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.
LakeWood , CA · Member since 2018 · 268 posts · 331 votes
7y
@Rob Malda I purchased this specific triplex 5years ago. My tenants have all been inherited. I’m the newest “tenant” to the property. Does that mean I’m able to increase my rents over the 5% cap?
@Rob Malda I purchased this specific triplex 5years ago. My tenants have all been inherited. I’m the newest “tenant” to the property. Does that mean I’m able to increase my rents over the 5% cap?
Nope, you are screwed. The exemption for owner-occupied MFs is only for duplexes. Since yours is a triplex you fall under the law regardless. For duplexes, it says:
(e) This section shall not apply to the following types of residential real properties or residential circumstances: ....
(6) A duplex in which the owner occupied one of the units as the owner’s principal place of residence at the beginning of the tenancy, so long as the owner continues in occupancy.
Just an FYI, landlord lawyer Bornstein says adding a second unit to an SFR in Oakland makes it a duplex from the city's perspective. So, then it's subject to rent control after construction of the ADU.
I'm sure anyone adopting this strategy will start at market rate rents, anyway, but then you're capped at whatever Oakland's yearly allowable increase is. https://www.oaklandca.gov/reso...
New construction is exempt for 15 years, so the ADU definitely won't be rent-controlled right away, and I don't think the adjoining SFR will become rent-controlled for 15 years either (although that point is ambigous according to the law).
Investor · Gardena, CA · Member since 2017 · 445 posts · 398 votes
7y
I have mixed feelings about rent control and I have a conscience when it comes to increasing the rents. A lot of landlords were being ruthless and raising the rents with short notices. I feel bad for many of the elderly people who were given the boot like dogs. Suppose, your mother is very elderly, not feeling so well, lived in a unit for 20 to 30 years and the landlord serves her with a $500 rent increase notice with the option to move within 60 days and her life is unraveled as she has to find a place to live and move all her belongings. That is why my rents are $500 below market value. While I love to make as much money as possible I also considered the welfare of my tenants. With my mixed feelings, I am sort of glad that rent control passed, but I am angry about the government getting involved with private business and putting a cap on investors' profits.
I am sort of happy about rent control because it will put a stop to the madness regarding the crazy prices increases to purchase apartment units and I know many investors will be angry about my statement, but the way the prices for multi-unit was increasing it was only a matter of days before many ignorant investors, who cannot do math, were going to get burned badly. There comes a time when the market price for rents does not justify the asking price for the units and the frenzy was causing too many ignorant investors to invest blindly with the assumption that there was no limit to how high they could increase rents. In reality, the new rent control laws caused the multi-unit bubble to pop because I am positive that many investors who purchased units in the past year with the presumption that they could increase rents will now lose money. I am not happy about it, but it was inevitable and I asked myself every day when the increase in multi-units was going to stop.
I look for properties to purchase, every day, and I there are thousands of Californians paying too much money for multi-units in other states because they think they can raise the rents in those states like in California, but they are going to find that places like Arizona cannot bare the rent increases they think they can demand. In the past few years, the prices for multi-units in the entire state of Arizona have increased by as much as 300% and with the current prices for multi-units I would be very cautious. I would be cautious about investing in multi-units in Tennessee because the majority of people cannot bare the rent increases Californians are used to demanding and that is why the investors in Tennessee are not purchasing the properties that are for sale. Maybe, you can find a good deal, but you need to be very cautious. when looking for properties you need the ability to know who your renters are and what rent increases they can bare. You have to be an analytical-type person who can do the math without relying on a so-called expert because he will not have to pay for your losses.
Investor · California, CA · Member since 2016 · 117 posts · 26 votes
7y
@Mike Franco
So which is it.. you have to either “term” out your tenant at end of fixed term lease or.. you have to take it off the market for a year. I guess I better read the bill.
So which is it.. you have to either “term” out your tenant at end of fixed term lease or.. you have to take it off the market for a year. I guess I better read the bill.
It doesn't matter if the tenant has a fixed term lease on month-to-month tenancy at-will. The bill states that once the tenant lawfully resides in the dwelling for 12 months the rent control and no-fault eviction ban go into effect. You can choose to not renew a 12-month lease, or you can give a month-to-month tenant a 60-day notice after 10 months. But once the tenant stays for 12 months you are screwed.
Investor · Oakland, CA · Member since 2016 · 89 posts · 50 votes
7y
I would like to welcome you all to the party. I bought my apt buildings in Oakland. The properties are subject to rent control. I get 3.5% this year which is higher than last year. I would love CPI+5%
prop 6 was a clear indication there was a problem, and public appetite to introduce a change but it was to broad.
Be mindful Alameda california had 5% flat for 4 years and the city council just cut that in half to 2.8%. That CPI+5 could get cut more.
A bunch of owners are selling their MFH in Alameda as a result.
Lived in my duplex til last month. Inhereted long term tennant at $1350. Raised the rent 15% in june to $1550. Still $250 under market. Was going to raise it 10-13% next june. Moved out last month and rented the 2nd unit so I cant.
i beleive im exempt from the 15% increase because i lived there at the time. I'm considering serving them a 30 day and just getting a new tennant at market before jan1.
I'm new to this and made the mistake of being the nice guy. Wish i would have raised it to $1600-$1700 on day one. Opinions?
ideally it would be nice if my 15% increase doesn't count towards future increases because it was owner occupied at the time and I could raise it 8% next month because they are m2m. Maybe i need a lawyer 😐.
Rental Property Investor · Torrance, CA · Member since 2016 · 724 posts · 1k+ votes
7y
@Keith A.
Yup, I live in LA and I’ve been to skid row. Grew up in Seattle and have watched it’s decline in the last few years. I can tell you for a fact that the vast majority of these people living in tents are drug addicts, mentally ill, or a combination of both.
Rental Property Investor · San Francisco, CA · Member since 2013 · 1k+ posts · 1k+ votes
7y
@Ryan Roybaul hey, I just looked up “law of unintended consequences” in the dictionary. You picture was next to it ;(
Yes the law compels someone in your situation to act harshly to your tenant: basically you can terminate the lease (if they are month to month) with 60 day notice, but you need to do that pronto, as it needs to expire before January 1, 2020.
Good question on the rent increase you gave while you still lived there. Sounds like it should stick. But in general with rent control, you want to avoid “gray areas”. I can tell you that in San Francisco, Oakland, etc., any interpretation of the law is usually sided with the tenant.
@Diane G. 100% true. Somewhere some lawyer is licking their chops to get involved in the case discussed ^ above. CA landlording is about to get a whole lot more interesting...
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
7y
I’ll be watching this because Colorado has been talking about something similar. Let’s be real though: CA is still one of the best places in the world to own real estate. Ability to raise rent 5% (plus CPI so closer to 7%), combined with historical appreciation average of 7% (which is six figures/yr. on most CA properties)= not bad at all in my book. Landlords in less desirable markets can only dream about raising rents 7% per year because most markets don’t support that, which is why nobody is calling for rent control in those places. And forget about six figure appreciation if you own in any of those less desirable areas; you’re lucky if your property value goes up at all. It’s unfortunate, but I’d still rather own in a market where large rent increases are possible and appreciation equates to hundreds of dollars per day than a flat market somewhere else where rent control isn’t an issue because rents aren’t going up that much anyway. To me this is just an unfortunate bi-product of owning in a profitable market. All the property owners I know in CA are doing just fine, having gained hundreds of thousands or even millions in equity in just a few years. Also the rent is high there so a 7% increase in CA is still better than a much higher percentage increase in lower rent areas (CA average rent is $1,400x7%=98, compared to Midwest average rent $600x10%= still only 60 and good luck raising rent 10% there anyway so it’s a moot point). This wouldn’t deter me from owning property in CA personally, you just have to make sure to not get behind on rent increases which is good business anyway. For value add investors the work around is to turn units over and start fresh with new tenants. Not that big a deal and the reward is you get to own property in one of the highest appreciation markets in the world. Look at areas that have had rent control for a long time, we’re still seeing huge value increases in those areas so to me yes it’s a small annoyance but the bigger picture is the (perceived) need for rules like this is an indicator of a solid market for long term investment.
Hey thanks Steve for putting things in perspective for those of us in CA...Everything you mentioned in your comments about CA real estate is right on.... Even though the this new rent control law is very annoying, and creats losers and winners.....