Cash for Keys in Los Angeles

7 Replies

Bigger Pockets Community!

Hello once again.  I purchased a 4 unit apartment building a few years ago in Los Angeles.  All four units are 2 bedroom and 1 bath, and in good condition.  Three of the tenants are around market rents however one unit, is paying about $300 - $400 below market a month (market rent being approximately $1,550).

The tenants in the below market rented unit have been there for over 5 years and have a senior citizen (I believe) and young child living in the unit.

I am considering offering them cash to vacate their unit in order for me to rent it out at market rents, after probably making about $2,000 - $3,000 worth of improvements to the unit.

I am wondering what do you deem is the right offer in terms of the amount I should offer them considering how much they're paying now and the general apartment rental market in Los Angeles.  

And what are some strategies/explanations/rationale to mention to the tenant as the reason why we are offering cash for them to vacate?

Thank you very much!!

A

Is this in the city of LA?  If it is, it most likely falls under rent control and the relocation fee is something like $19k.  Have you tried talking with them to see if they would be willing to move?  You could try offering a few thousand and hope they don't know rent control laws?  

Originally posted by @William Larsen:

You could try offering a few thousand and hope they don't know rent control laws?  

 It's my opinion, but I would never ever offer a few thousand.

A Bee, why don't you just raise their rent??

Gentlemen,

Yes this is in the City of LA and the property is under rent control, so I would be able to raise the rent by 3%, not more this year.  

What do you think I should say when I offer them some money as the reason I'm asking them to move?

Thanks,

A

@Stone Teran what's your strategy for getting tenants out in areas with rent control laws?

@A Bee - that's tough. I would just be honest and say you want to make improvements to the unit and raise rent.  They either know rent control laws and will fight you, or they won't and they'll accept some $ to move.  I purchased a duplex last year and ended up paying a total of $12,000 to get both units vacant.  They knew the laws and that they could possibly get $19k each, but at the same time they didn't want to go through the court relocation process so we were able to work out a deal.  They just wanted to find a better place to live and move on with their lives (the property needed a LOT of work)

Originally posted by @William Larsen:

@Stone Teran what's your strategy for getting tenants out in areas with rent control laws?

@A Bee - that's tough. I would just be honest and say you want to make improvements to the unit and raise rent.  They either know rent control laws and will fight you, or they won't and they'll accept some $ to move.  I purchased a duplex last year and ended up paying a total of $12,000 to get both units vacant.  They knew the laws and that they could possibly get $19k each, but at the same time they didn't want to go through the court relocation process so we were able to work out a deal.  They just wanted to find a better place to live and move on with their lives (the property needed a LOT of work)

 I've never dealt with rent control laws, sorry.  I assume by your post that you can't just terminate their month-to-month lease?

To this day I don't understand how rent control can be legal?  I mean if a property owner owns a duplex shouldn't they be able to charge whatever rent they see fit or raise it to market rents?  It doesn't make sense to me if this is a free country.  I've dealt with rent control and it's hell.  My properties in rent control I just do minimal upgrades to and let them sit while my non-rent controlled properties I constantly fix up and try to improve constantly.  
There's a lot of talk in Los Angeles City and County about adding more rent-control regulations.  It's pretty scary. Another reason people invest out of LA or out of state. Take their money elsewhere

Updated almost 6 years ago

If you do research on rent control a great majority of economists say that it's bad for the local economy and community. It leads to bad neighborhoods and blight. Also it can lead to huge disparity in rents...like if a rent controlled unit comes onto market, a landlord feels the need to charge a ridiculously high rent for any single units that are new on market

Even under rent control, if you make capital improvements to the unit, you can raise the rent. I think the city has a chart for that. So in addition to your 3% rent raise, you might get a little more out of it if you study the rule. I don't think you'll get close to market, but it's worth looking into.