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
CA & NV · Member since 2019 · 215 posts · 378 votes
7y
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.
Rental Property Investor · Sacramento, CA · Member since 2016 · 93 posts · 85 votes
7y
@Eric G. Builders rolled over this because there is a provision which excludes new construction for the 1st 15 years. This was designed specifically to not impact them in the near term.
Thanks for all the discussion on this everyone. I think we can all agree there is a huge homeless problem in CA and something needs to be done about it, but my issue with this bill is that I don't see it based on actual proven methods, or data, or studies from some top research institute. It seems to be emotional work, and an irrational response to people that are suffering from high rents. People that suffer from high rents tend to think that limiting the thing thats hitting them, rent, is the solution- if we think about this logically however limiting rents is like aimlessly fighting symptoms but never addressing the actual illness. We to incentivize builders and investors in CA to increase supply, not the contrary.
I'd love to build multi families, and I'd love for the process to be made cheaper or simpler for me. That's what we should start thinking about
Is there anyone out there that can decipher this for me:
(8) Residential real property that is alienable separate from the title to any other dwelling unit, provided that both of the following apply:
That language is confusing but it was taken from the Costa-Hawkins Rental Housing Act. It does refer to single family houses. Subsequent clarifications, post Costa-Hawkins, have determined that if there is another structure on the same lot as a single family dwelling, then the home is not “alienable separate from the title to any other dwelling unit” because it cannot be sold separately, and the single family dwelling will not be exempt. But most single family homes will be exempt.
SFH is NOT exempt unless you are living in it and are renting out rooms, from what I read.....
Diane, I got tripped up on that as well, but item (8) says if your unit is alienable, under a separate deed, able to be sold separately, not controlled by a corporation/reit, it is exempt.
In contrast, apartment complexes owned by one owner, where units can't be separately sold, are not exempt.
Originally posted by @Edit B.:
@Eric G. Builders rolled over this because there is a provision which excludes new construction for the 1st 15 years. This was designed specifically to not impact them in the near term.
Builders are completely safe. New construction is untouched, and the bill expires in 2030, which is a mere decade from now.
Vote out fiscally Liberal leaning state senators and reps.
Also vote against Governor Newsom. He does not understand basic economics. He's chasing small business out of California.
I understand there's ways around these laws but the red tape makes it simpler to just go to greener pastures. I've already done so but I think California will continue to be a great place to invest in the long run.
Rent controls in the long run lead to less housing and a lower supply. In the short run there may be buying opportunities. They seem nice on paper but broadly and long term they devastate lower income housing. Also these policies don't last long they usually end up with appreciation of current housing stock and are merely a bandaid fix... By this time these politicians will be out of office or on to their next platform.
The Realtor Association was fighting this down to the last minute. But somehow the California Builders and the Apartment Association decided to roll over on this. I’m pretty sure these groups put a lot of money and effort into opposing the rent control proposition on the last ballot. So I’m not sure why they rolled over months later.
Builders rolling over makes sense; I'm assuming that new construction is exempt?
Apartment Association rolling over is actually similar to something we saw locally, in Alameda. The landlords, facing a severe rent control measure, 'compromised' and caved to go for a very modest one. 5%+CPI is fairly modest, to be fair.
CAR is usually pretty good at protecting property owners, no exception here, good on 'em.
Rental Property Investor · Orlando, FL · Member since 2019 · 105 posts · 71 votes
7y
@Ed Morrison
Remember that these politicians have never held a job or run a business outside of government . Their world is imaginary, they imagine their policies are good but do not have foresight to conclude what happens when they move economic levers. There are exceptions, but I see most of them like toddlers mashing buttons on a video game controller with no regard for the object of the game.
Maybe they have good intentions, but often that road leads to hell.
I do not live in California, and I imagine that a lot of what we see on tv I sensationalized. However,
If a fraction of what is projected (extreme homelessness, drug abuse on public streets, human feces, needles and the like covering the streets) then California is in trouble as it faces the impending mass exodus of its productive citizens.
Rent control itself is dangerous as it promotes more government intrusion into a market that should be free. Additionally, how interesting it is to point out that one of the biggest expenses faced by investment property owners is tax. Tax and expenses are always spread amongst the tenants who occupy. Taxes go up, so does the rent. Point is, the ones they say they are trying to help have to shoulder the burden of higher tax implication.
The proposition has many implications, the biggest could be valuations as the cap rates could be stagnate for an uncertain amount time.
As per this forum rental hikes by owners hedging against the proposition will most certainly impact the occupants. Shotgun rent hikes will effect consumer spending.
Consumers who do not spend, affect commerce and the overall economy.
Long story short, the market sector that affects all other market sectors is Real Estate. You mess with mess with Real estate, you risk the economic instability.
Rental Property Investor · Orlando, FL · Member since 2019 · 105 posts · 71 votes
7y
@Ed Morrison
Remember that these politicians have never held a job or run a business outside of government . Their world is imaginary, they imagine their policies are good but do not have foresight to conclude what happens when they move economic levers. There are exceptions, but I see most of them like toddlers mashing buttons on a video game controller with no regard for the object of the game.
Maybe they have good intentions, but often that road leads to hell.
I do not live in California, and I imagine that a lot of what we see on tv I sensationalized. However,
If a fraction of what is projected (extreme homelessness, drug abuse on public streets, human feces, needles and the like covering the streets) then California is in trouble as it faces the impending mass exodus of its productive citizens.
Rent control itself is dangerous as it promotes more government intrusion into a market that should be free. Additionally, how interesting it is to point out that one of the biggest expenses faced by investment property owners is tax. Tax and expenses are always spread amongst the tenants who occupy. Taxes go up, so does the rent. Point is, the ones they say they are trying to help have to shoulder the burden of higher tax implication.
The proposition has many implications, the biggest could be valuations as the cap rates could be stagnate for an uncertain amount time.
As per this forum rental hikes by owners hedging against the proposition will most certainly impact the occupants. Shotgun rent hikes will effect consumer spending.
Consumers who do not spend, affect commerce and the overall economy.
Long story short, the market sector that affects all other market sectors is Real Estate. You mess with mess with Real estate, you risk the economic instability.
Rental Property Investor · Keene, NH · Member since 2018 · 114 posts · 73 votes
7y
Originally posted by @Account Closed:
I appreciate the help and I am bummed out. All the other landlords increased the rents so fast I didn't know what was going on. I have 4 apartment buildings in Los Angeles, Torrance, Gardena and Long Beach. I am sort of lucky because I raised the rents in two of the buildings and the increase took effect on March 1, 2019. So, I do not have to roll back those rents and I will definitely raise the rents again this March. I always give my tenants a 90 to 120 day rent increase notice.
Today, believe it or not, before I heard about the new law, I printed rent increases for 35 units and increased all the rents $200. A few minutes ago, I just re-printed the notices and had to decrease the rent increase to only $100.
I've always been generous to my tenants and kept the rents low. If I had increased my rents to what everyone else is charging I would be netting about $150k more every year and that is $1.5 million every 10 years. Bad landlord!!! But, I have happy tenants if that is worth all the work and frustration.
You could give the required notice now to raise rents to market. You'll have to revert later, but you may turn some apartments in the process and be able to move forward at market rate.
Sucks for the tenant. Hopefully the ones adversely affected are the ones that voted for it.
Rental Property Investor · Simi Valley, CA · Member since 2019 · 53 posts · 42 votes
7y
How is this going to affect the Section 8 formula? I can't even begin to think how one would determine on whose side the rent increases for especially with the rent cap Section 8 imposes. Will Section 8 eat the brunt of it?
If a fraction of what is projected (extreme homelessness, drug abuse on public streets, human feces, needles and the like covering the streets) then California is in trouble as it faces the impending mass exodus of its productive citizens.
I would say that over the last 5 years in Sacramento it has been really bad and is only getting worse. You don't have to look hard to find "extreme homelessness, drug abuse on public streets, human feces, needles and the like covering the streets".
Real Estate Investor · Sacramento, CA · Member since 2010 · 292 posts · 103 votes
7y
Many of you are forgetting that just because there is a cap of 5% on rent increases,by golly you're going to increase them the full 5%, perhaps in a show of retaliation. Don't forget laws of supply and demand where even a 2 or 3% increase might discourage tenants from wanting to live in your property. You can only get any rent increase if tenants are willing to pay the new rent.
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....
Diane, unless I'm mistaken, the law does not apply to SFH, so you should be free to raise rents in one fell swoop
Real Estate Investor · Sacramento, CA · Member since 2010 · 292 posts · 103 votes
7y
Originally posted by @Account Closed:
I raised the rents in an apartment building and the increase took effect on September 1, 2019. If I am reading the new law correctly, In January 2020, I have to roll the rent back to what it was on March 15, 2019 and I can increase the rent from the March 15, 2019 rent by 5% plus inflation in January 2020. Then, when will I be able to increase my rents again. I am guessing (hoping) that I will be able to increase the rent again on September 1, 2020 since all my units are currently about $500 under the current market.
Where do I get the inflation rate. Yesterday, I increased my rents by 5% plus 3% for inflation since the Consumer Index rose a little more than 3% in the past year.
Jack, even if you "have" to reduce rents in January 2020, I wouldn't do it. Just act dumb and ignorant. Wait until some sharpie tenant realizes your rent is illegal and forces you to. It may never happen.
Rental Property Investor · San Francisco, CA · Member since 2013 · 1k+ posts · 1k+ votes
7y
A few quick observations:
1- I sense that a lot of nice-guy landlords with way below market rents just got a major adrenaline injection, and are goona be quickly serving 60 day termination letters to those month to month tenants...so not sure exactly how that will help to stabilize homelessness. (The just cause aspect of the bill only goes into effect January 2020.
2- for MF buyers, a new strategy will be buying under performing assets at discounted prices, and then it’ll be “my family is moving in” big time (until the specifics of that are tightened up) and then next it’ll be “hello buyouts!”
3- owning rental SFH's and condos just became that much more of a valuable investment strategy in CA. So all of you "little ol me, I'm not sophisticated enough to do multifamily, just SFH and condos" investors, it's time to break out the Champaign this weekend...cause you just won the lottery!
4- looks like all of the California rental market just got a lot more precious, where we in San Francisco have been dealing with this for a long time. It basically creates loads of inefficiencies in the rental market, and savvy landlords will benefit from the cumulative effects big time. I mean, how many poor landlords do you know in San Francisco? For christsakes I know property owners in SF sitting on vacant by choice buildings (there are an estimated 30-40,000 vacant units in SF)- they don’t even have to rent them out anymore.