My fiance and I have owned an owner occupied duplex in Los Angeles for the past two years. It has appreciated about 36% in that short amount of time. We want to buy another 2-4 unit multifamily rental. We were looking in Los Angeles, but nothing really cash flows enough. We started looking in Bakersfield and we like the cash flow and prices much better. What we don't know is how landlord tenant law/regulations in Bakersfield differ from that in Los Angeles. We are very familiar with the laws and regulations, etc. in Los Angeles, but are a little scared of the unknown when it comes to investing in the new market of Bakersfield. Does anyone know the key differences if any between these two markets? Just looking for broad strokes. We will have to get more specific as we start to close, etc. We just wanted to get a basic idea of what to expect and see if any of the regulations in the Bakersfield market will effect our calculations we made on the properties.
Specific questions we have are:
1. Does Bakersfield have rent control?
2. Does the tenant usually pay utilities in this market? which ones? which utilities does the landlord generally pay? I know this is different on each property based on how many individual meters they have etc., but again just interested in what is typical for this area.
3. Any other weird, unusual or unexpected regulations we should know about in the Bakersfield market?
Thank you! Any help is appreciated.
Chase Matthews and Alison Janes
No rent control to worry about and tenants pay utilities. Nothing weird or unexpected that I know of. Evicting tenants can take a while but that is more as a result of California law rather then local laws. I would think it would be easier to work in Bakersfield then what you are used to in Los Angeles.
@Chase Alison Matthews congratulations on your investment! Sounds like it was a good idea to get started.
I think that your idea regarding changing locations is a good one, especially to Bakersfield (although I am slightly biased). Multi-family here in town is a good investment if you are looking to move into a more 'stable' neighborhood.
What I mean by stable, is that we generally will have price appreciation in the single digits, rent appreciation in the single digits, and the market doesn't tend to fluctuate 36% in only a few years.
The Landlord/Tenant laws in Bakersfield are much different compared to most in LA County. For example, we do not have rent control which most properties will have in those areas. Section 8 is more popular on the low end here due to the guaranteed income and the HA being more willing to work with us on problem tenants.
On your second question, the utilities are generally paid by the Tenant, except water. Most buildings here in town have a shared water meter which the Owner will pay. That being said, there are ways in 'charge back' that expense as well.
Other than those rules, we are generally the same as other parts of CA. You still have to go though the eviction process if you have a problem tenant, and that process still takes time, although they have implemented a new process beginning in 2019 which should theoretically take less time. This is my understanding of how it works (Only my understanding because we have not had to go through an eviction yet this year :) ):
Three day notice
2-3 weeks court mediation
2-3 weeks court trial if mediation does not solve the problem.
Technically those 2-3 week periods should be 15 days, but we all know how the court system works!
Going back to cash flowing property in Bakersfield, there are definitely many of those that we come across. If you would like to chat further about real estate or property management feel free to PM me!
Ditto to above. As an owner who does their own PM, pretty easy Compared to other parts of California.
I’ve been looking into this question recently with the new AB 1482 legislation that was just signed into law. I’ve heard people say it doesn’t apply to Bakersfield and other areas, but I think they may be referring to the previous law. On the other hand some have said it applies across the board for the state.
Do you have any more information?
@Will Sholy , AB 1482 is statewide and every part of the state, including Bakersfield, is affected.
I have another question if you wouldn’t mind.
I’m fairy new to this, but this law seems to negatively impact the value of rental properties that have not keep rents up to market value. Since new landlords would only be able to increase rents by 5% plus inflation, is it even more vital to make sure that rental rates are adjusted properly?
@Will Sholy , Yes, it does take away the ability of multifamily landlords to quickly bring rents up to market. But if the rents are inline, 5% plus inflation is likely more than most landlords would increase rents annually. Because my units are all single-family, it looks like we are ok for now as single-family homes are excluded. But this may be a trend and we may see an expansion in the coming years. California is becoming more and more unfriendly to landlords (and all business owners).
That said, I still think that my portfolio of rentals (all in Kern County) is still a solid play, as Kern County is growing in terms of jobs and growth. But the current trend is concerning.
@Will Sholy the newest legislation is going to cover the entire state of CA. That does not excuse any locations in the State.
I agree with @Gene Hacker about the valuation of multi-family properties in the state. The problem is going to come when you have properties who have below market rents. My thought is that the appraisers are going to start bringing valuations down on that, however, as an investor that provides you with a greater opportunity to bring value to the property and get the rents up.
Now your argument will probably be that we will not be able to just go in and increase rents like we have in the past, however, if you are close to market, as Gene said, it would be very easy to catch up to market rents with 12-24 months without hassle. If you are much below market, then you will have to go through and really be creative on how to increase income to the Property. That is where management will come into play to add value. As a good management company we will know how to get around some of these intricacies so we can help our investors bring up values in their properties.
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