“You have to learn the rules of the game. And then you have to play better than anyone else.” – Albert Einstein
As you hand out rent raise notices (I hand out notices to my tenants around the middle of January) be SURE to keep in mind the proper time required when you deliver the notice until the new rental amount takes effect. The notices can be 30-day, 60-day, or 90-day minimum notice, but different rules apply. You can always give ADDITIONAL notice if you like, but here we are discussing the minimum notice to the tenant.
30-DAY NOTICE
Years ago, this was the most commonly used notice. You would deliver a 30-day notice to your tenant and the following month, the new rental amount would be paid. Currently, the 30-DAY NOTICE can be used when the tenant has been in the property for less than one year.
60-DAY NOTICE
This will be the most commonly used notice for most landlords. Unless you have a very high rate of turnover, in which case you will most likely not need to serve notices – just raise the rent when a new tenant moves in.
90-DAY NOTICE
This is the notice you would serve on your tenant IF THE RENT RAISE IS ABOVE 10%. You may be asking yourself how you could raise rent over 10% since the passage of AB1482. This rent control legislation limits rent increases to 5% plus the cost of living to a maximum of 10% even if the cost of living is over 5%. Some cities have limited the total to 8% so where are these 10% rent raises? Well, there are exceptions to 1482 such as:
1) Properties built within the past 15 years
2) Some single-family homes
3) Some dormitories
4) Affordable housing
5) Rental properties provided by non-profit organizations
There are others. Be sure that before you go over 10% you check with your Apartment Association and your attorney who specializes in real estate. You may think you have a candidate for that 15 or 20% raise, but you need to make sure you are correct. It is always a good idea to serve your rent raise notice personally or tape a copy to the tenant’s front door if they are not at home and also mail a copy to the tenant.
As always, this email is not intended to provide legal advice, as I am not an attorney. It is designed to give you food for thought. Always verify with your apartment association and your real estate attorney, as changes are always being made by the many government agencies we deal with.
My goal here is the REMIND you to raise your rent annually if you are able. Rent raises put money in your pocket, and increase your NET OPERATING INCOME which can be very helpful when you sell or refinance.
“Today I will do what others won’t, so tomorrow I can accomplish what others can’t” – Jerry Rice
What we at PRS PROPERTIES CAN DO. We can discuss with you the current rents in your area and supply you with comparable rental prices for similar properties. Before you hire a manager, make sure the compensation is fair to you! We can also look at your building for changes that might allow you to get a higher value in order to create value without huge expenses for your building. We can help you to get the maximum value for your property, should you decide to sell, or the maximum return if you are planning to keep your building.
We always have many investors who are looking for “as-is” properties and are willing to purchase with low rents, a moratorium, or even with a problem tenant in place. We have put together numerous transactions over the years which involve properties that are not listed for sale. Many investors are in 1031 exchanges and need to identify a replacement property before their 45-day identification period runs out.
Should you decide to put your property on the market, we will put together an aggressive, targeted, and professional campaign to get your property sold fast. We have been doing this for over 40 years, and we will use all the tools available to bring you the most dollars at closing. If you are thinking of selling or are just curious about the value of your property, don’t hesitate to give us a call.
Remember – KNOWLEDGE IS POWER!
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