The Statewide rent control law for California (AB 1482) Allows a raise of 5% per annum plus the amount of change in the Consumer Price Index up to an additional 5%. For 2022, rent raises from August through next July can be the full 10%. Of course, the total may not exceed 10% but these are the highest percentages under the Statewide law so far. Remember, this is the Statewide law, but your city may have its own rules.
APARTMENT ASSOCIATION
Always a good idea to check with your Apartment Association before sending out rent raise notices. Some cities, like Los Angeles, have lower caps (8%) on rent raises and moratoriums on rent raises and evictions which are scheduled to last well into next year.
EXEMPTIONS
If your building received a Certificate of Occupancy within the last 15 years you may be exempt, but as time passes, that exemption may disappear. It is always a good thing to read through AB 1482 as well as any rent control law for the city where your building is located to make sure you are in compliance.
ANNUAL RENT RAISE
It is a good idea if you are permitted and the market will allow for it, to raise rents every year. The tenants get used to the annual notice so you get less negative feedback. Not that you won’t get negative feedback from your tenants, but the raise will become more routine. With rent control, if you do not raise rent one year, you can’t, in most cases, double the amount the following year, Thus, you have lost not only the monthly income but may have limited what amount you can charge in the future.
EFFECT ON SALE AND REFINANCING
If you don’t raise rents when you can end up with less on your appraisal and a lower sales price. This can translate to less dollars at closing or a smaller proceed check from your refinance. Since the value of an income producing property is based on its income, you may not get the number you were counting on from the appraiser.
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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