Property Manager · Central California · Member since 2020 · 13 posts · 1 vote
We are closing on a 7 unit in California in just a few days with rents that are very low- $450 instead of $630. Long-term, month to month tenants, rents have not been raised in years. We will immediately raise the rents as much as we can but we are limited in CA regarding how much we can raise them. I am looking for creative ideas for bringing the rents up to the market rate.
Is it worth having the tenants sign a year lease so that at the end, I can opt to not renew it and move them out that way? RUBS? Any other thoughts? Look for violations that would provide just cause? Renovations that would be serious enough to require permits and needing to vacate the building? I'm not set on getting everyone out, but I do want to see this property perform.
@Sarah Martin, welcome to CA! Our statewide rent control law is a little more tenant-friendly than you’re used to, so hold onto your seat here...
Annual rent increases are capped based on CPI. This year’s cap, I believe, is 8.3%. So that’ll get you to $487 or so.
You cannot terminate a residential lease here. You can only evict for cause, and if the cause seems frivolous, the judge will side with the tenant.
Your best bet is to perform a major renovation that requires vacating the building for a minimum of 30 days. As I understand it, this is about the loophole.
You can also buy out your tenants, but talk to. CA attorney first. The correct process is a bit involved, and it will be expensive. In LA, tenants demand $25K, $50K, $60K to vacate an apartment!
You also need to make sure to be in compliance with the municipal and county rent control laws, if any exist. Where is your property?
You'll want to look closely at the state-wide rent control laws that were enacted last year, and see if there are any local rent ordinances you have to follow too. This article may help give you some background: https://www.mmpph.com/wp-conte...
*This post does not create an attorney-client or CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.
@Katie L. Thanks for the link! Great article! I'm in the Central Valley- Fresno area- and there don't appear to be any local ordinances here that prohibit RUBS. In the short term, we are leaning towards raising the rent 6% (limit for the area) and then billing back a portion of the utilities. Long term, this property has quite a bit of deferred maintenance so we will more than likely need to evict for a large scale renovation.
@Jon Schwartz Thanks for your response! Our property is a little outside of Fresno. Still subject to CA laws, but less stringent than in the major metros. I'm thinking the renovation will be our best long term play. This is a lower income area so we can buy the tenants out more easily than in more expensive cities.