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Rent Control and Multi-family investors: What is the impact?

Posted by Craig Wise on October 16, 2019
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If you own or are interested in multi-family rental properties, you may have been watching the news surrounding the passage of Assembly Bill 1482, or the rent control bill. Allwest Properties has been guiding multi-family and commercial building buyers for years. We want to clear up the information surrounding this bill and what it means to current owners or prospective buyers of multi-family real estate.

What is AB 1482?

California Governor Gavin Newsom recently signed Assembly Bill 1482, and it takes effect January 1, 2020. The bill regulates how much rent can increase each year. This bill may cut into some of the revenue that property owners had calculated for the years to come. It should not deter people from investing in multi-family real estate.

The authors of this bill hope to ward off egregious rate hikes.  It isn't an attack investors; its takes aim at shady practices that give landlords a bad name. It is likely that you have good relationships with your tenants. You likely weren't going to increase their rent by 25% every year.  

How does the bill work?

Here is a great breakdown of Assembly Bill 1482 from NREIOnline:

  • Most annual rent increases over the next decade will be limited to 5 percent plus inflation, or 10 percent (whichever is the lower of the gross rental rate). Concessions and discounts are excluded.
  • Landlords can set rent to the market rate once a tenant leaves a unit.
  • Capital improvements may not be used to increase the rent beyond the cap for existing tenants.
  • Protects tenants from eviction without cause.
  • This law does not supersede any existing rent control laws/tenant protections.
  • The law does not change the rules for tenants already under rent control rules in Los Angeles, San Francisco, and other cities across the state.
  • The cap does not apply to apartments built within the last 15 years. In addition, single-family home rentals are exempt unless they’re owned by corporations or institutional investors.
  • A landlord who wants to convert a building to condominiums, or make substantial renovations to units, could evict tenants but would have to pay relocation assistance equal to one month’s rent.

Allwest Properties watches the marketplace, and we do not see any reason why this bill should prevent real estate investors from buying multi-family buildings.  With higher incomes and a shortage of properties, we expect rents to continue their climb.

What are the projections?

USC research, as reported by the Commercial Observer, reports that rents should see triple-digit rent increase by 2021.

Researchers attribute the increase to salary and employment improvements in Southern California. The USC Casden multi-family forecast predicts the average apartment dweller in Southern California will pay at least $100 more per month for rent by the end of 2021. The report predicts that over the next two years, average rents will jump from $2,230 per month to $2,369 per month in Los Angeles County.

Here are the predicted average rent increases:

  • $106 in Orange County
  • $100 in the Inland Empire,
  • $209 in San Diego County
  • $110 in Ventura County

How do I Find Answers?

You don't need to make investment decisions alone.  If you need more answers, please give us a call. Allwest Properties, Inc. offers a full range of real estate services for commercial, industrial, and multi-family apartment properties throughout Los Angeles, Orange, San Diego, Riverside, and San Bernardino counties.

With over 25 years of industry experience, we offer a comprehensive array of solutions. This includes sales, leasing, tenant representation, landlord representation, investments, site selection, and consulting services.  Our goal is to exceed our clients’ expectations with each and every transaction.

Contact us today by calling 949-287-3291 or emailing info@allwestproperties.com.

 

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    Paul M.

    “Craig, I would like to thank you for your expertise in helping me along with the Mies Family Trust in selling the rental properties located in Long Beach and Costa Mesa. These transactions went very smoothly and professionally.” I would also like to thank you for assisting the Mies Family Trust in the acquisition of the 8 unit apartment building in Santa Ana. Every year this building has proven to be a winner for the Trust with some great cash flow. Since acquiring this building, we have been able to refinance and pull out some built up equity and purchase a 10 unit building in Long Beach in which you assisted.

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    2016-10-29T19:08:21-08:00
    “Craig, I would like to thank you for your expertise in helping me along with the Mies Family Trust in selling the rental properties located in Long Beach and Costa Mesa. These transactions went very smoothly and professionally.” I would also like to thank you for assisting the Mies Family Trust in the acquisition of the 8 unit apartment building in Santa Ana. Every year this building has proven to be a winner for the Trust with some great cash flow. Since acquiring this building, we have been able to refinance and pull out some built up equity and purchase a 10 unit building in Long Beach in which you assisted. All of our transactions over the years have gone very smoothly and I look forward to working with you again in my next real estate transaction. I will also continue to recommend you to my clients.”

    Ken E.

    “Craig Wise did a great job in selling my rental property. He provided me with quality information about pricing it correctly, advertised and marketed it effectively, and provided solid guidance in negotiating a sales price. Craig was extremely professional in handling all aspects of my sale and got me top dollar for my property after only being on the market a few weeks. Craig will be my realtor for any future real estate needs.”
    2016-10-29T19:08:59-08:00
    “Craig Wise did a great job in selling my rental property. He provided me with quality information about pricing it correctly, advertised and marketed it effectively, and provided solid guidance in negotiating a sales price. Craig was extremely professional in handling all aspects of my sale and got me top dollar for my property after only being on the market a few weeks. Craig will be my realtor for any future real estate needs.”

    Estella G

    “I have known Craig Wise for over twenty years on both a personal and business level. Craig has done a phenomenal job in building a loyal list of clients and a very professional image. Craig’s success stems from his ability to keep his client’s needs a high priority and consistently meeting expectations, even in the toughest markets.

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    “I have known Craig Wise for over twenty years on both a personal and business level. Craig has done a phenomenal job in building a loyal list of clients and a very professional image. Craig’s success stems from his ability to keep his client’s needs a high priority and consistently meeting expectations, even in the toughest markets. My house was recently sold by Craig in only 2 weeks. He thoroughly impressed me with his tenacity and dedication in finding me a single story home in this challenging market. Craig is an ideal realtor, he is a savvy yet humble individual, has a very energetic work ethic, is always eager to go above and beyond for his clients.”

    Wally L.

    “I had the pleasure of working with Craig while searching for a rental home for my family in South Orange County. As this was a new process for my wife and I, it was great to finally find a real estate professional that genuinely cared about us and our needs. Craig went out of his way to answer questions, solve issues when they arose, and step us through the necessary paperwork. He was always on time and had a wealth of knowledge to share with us. I would highly recommend Craig and will be using his services in the future.”
    2016-10-29T19:06:51-08:00
    “I had the pleasure of working with Craig while searching for a rental home for my family in South Orange County. As this was a new process for my wife and I, it was great to finally find a real estate professional that genuinely cared about us and our needs. Craig went out of his way to answer questions, solve issues when they arose, and step us through the necessary paperwork. He was always on time and had a wealth of knowledge to share with us. I would highly recommend Craig and will be using his services in the future.”

    NTGTestimonial

    “I cannot tell you how happy I am to enthusiastically recommend the services of Allwest Properties.

    Allwest made it possible for our rapid expanding law firm to relocate to a much larger office space. We chose Allwest not only for their expertise in the industry, but the personal level of service they provide, as well as expert negotiation skills. They not only negotiated a cost effective lease rate for our new space but also received an allowance to cover the rent on the remaining lease term for our existing space -- well above our expectations.

    Their knowledge, extensive experience, responsiveness, familiarity with this areas commercial real estate and network of related professionals make them the ”go to professional” to get things done. The process could have not gone any better! I am fully convinced that if they have not been involved, none of this would happen.”

    - Newport Trial Group
    2016-10-29T19:02:51-08:00
    “I cannot tell you how happy I am to enthusiastically recommend the services of Allwest Properties. Allwest made it possible for our rapid expanding law firm to relocate to a much larger office space. We chose Allwest not only for their expertise in the industry, but the personal level of service they provide, as well as expert negotiation skills. They not only negotiated a cost effective lease rate for our new space but also received an allowance to cover the rent on the remaining lease term for our existing space -- well above our expectations. Their knowledge, extensive experience, responsiveness, familiarity with this areas commercial real estate and network of related professionals make them the ”go to professional” to get things done. The process could have not gone any better! I am fully convinced that if they have not been involved, none of this would happen.” - Newport Trial Group

    Gina G.- Chomp Chomp Nation

    Craig has a broad skill set which has resulted in successful site selection based on short and long term brand strategies. Craig is a superior negotiator and expert in commercial leasing which have a dramatic effect on the bottom line of any growing business. Craig’s business acumen and integrity are second to none.

     
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    Craig has a broad skill set which has resulted in successful site selection based on short and long term brand strategies. Craig is a superior negotiator and expert in commercial leasing which have a dramatic effect on the bottom line of any growing business. Craig’s business acumen and integrity are second to none.  

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    “Craig is detail oriented and looks out to protect the interests of his clients. He’s professional, courteous and cooperative. He would be a great person to have on your side.”
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    “Craig is detail oriented and looks out to protect the interests of his clients. He’s professional, courteous and cooperative. He would be a great person to have on your side.”

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    “I count it a great privilege to recommend Craig Wise for any of your Real Estate dealings. I first became acquainted with Craig as we worked side by side in the Real Estate Department of a major lender. During the fifteen years we have know each other we have gone from coworkers to good friends. I have always know Craig to deal with people with the utmost of character. This is the reason that when my son and daughter-in-law were first time buyers and I asked Craig to assist them through the entire process and he made sure the transaction went smoothly. You will not find someone who combines knowledge, skill and integrity to a greater degree than Craig.”
    2016-11-02T21:48:42-08:00
    “I count it a great privilege to recommend Craig Wise for any of your Real Estate dealings. I first became acquainted with Craig as we worked side by side in the Real Estate Department of a major lender. During the fifteen years we have know each other we have gone from coworkers to good friends. I have always know Craig to deal with people with the utmost of character. This is the reason that when my son and daughter-in-law were first time buyers and I asked Craig to assist them through the entire process and he made sure the transaction went smoothly. You will not find someone who combines knowledge, skill and integrity to a greater degree than Craig.”

    Chris Z

    Craig - thank you, I sincerely appreciate your dedication to getting things accomplished with the commercial association. You showed great fortitude given the difficult personalities over the years and I thank you for everything you have done

    2016-11-15T05:27:27-08:00
    Craig - thank you, I sincerely appreciate your dedication to getting things accomplished with the commercial association. You showed great fortitude given the difficult personalities over the years and I thank you for everything you have done