All Forum Posts by: Jon Schwartz

Kyle, you're wrong. Let me break down the actual text of the proposition for you so that you understand.

You can access the full text of the proposition here: https://ballotpedia.org/Califo... relevant text is section 1954.53, which says:

(a) Notwithstanding any other provision of law, and except as provided in Section 1954.52 and in subdivision (b) of this section, a city, county, or city and county may by local charter provision, ordinance, or regulation control the initial and all subsequent rental rates for residential real property.

(b) In any jurisdiction that controls by charter provision, ordinance, or regulation the initial rental rate of a dwelling or unit, if the previous tenant has voluntarily vacated, abandoned, or been evicted pursuant to paragraph (2) of Section 1161 of Code of Civil Procedure, the owner of the dwelling or unit shall be permitted to establish the initial rental rate for the vacant or abandoned dwelling or unit provided that the initial rate established pursuant to this subdivision, in combination with any increases in the rental rate during the subsequent three year period, is no greater than 15 percent more than the rental rate in effect for the immediately preceding tenancy. Any increases in the initial rental rate permitted by and established pursuant to this subdivision may be in addition to any increases in rental rates otherwise authorized pursuant to local law.

This text is very confusing, so let me break it down for you.

Paragraph (a) says that cities and counties can set initial rent prices and rent increases in any way they want with the exceptions of Section 1954.52 and paragraph (b). Section 1954.52 deals with single family homes and the 15-year rolling exemption. Paragraph (b) deals with this 15% issue.

Paragraph (b) then says that, in any city or county that regulates rent increases at vacancy (ie, "vacancy control"), the landlord is entitled (the exact language is "shall be permitted") to raise rents up to 15% over the outgoing tenant's rent. This is what state law will guarantee. Regardless of how a city or county wants to regulate vacancy, this state law supersedes it and establishes that landlords have the right to raise rents up to 15% at vacancy. Paragraph (b)'s last sentence then says, "Any increases in the initial rental rate permitted by and established pursuant to this subdivision may be in addition to any increases in rental rates otherwise authorized pursuant to local law." This sentence means that cities and counties that decide to enact vacancy control can pass laws to allow rental increases at vacancy beyond 15%.

Does this make sense to you now? The 15% increase is a floor guaranteed by the state. If a city or county wants to enact vacancy control, they must abide by this state protection of landlords and have the option of allowing greater rent increases.

For example, in LA, there's no vacancy control. If Prop 21 passes, it doesn't immediately change anything in LA as regards vacancy control. If the LA City Council then decides to enact vacancy control, they have a few options. They can enact it without any adjustment to state protections, putting into place a 15% cap on increases at vacancy. Or they enact it with an increase over state law, allowing for more than a 15% rent increase at vacancy. Or they can do state law plus a CPI index to have a variable increase at vacancy. They can do whatever they want except break this landlord protection of a 15% increase. Makes sense now?

There's also confusing language about a "subsequent three year period" that makes it sounds like the 15% increase is cumulative over three years. Not so. I can get into the math if you like, but long story short, that language just prevents a landlord from enacting a 15% increase at vacancy more than once every three years. So, for example, if a landlord has a bunch of one-year tenants in a row, and enacts a 15% increase on the first new tenant, he can't enact 15% increases on subsequent tenants until three years have passed. And again, this is only in effect if the local jurisdiction enacts vacancy control.

This is one giant problem with CA propositions. We're not professional law-makers, and few people, even those who aim to speak with authority on online forums, don't dissect the actual text to understand what it says!

And FYI, I'm also against Prop 21.

Best,

Jon

@Bruce Leong, no, you’re wrong. The language is really confusing. Read the whole section of the prop again.

 Mike,

I built a spreadsheet specifically for analyzing househacks. I'm going to message it over to you now.

Best,

Jon

Kwon,

It's incorrect the condos in LA appreciate worse that houses.

Here's the Case-Schiller Home Price Index for LA:

https://fred.stlouisfed.org/se...

And here's the Case-Schiller Condo Price Index for LA:

https://fred.stlouisfed.org/se...

Both graphs are indexed to 100 in 2000. As of today, the home index is at 299 and the condo index is at 314. Condos have actually outperformed the overall home market since 2000!

As far as the condo vs. rental debate, you'll have to do the math and determine if the cashflow from a new Indiana home is more valuable than the principal paydown and appreciation prospects here in LA. My vote is for LA; you'll pay down more than $300 of principal each month with a WeHo condo, and there's appreciation on top of that.

Another point for the condo purchase is that the market appears to be flooded with condos now. If you're planning to live in it for a number of years, now seems like a good time to buy one.

I'm interested in hearing what route you pursue!

Best,

Jon

Oscar,

If you're confident that your lease protects you, just don't move out. Your landlord will have to go through an eviction process to force you out. He's not allowed to force you out; only a sheriff can come and compel you to move your things out of the unit.

There are also tons of free legal services for tenants. Google "california tenant legal aid," and I'm sure you'll find some resources. I'm sure you'll find a legal aid group that will review your lease for you and let you know how you can keep from being unlawfully evicted.

Of course, all of this goes out the window if you're renting a SFR or condo; are you?

Best,

Jon

 Jonathan,

I'd be careful right now. I think the direction of prices in Socal over the next year is a big question mark. If you find a great flip or BRRRR deal, go for it, but if it's not a great deal, be careful.

Another solid strategy with HELOC money is building an ADU. Have you considered adding an ADU to your duplex? The ROI on ADUs is phenomenal relative to other ROIs in Socal.

Also, if you do go the flip or BRRRR route, maybe stick with condos. So many people are leaving their condos for the 'burbs that you can probably find a sick deal on a dated condo.

Interested to know what you end up doing!

Best,

Jon

Brandon,

Thank you for your service.

I'm in an investor in LA.

Where in SoCal are you considering?

Best,

Jon 

 Hmmmmmm...

I'm doing super approximate math, but here's what I got:

Refinancing will cost you $36K per year plus an up-front $56K that you'd want to recoup.

You'll get $571K to work with in FL, where you're looking at 5-6 caps.

Let's say $571K affords you $2M of property at 75% LTV leverage. $500K down, $71K in costs, and $1.5M in loan.

I don't know what rates are in Tampa, but the best I've been quoted recently in LA from a commercial lender is 3.25%, so let's go with that. Let's say it's a 25-year amortization with principal and interest payments.

A $2M property operating at a 6 cap with the above loan should cashflow about $32K per year.

So in this scenario, no, it doesn't make sense to refi and invest in Tampa.

Question: you said your NOI is $4500 and would drop to $1500. Do you mean NOI or cashflow? Do those numbers account for your debt payment?

Best,

Jon

@Nitit Chartuprayoon, yeah of course! Send me a message!

Best,

Jon

Bravo, my man!