Ouch...Only in Cali

12 Replies

I cannot even imagine being a landlord in a state like California.  I really have to tip my hat to those of you that are successfully doing this.

Wow, that's amazing. And in a couple years the city will wonder why the number of available rental units have fallen even more.

Things are getting pretty close to communism in the Bay Area.  People doing rentals there are insane, nothing like a cash flow negative rental with these type of headaches to deal with.  

I'll say this. You can know this going in and it reflects on the price you offer. 

So, it does hurt the owner and the ordinances suck. I don't play in areas with them BUT you price your offer accordingly if you want to take one of these down. 

I negotiated $25k for my assistant, she wanted to move (LA) and a new owner wanted her out. Worked out great. 

Yes this is crazy, but I believe there was a ruling that said this was unconstitutional. They have until today to appeal the ruling. It's pretty crazy here but if you are doings things correctly there is still money to be made.

Originally posted by @Patrick L. :

Things are getting pretty close to communism in the Bay Area.  People doing rentals there are insane, nothing like a cash flow negative rental with these type of headaches to deal with.  

 When rents have increased so much that it creates this gap, there is a ton of new wealth that can be created by paying them off. In this case, it's tricky because they don't intend as using it as a rental. If they did, they would be cash flowing like crazy for this investment...

But the payoff represented 2 years of the difference between controlled and market. So if you pay off, then rent out, gross rents pay back the buyout in 4 years, if you assume 50% expenses (usually lower in SF due to high rents..)

So a 2-4 year payback would not be too shabby if they were to rent it back out.

I'm currently in the process of offering to GIVE a tenant in Oakland a modest downpayment for an FHA loan so she can buy a house of her own in Oakland. The payoff is about 8 months, so we'll be making more money by having done the payout after summer of next year.. And free up about $100K of equity in the process.

These laws can create a lot of headaches, and a lot of opportunities. And my vacancies, even in lower income areas around here, are about .5% (99.5% occupancy). I would take knowledgably operating in these Bay Area markets any day over a lot of the rental markets in most of the country, so to each their own ;) I guess I'm insane, but I'll just get rich off this "communism" ;) lol

Medium logoJ. Martin, SF Bay Summit | jthoma[email protected] | 510‑863‑1190 | http://www.sfbaysummit.com

Originally posted by @Tim G.:

I'll say this. You can know this going in and it reflects on the price you offer. 

So, it does hurt the owner and the ordinances suck. I don't play in areas with them BUT you price your offer accordingly if you want to take one of these down. 

I negotiated $25k for my assistant, she wanted to move (LA) and a new owner wanted her out. Worked out great. 

 Me and a partner are going to make a killing on this place in West Oakland we just bought because a wholesaler locked it up in contract, but nobody could flip it, because they can't just go in and evict the tenants.

So they have this tight contract w/ a great price, and none of the flippers know what to do, or have the time to do it, because of the rent control laws..

So me and another long-term investor snagged it a couple months ago, and are negotiating everything right now. I think we'll be cash flowing between 1-1.5% rent/price when all is said and done, including rehab, in a great gentrifying area of West Oakland. But will take some time to get from point A to point B.

Anyway, I'm going to end up with a cash cow and what looks like at least another $100K in equity for my share after all is said and done -

$100K IN EQUITY AND AN EVENTUAL CASH COW THAT I NEVER WOULD HAVE HAD W/O RENT CONTROL AND EVICTION PROTECTION. And I might be able to give a low-income tenant a deposit for her own house while making a great ROI. Couldn't be happier.

Unfortunately for the last owner, we got to eat some of his lunch, partially because of his own mismanagement of the building and units over decades (1990's rents, deferred maintenance..)..

AND I FORGOT TO WRITE MY THANK YOU LETTER TO THE CITY FOR THE LAWS!!!

Medium logoJ. Martin, SF Bay Summit | [email protected] | 510‑863‑1190 | http://www.sfbaysummit.com

Another link if you can't read the WSJ article.

http://www.sfgate.com/bayarea/article/SF-s-new-law...

I am in Central Valley and have done very well! As jmartin has stated the key is to know your laws and market better than the other investors. If there is a will there is a way. That's why it is sooo important to know your laws. It is also important to be able to work with tenants. Plus a lot of these issues that landlord has is due to mismanagement. Most rent control allows you to slowly up the rent you just can't jump 40% in one fellow swoop. I know a lot of here think I  an aweful person but this is a business! While I treat my tenants with respect. I am a strict landlord! This is a business I have a 14 page lease that I go over and expect the tenants to follow! 

How ironic that the acronym for the ordinance is TRAP

I am putting up my townhouse for rent right now. I placed my ad on Saturday. 10 min later I got my first serious response. I had 6 serious showings in less than one week and 2 applications. This is for a 3100/month rental. Both applicants make over 6 figures and are professionals. Compare this to my Indiana rentals that go between 700-860/month, usually take at least one month or more to fill and turn over every 18 months on average. On my BA rental, I will not need a PM, probably not have evictions have an appreciating asset (unlike the midwest). So not, all bad. But having said that, i would never want to rent in any rent controlled areas.

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