All Forum Posts by: Robert C.

All kidding aside, there’s actually not a lot of literature on what to do with larger amounts of wealth. There’s ton’s of input on “making your first million” but nothing about handling bigger numbers. People assume that if you can make a million than you can make more easy-peasy, and that’s not always the case. 

Not to mention, there’s a psychological shift you have to manage when you have more to lose!

Certainly, you could have accomplished the task much more easily over the last 10 years in real estate, but I think it’s getting trickier. 

@Amit M., I don't know if I'd call it optimism, but I do feel the need to balance out some of the folks who feel like the sky is falling. People who haven't dealt with rent control directly, don't ever think about the possible upsides for investors, in my opinion.

Also, I'd be singing a different tune if they had implemented these rules 3-5 years ago, or if they made the cap like SF or Mountain View. But the timing of it is just stupid... like what are they actually thinking they will accomplish at the top of the cycle. What are the chances we will have a rent increase run like we've had since the GR back-to-back? The renters around here will only be helped in some sort of hyper inflation scenario in the upcoming years. I suppose some of the suburbs will be more affected as people get priced out of the metros, but those are usually the first places to get rent relief during recessions. And they (state and local governments) are still doing nothing to close the gap on supply, while increasing construction/permitting/carrying costs. 

Incidentally, the more construction costs keep going up due to regulations and tariffs, the more valuable some of my buildings become as well.

At this point, I really think the only way things get any better for renters as a whole (not good for landlords, of course) in the Bay Area, is if we have a massive tech crash and exodus of residents. 

@Account Closed is right about lowering the rent, but just want to add the text currently states you don't have to do that until January 1, 2020. Also, I would look regional inflation rates. The text also says you can use regional CPI data, and only have to go with the state CPI if there is no regional available. 

Some things to consider:

1.) Yes, it hurts anyone who was being nice about the rents or who recently bought value-add, however, I've heard that it is already driving up prices around the Bay Area for MF that has rents near market. Rent control picks winners and losers.

2.) There will be a short term slump, but for those of us who have been keeping up with rents, this effectively adds to a rent "floor" by increasing the reluctance to lower rents in the case of a downturn, and because everyone is going to start pushing rents up now to stay in range of market prices.

3.) As people have mentioned, there are some useful loopholes. Like, you can still get rid of a bad tenant during the 1st year without just cause. 

4.) This could be a buying opportunity for long term hold investors. 

@Scott Mac, It passed the assembly today so it's going to be law. Actually, for people who have been keeping up with rents around the Bay Area and Los Angeles, I think it's going to help create a floor for rents given the timing in the cycle plus our massive housing shortages. Landlords are going to be that much more reluctant to lower rents in any sort of a downturn if they know they have to wait years to bring it back up. And it's like what happens at the gun store when the government starts talking about gun control. In this case, anyone who was being nice about the rents isn't going to be as friendly anymore. I've heard anecdotally that MF buyers have been paying even more of a premium for buildings with close-to-market rents. 

Still stupid legislation, but I think some of us are going to actually benefit from it.

@Kyle Calica, I would say that it's a mixed market, but overall I see flat rents, and some markets are still going up but slower. It's kind of like what's happening with home buying - still a strong market, but location dependent, and there's more negotiation. Luxury apartments in the Peninsula still raised rents this year. 

What you might be seeing is more new apartments hitting the market in San Francisco. Every time a new building comes online, there's a local dip because they are offering specials, etc. 

@Anthony Gayden, I totally agree with your reasoning on why rent control is twisted policy. 

@Joe Scaparra, Up until now, we've also mostly had it the same way where you don't have to give a reason to evict. It's just that certain cities like San Francisco get all the attention for their rent control laws. Of course that will change once AB 1482 passes. 

I do want to add to all this, though, that just because there's rent control doesn't mean you can't make money here. One key take away is that rent control creates winners and loser through policy. That's true about renters, but it's also true about investors. You just have to adjust to the rules of the game, and it creates advantages for certain people who have more knowledge about the rules and where the inefficiencies are. 

In my opinion, rent control is bad for society. However, it's only bad for certain renters and certain investors, just like it's actually very good for certain other renters and certain other investors. I find it's a distinction that gets lost on a lot of folks from out of state looking in.

@Account Closed, One other thing - why was it even necessary for Sacramento to pass this now when it looks like AB 1482, the statewide measure looks likely to pass? 

@Sadrud-Din Williams, I think what we should really be discussing in this thread is Illusory Superiority. Seems much more interesting given the type/quantity of responses here rather than whether or not your stats are accurate. Haha. 

@David S., I think what you're saying is fair. After all, we're talking about predicting the future here, and I don't think we're disagreeing that much. Eventually somethings got to give, but we're in unprecedented territory I think. If I could lock in more 30 year rates right now, I would, too!