will be negative - not a good business model.
But the good people of California elected these fools, now everyone will pay the price.
@Edit B.I’m assuming big pocketed developers will buy and tear them down for condos or something. Why the hell else would San Francisco lawmakers pass anything ,if it doesn’t benefit developers they don’t do it
@Ed Morrison there was supposedly this all powerful California Apartment Association that just rolled over. I’m in bad shape. A bunch of my units are way under rent because I gave tenants a break while I was repairing the stucco
@Thalia G. no, that won't exempt you from rent caps.
However, as stated in the bill, you can remove tenants for no-fault just causes
(A) (i) Intent to occupy the residential real property by the owner or their spouse, domestic partner, children, grandchildren, parents, or grandparents.
As long as your property is considered residential real property, the bill says you can move in and get rid of the tenant as a no-fault just cause.
However, according to section (d)(1), you will be responsible for their moving expenses, equivalent to one month's rent.
If you are way way below market, this could be a worthwhile solution.
There are so many loopholes with this bill, unsurprisingly. It's not ironclad. For example, it doesn't specify how long the owner and relatives must stay after moving in.
Without any guidelines, you could move back in for 1 week, and put it back up for rent, if no other law prohibits this.
not going to get political.... but if california "lawmakers" think that this move is going to reduce the tent population, they are wrong. The tent population wants to live in tents and the only way they won't live in tents is if the government supplies the housing for free. You get what you vote for, unfortunately there are still some good citizens and investors in that state that i would hate to see hurt.
One solution is to get them to sign a new fixed term lease (3,6,12, even 2 month lease terms) with no automatic renewal.
Then at the end of term, they would be required to leave, and you can jack up rents to market rate for the new tenant.
.
If I recall correctly, with a 30-60 day notice, you can even change the terms of the current m2m tenancy-at-will contract into a fixed term lease. That's another loophole not addressed.
Signing a new fixed term lease contract gives them a future move-out date, but is technically not an eviction.
You're not stuck with a below market tenant forever.
Cuomo did the same thing in New York a few months ago. Really bad for real estate investors. New York and California expect private property owners to act like a charity and provide cheap housing to tenants without compensation, i.e., a reduction in property taxes.
Should private citizens who own apartment buildings, be held responsible for paying for housing subsidies? If they are, should the government compensate them? Or is it correct to believe that property owners “should pay for it” because they “already have enough“?
I've been talking to a few people about it. It sucks because I was really looking into multifamily investments in the Sacramento area (where I live). I've given up on CA when it comes to buy and hold. I'll just flip here and take the money elsewhere.
@Mike Franco moving back in is not a real option for most real estate investors. I would say the odds that a rental property is a fit for your family is very low. And a $1000 monthly rent can only be raised $50-$75 including the inflation factor ? Yes,I would say that is a very big deal. And in my estimation this is not even the worst part of it, the non-evection clause is a huge issue. Yes financially it will only cost you one month of rent to relocate them, but morally the fact that you have to pay someone to move out of your property is not right.
I think this new law will definitely PUSH UP market rent, because landlord will rush to go to market rent....
I personally have a SFH that I have been renting to 3 college students... Great tenants... Market rent is likely $3800 and I am at $3150, and never raised rent in the 2 years they are there...
Now I am going to raise 5% every year to get caught up with the market, so that they don't have incentive to stay there forever, since I can no longer ask them to leave....
@Kyle J.theyve been sneaking in all kinds of sewage and road taxes.We are subsidizing the gigantic projects that are going up.They should pay for their own damn infrastructure!
Sounds like some of us Jersey Landlords should come in and take over for those who can’t swing a profit ;)
We have lived under an anti- eviction statute that calls for cause, we cannot refuse a qualified section 8 and many of our municipalities rent control is limited to just the CPI (sometimes in the negative!)
California just put tenants on notice that they should be expecting a roughly 7% increase a year. Man I have never hit my tenants with that. ($100+)
As for the landlords who were “nice” and didn’t raise the rent- they are not business people. They have voluntarily devalued their property over the years and they can’t pretend to now be business minded.
I am “nice”, but I run a business and rents go up. It is not “mean” to raise rents, it is business.
I think this new law will definitely PUSH UP market rent, because landlord will rush to go to market rent....
I personally have a SFH that I have been renting to 3 college students... Great tenants... Market rent is likely $3800 and I am at $3150, and never raised rent in the 2 years they are there...
Now I am going to raise 5% every year to get caught up with the market, so that they don't have incentive to stay there forever, since I can no longer ask them to leave....
I actually feel sorry for them....
Sounds like there's some confusion. The way I read the bill, and every single news article I've read about the bill, says that single family homes are exempt unless they're owned by a corporation or a REIT. So hopefully nothing should change for you unless your house is owned by a corporation.
I think this new law will definitely PUSH UP market rent, because landlord will rush to go to market rent....
I personally have a SFH that I have been renting to 3 college students... Great tenants... Market rent is likely $3800 and I am at $3150, and never raised rent in the 2 years they are there...
Now I am going to raise 5% every year to get caught up with the market, so that they don't have incentive to stay there forever, since I can no longer ask them to leave....
I actually feel sorry for them....
I feel more sorry that you didn't raise the rent on them. If market rent is $3800, why do you choose to stay so far from it?
College students have financial aid and mommy and daddy, and are more than willing to pay.
.
I don't think this bill will affect the market much. Those landlords who never raise the rent, will continue not to raise rent, until their current tenant decides to move.
According to the bill, you are allowed to re-rent at market rates for new tenants.
As a California landlord, while I'm not happy about this, it really isn't that bad (yet). In most areas people buy for capital appreciation, not positive cash flow. It's really hard to positive case flow in the popular areas. This law will have many benefits for landlords. Existing (mainly mom & pop) landlords won't want to deal with the issues will sell their rentals to homeowners. Those rentals are gone off the market. Less supply. Developers will be much less likely to build new inventory, so the demand for existing inventory continues to rise. Less supply. Landlords that continue to rent will be much more aggressive in raising rents at renewal. Higher rents. Those landlords that used to let a renewal go without a rent increase or a very modest one will be raising rents even higher out of fear of being left behind. I never raised rents on the first renewal. I will now. I used to try and be fair to tenants and raise 2%-3% annually, but now I will likely be raising significantly higher, like 5% + CPI.
Gov. Nuisance knows that rent control does the opposite of what people think it does. When he ran for governor he was against it. He and the legislature have done some amazing PR work. They pass legislation that "forces" cities to build more housing by relaxing zoning laws. If the cities fail, the penalties are harsh - at least a dollar or two per taxpayer. Then they pass legislation that limits rent increases and completely discourages the building of new units and encourages the conversion of existing units. All the while the cities with high rent continue to have permit fees that are insanely high and out of line with what is really necessary and they take way too long to approve them. They have just pandered to the dumb voters that don't understand that this will do the opposite of helping them. And contrary to popular perception, California has a massive amount of stupid people - uneducated college educated, clueless, Pollyannas that think they are special and the entire world should listen them them and their enlightened views.
@Edit B. I worked for investors indirectly and in house in Los Angeles with various different complicated rent control code books to keep up with. It is a pain as an owner but I’ll tell you what I discussed with our main principals. If this occurs and more likely when it does, a few things will be important to consider.
If you are a current owner and are currently at or near market rates and competent enough to keep up with the annual increases you are in great shape and your value and rents will only increase no matter what as supply plummets for both rentals and sales and cash flow will dictate value. So in those terms hang on to what you have and keep up with increases, don’t panic and sell or you will see the next owner realizing the insanely higher than average gains you could have experienced compared to other markets. The only exception is if you’ve already owned say 10 plus years, then maybe it’s time to 1031 exchange into a great secondary market out of state with great growth potential.
The second main topic is buying investments in California is going to shrink only to buyers that must buy and are stubborn enough to stay in markets that are such high demand and are ok with say a 3% cap rate. Essentially if you’re looking for brand new acquisitions without an exchange I would honestly look elsewhere because it will be extremely difficult to make money on a new deal that has below market rents and everything possible working against you in terms of realizing market rate rents. The only slim chance possibility here is if you have experience and are well versed in doing cash for keys and evictions properly, which I specialized in during my tenure there but it’s not for everyone.
In short best of luck, but enjoy the pros you have and will experience for any current investments and I would only caution with underwriting new deals at that point but not to the point of suggesting a full exit of the market if you are or have a great skilled operator.
i don't understand all these new laws. I read something in them that says the laws are not effective until January 2020. Then, I see something on BP about rolling rents back to March 2019.
I guess I will have to call an attorney, tomorrow, but maybe someone can answer my question. I own a few apartment buildings in Torrance California and Los Angeles. My Los Angeles building was built after 1978 and is not under rent control. I have not been raising the rents high enough and my current rents are very low compared to other units in the area. With the new law, what is the maximum I can increase my rents, today.
1-Bedroom in my area are currently going for about $1600 per month we want to raise our 1-bedrooms from $1100 to $1300
2-bedrooms are currently going for $2100 to $2300 and we want to raise our units from $1450 to $1650.
Are these increases legal, or am I going to have legal problems with my tenants?