I'm going through the process of assessing and making an offer on a multi-tenant building in Oakland.
My main concern is that all the tenants are paying well under market rate ($800 for 1br, $700 for 1br, and $900 for a 2br).
If purchase happens, I would like to do renovations on all of the units, progressively. I would also like to owner-occupy one of the units.
The owner's agent says that the tenants have handshake-agreements with the current owner, and they are all "month to month".
One of the tenants (1br) is actually moving out in October (which is great).
Ultimately, I'm trying to avoid cash-for-keys, but raise their rent on the 1br from $800->$1200, and the 2br from $900 to $1500 min.
Does anyone here have advice/experience with this kind of situation? I am also reaching out to an Oakland tenant law lawyer.
Hi @Dustin Hoffman ,
I tried to make a similar move a few months ago on bank-owned triplex in Fruitvale, and I got mixed information about what I could do. That said, I'm pretty sure this is the rule: your 3 - unit property is NOT exempt from rent control until you have occupied the property for two years. After two years, you have to get a certificate of occupancy and petition the rent board.
A certain local law firm (will PM you) sent some information that made it seem like I could evict the other tenants simply because I was owner occupying one of the units, but I doubt that's the case...Unless of course you have just cause to evict them. I'll have to brush up on the capital improvements section of this document concerning your plan to renovate the units (I think you can evict them to make major renovations, but then you have to offer it back to them after you're done?), but here is the link to the document: http://www2.oaklandnet.com/oakca1/groups/ceda/docu...
There are also quite a few other posts in the forums that talk about rent control in Oakland, allowed rent increases, and cash for keys:
And here's some more info about the amount you could raise the rents from the first forum link listed above:
Originally posted by @Alex Capozzolo:
Rent Control for Oakland:
- Starting July 1st, 2017: You can raise your rent 2.3%. This has been increased 0.3% from the previous year. Great news for landlords.
- Frequency: This can only be done ONCE every 12 months. Even if you don't use the entire 2.3% (i.e. you raise the rent 1.0% to start out) it still freezes your ability to raise the rent for the next 12 months after that.
- Rent raises do rollover ! However, only up to 3x the current CPI amount. For example, if you haven't raised the rent in 37 years - like the real life example above (although that took place in SF, not Oakland) - you can only raise the rent a total of 6.9% if you do this after July 1st of 2017.
- Important: Also, make sure to give your tenants at least a 30 day written notice of any rental increase!
You can read more up on the specifics of the regulations here!
Also, check out this link for some information on Fees!
Anyway, like I said, I'll PM you with the info from that law firm I mentioned. If you're getting into the property below ARV and you can take the low rents for two years, I'd do it.
@Dustin Hoffman make sure you get estoppel certificates prior purchase. This will document anything in the "handshake agreement" the tenants have with the current owner. This should include the intent to vacate for the one tenant that they say will leave in October. Without this the tenants can pretty much make up anything and say it was in the "handshake" agreement.
I got signed estoppel certificates from all tenants stipulating their leases are month to month.
One of the tenants was actually convinced to move out prior to closing by the seller. They were using too much water for gardening and were sick of being harassed so they left.
I have an Oakland based tenant lawyer (Anthony Leung) helping me serve my Owner Occupancy notice for the larger of the 3 units.
Hopefully I can finish the renovation on the vacant 1br by the end of the year and begin renovations on the upstairs 2br when I occupy the residence in January!
@Dustin Hoffman congrats on the purchase! Sounds like you have things pretty much under control :-)
woohoo! Congrats! Look forward to your updates
@Bruce Palomarez , when the keys were turned over to me one of the units was vacant, so I quickly redid some of the dated fixtures in the kitchen/bathroom (cabinets and appliances). Ripped out the old carpet and put down fake hardwood vinyl, and repainted.
At the same time I owner-occupied the other unit, which I received access to 1 month early (60 days notice is standard).
I'm currently living in the building, and moved new tenants in downstairs (effectively doubling the rent of that unit).
Doing renovations in the space I'm living in is feeling daunting, and I need a break, so I'm just dealing with the old-everything while I recoup some $'s and wait to see what my CPA comes up with for tax season...
Honestly, outside of some stupid problems with an incompetent GC, the biggest issue for me has been the insurance company (AAA), because they decided to cancel my insurance after inspecting the property during the holidays. I wouldn't have purchased this place if I'd known the insurance companies wanted so much work to be done immediately. I intended to do progressive maintenance on a longer timeline.
They were pretty uncommunicative through this whole process, Sending me a 60 days cancellation notice saying "all 4 major systems must be updated", but every time I called them I got a different agent, and no attempts to work with me to extend my policy/not cancel so I could deal with these issues. Finally, my policy was cancelled and I was without insurance, at which point the mortgage company was saying they were going to insure me for an arm and a leg.
I finally got in touch with the agent who sold me the policy, and she reinstated my policy and is giving me more time to work through these issues.
They are asking me to get a new roof immediately, but I'm going to get another inspector to give a second opinion. Additionally they're making me upgrade the electrical from the street to be 100 amps per unit (these 1brs are small, have 60 amps, and definitely don't need 100). They also threw out the concept of making me completely replace all the water pipes in the house, and also the electrical. I did some major upgrades to electrical so that the old knob and tube fuses are gone, replaced instead with circuit breakers.