California Rent Control

General Landlording & Rental Properties
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California Rent Control

Edit B.
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

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Jeff Willis
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.

https://ballotpedia.org/California_Tax_on_Commercial_and_Industrial_Properties_for_Education_and_Local_Government_Funding_Initiative_(2020)

Heck LA County just approved a rent control ordinance. https://abc7.com/politics/los-angeles-county-rent-control-ordinance-approved/5529287/

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. 

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  • Account Closed
    Rental Property Investor · Torrance, CA · Member since 2016 · 724 posts · 1k+ votes
    7y

    @Greg M. Come down to the SouthBay. Leave all the needles and feces for the “enlightened” ones. SouthBay is the only area of L.A. County I can stomach. I don’t understand why people pay more to live in LA proper surrounded by all that urban blight. If Torrance ends up like the rest of the County I might just have to give up on SoCal. I work at LAX and I’m not driving 2 hours one way to get to work.

    0Reply
  • Richard Olshove
    Rental Property Investor · Rowland Heights, CA · Member since 2015 · 73 posts · 22 votes
    7y

    This is not at all surprising with the large problem we have in the state with housing.  I would call my tract home in Rowland Heights not affordable either!  Supply and demand for housing all driven by policies restricting housing growth.  The part I don't understand from this is why lawmakers don't just push for more building?  The recent push for ADUs in the major metros is a good step in this direction.

    1Reply
  • Jeff Stanners
    Member since 2018 · 21 posts · 7 votes
    7y

    Can someone clarify....I've read conflicting answers.  Are single-family homes owned by an individual owner exempt?

    My 2 cents....the biggest BS about this is it was just on the ballot last year (prop 10) and was soundly defeated.  Now lawmakers ignore what the people voted for and find a way to enact it anyways.

    1Reply
  • Michael Swan
    Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    7y

    I sure am glad I 1031 exchanged all my rental properties in San Diego for Apartment complexes in NE Ohio.  California Liberal BS does not have any consequence on my 200 units in 10 apartment complexes out there.  People said I was crazy to sell my 10 condos in 2015, 2016, and 2017.  I sold when they all doubled in value and through the power of the 1031 exchange it was all tax deferred!!  Now my cash flow is at $180,000 a year, instead of $50,000.  

    WOW!!!  I will live in San Diego forever, but with this new law I may never buy rental properties here again.  We shall see!!

    Swanny

    4Reply
  • Thalia G.
    Member since 2018 · 80 posts · 21 votes
    7y

    @Michael Swan the condos are exempt.I think they are going to rocket in value

    4Reply
  • Terence W.
    San Francisco, CA · Member since 2015 · 23 posts · 10 votes
    7y

    For those properties that are exempt, does exemption only apply to no fault just cause or does this apply rent increase of 5%+inflation as well?

    0Reply
  • Michael Swan
    Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    7y

    Hi @Thalia G.,

    I took all that equity and bought apartment complexes in NE Ohio in our LLC's. If I would have done that in San Diego, instead, my cash flow would have been much much lower, next to nothing. Then, we would have not been able to raise rents now to reposition true value play Apartment complexes here in San Diego.

    Swanny

    2Reply
  • Rob Malda
    Las Vegas, NV · Member since 2017 · 43 posts · 33 votes
    7y
    Originally posted by @Terence W.:

    For those properties that are exempt, does exemption only apply to no fault just cause or does this apply rent increase of 5%+inflation as well?

     Exemption applies to both the 60-day notice ban and rent increase cap.

    0Reply
  • Meir Greenblatt
    Rental Property Investor · Houston TX / Tacoma WA. · Member since 2019 · 166 posts · 89 votes
    7y

    @Edit B.

    Check out this video about the new rent control, it explains all of the pro's and con's. It is actually not that bad.

    https://youtu.be/4-50RlGC9I0

    2Reply
  • Thalia G.
    Member since 2018 · 80 posts · 21 votes
    7y

    @Meir Greenblatt bad for me because I inherited a building with 1990’s rent,and I didn’t raise them until April.My ace in the hole,I guess,is that the bathrooms are in horrible shape,and I can probably evict people for substantial remodeling.I sunk quite a bit of money fixing termites damage,bad stucco,roofs.It was all exterior.

    0Reply
  • Thalia G.
    Member since 2018 · 80 posts · 21 votes
    7y

    @Meir Greenblatt wow!This is great!I hope this guy is right!

    1Reply
  • Thalia G.
    Member since 2018 · 80 posts · 21 votes
    7y

    @Michael Swan I think you scored

    0Reply
  • Meir Greenblatt
    Rental Property Investor · Houston TX / Tacoma WA. · Member since 2019 · 166 posts · 89 votes
    7y

    @Thalia Georgopoulos

    I'm not sure if its actually possible to do it but if you can pay them 1 month rent to leave and it's a 1990 rent, so it will not be fun but still okay.

    0Reply
  • Thalia G.
    Member since 2018 · 80 posts · 21 votes
    7y

    @Meir Greenblatt I’m not sure if this guy is right.

    If they have been there month to month for years you can just buy them out?

    0Reply
  • Ryan Roybaul
    Member since 2019 · 10 posts · 2 votes
    7y
    Originally posted by @Thalia G.:

    @Meir Greenblatt bad for me because I inherited a building with 1990’s rent,and I didn’t raise them until April.My ace in the hole,I guess,is that the bathrooms are in horrible shape,and I can probably evict people for substantial remodeling.I sunk quite a bit of money fixing termites damage,bad stucco,roofs.It was all exterior.

    If im not mistaken I think you can evict them all right now if they are m2m, before jan1 which is what im considering. That may be a lot to take on but it's an option.

    0Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    7y
    Originally posted by @Michael Swan:

    I sure am glad I 1031 exchanged all my rental properties in San Diego for Apartment complexes in NE Ohio.  California Liberal BS does not have any consequence on my 200 units in 10 apartment complexes out there.  People said I was crazy to sell my 10 condos in 2015, 2016, and 2017.  I sold when they all doubled in value and through the power of the 1031 exchange it was all tax deferred!!  Now my cash flow is at $180,000 a year, instead of $50,000.  

    WOW!!!  I will live in San Diego forever, but with this new law I may never buy rental properties here again.  We shall see!!

    Swanny

     You do realize the rent control is 5% plus inflation so 7%?   Has Cleveland ever had 7% rent increase without a value add?  According to rentCafe the average rent increase for an apartment in Cleveland was was 4% last year.  

    On some of our units, we can raise the rent $238/month (using 7%).  The only time we have raised our rent by as much as 7% is when we want the tenants rent to leave.  

    I am not for rent control for many reasons, but for this particular rent control rule it is not due to the amount I can raise our rents.  We will be doing great with our RE investments raising the rents 7% a year.  Even our low rent units, this amounts to over $100/month rent increase.  

    5Reply
  • Thalia G.
    Member since 2018 · 80 posts · 21 votes
    7y

    @Ryan Roybaul that’s what I thinking.It would be 6 empty units and the eviction haggle.

    0Reply
  • Michael Swan
    Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    7y

    Hi @Dan H.,

    We buy the apartment complexes and rents go up about 8 to 10 percent in the first year.  I only buy value deals from burnt out old owners.  Example, average rents of the complex are $600.00 when I purchase it.  The market rents are much higher.  So, at lease expiration rents go up an average of $60.00 (10% increase). That would not be possible now in California.

    Swanny

    0Reply
  • Mike Franco
    Los Angeles, CA · Member since 2013 · 555 posts · 261 votes
    7y


    sure, you can raise it 7%, but will the free market support it?

    0Reply
  • Thalia G.
    Member since 2018 · 80 posts · 21 votes
    7y

    @Will F. CAA hosed us

    1Reply
  • Carrie K.
    New to Real Estate · Sacramento, CA · Member since 2015 · 104 posts · 33 votes
    7y

    Does this exempt owner-occupied triplexes as well as duplexes? It exempts "Single-family owner-occupied residences, including a residence in which the owner-occupant rents or leases no more than two units or bedrooms, including, but not limited to, an accessory dwelling unit or a junior accessory dwelling unit."

      0Reply
    • Rob Malda
      Las Vegas, NV · Member since 2017 · 43 posts · 33 votes
      7y
      Originally posted by@Carrie K.:

      Does this exempt owner-occupied triplexes as well as duplexes? It exempts "Single-family owner-occupied residences, including a residence in which the owner-occupant rents or leases no more than two units or bedrooms, including, but not limited to, an accessory dwelling unit or a junior accessory dwelling unit."

      Triplexes are never exempt. Duplexes are exempt if the owner lives in one unit prior to the tenant moving in, and only while the owner still lives there.

      0Reply
    • Account Closed
      Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
      7y
      Originally posted by @Steve K.:

      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.

      Ah yes, the 'ol Frog in the Pot technique. Well, it looks like people are buying into it.

      1Reply
    • Dan H.Pro Member
      Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
      7y
      Originally posted by @Michael Swan:

      Hi @Dan H.,

      We buy the apartment complexes and rents go up about 8 to 10 percent in the first year.  I only buy value deals from burnt out old owners.  Example, average rents of the complex are $600.00 when I purchase it.  The market rents are much higher.  So, at lease expiration rents go up an average of $60.00 (10% increase). That would not be possible now in California.

      Swanny

      So with your value add you are raising your rents 1% to 3% more than the California rent control limit   The thing about value adds is that they are typically done once in a couple decades   It is the same route I have used in San Diego county.  Buy a property, perform the value add (typically a rehab), refinance to pull out most of my investment while raising rent.  I suspect it will be at least 20 years before I can do the same value add to a unit.

      The thing about my San Diego units is that without the value add, my market rents go up $50 to $200 per month.  The rent control is higher than this amount so in terms of raised rent, the rent control does not hinder these increases   

      0Reply
    • Nicholas N.
      Orange County, CA · Member since 2018 · 3 posts · 2 votes
      7y

      I think Rent Control aka Government Imposted Prices for Rent will have 2 negative unintended consequences for both renters and landlords.

      1. Landlords - legals fees, fines and penalties due to non compliance, and costs to arrive at compliancy.

      2. Tenants - 15yrs reprieve for new builders may be revised to 10yrs when Newsome runs for reelection. Zero profits for investors = less builders = less available housing for tenants.

      POV from PragerU.  https://www.youtube.com/watch?v=vZyeNFTje2A

      2Reply
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