“Happiness is a positive cash flow.” Fred Adler

With California Statewide rent control (AB 1482) limiting rent raises, it is absolutely essential to raise your rents once a year. Much of California allows for a 5% raise and then the CPI (Consumer price index) can add additional an additional percentage up to 5% for a total of up to 10%.

LAST YEAR. The CPI last year was OVER 6%, but because of the 5% CPI cap, maxed out at 5%. This along with the annual rent increase of 5% allowed for a 10% raise. Unfortunately this year, according to the Apartment Association, we are looking at a CPI of 3.8% for the Los Angeles, Long Beach, Anaheim area which accounts for most of Southern California. Because of the CPI, many properties included in AB 1482 will be getting a 8.8% increase. Better still, properties in San Diego, San Francisco-Oakland and Riverside, will be getting a higher CPI with San Diego at 5.3% and Riverside at 4.6%. San Francisco is a 4.2%.

THE BAD NEWS. Even though many will be contemplating a rent raise, some will be getting less. Many areas including Los Angeles, LA County Strip and West Hollywood, will get the CPI, but not the annual rent increase, causing the increase amount to be 3.8%. Some areas will limit the maximum rate at an ever lower number. There are lots of rules and requirements and penalties for doing things incorrectly. My best advice is to speak with your Apartment Association. Your California Apartment Associations can help to navigate the course. They are an important partner in your real estate management business, and the fees are tax deductible. If you haven’t already joined, it is worthwhile to visit them.

DON’T WAIT. There was a time when you could wait to raise rents, for a couple of years. I have even had some clients go much longer. In the past, you could always catch up, and if the tenant left, you could just do a few upgrades and get a higher rent. In this time with Statewide rent control, and many very prohibitive measures in effect, increasing rent is not an option. It’s now “Use it or lose it”. If you don’t take a raise, you can’t take a double raise next year. The amount of your raise will be based on the current amount along with your percentage of allowance only.

MORE THAN JUST THE RENT. When you increase the income, you are doing more than just increasing cash flow, although that is important. You are increasing the Gross Scheduled income of the property, thus increasing the value, which will show in the profit and loss statement. This increased valuation will come in to play not only if you sell. but also if you decide to refinance.

“Adversity causes some men to break; others to break records.” William Arthur Ward

What we at PRS PROPERTIES CAN DO. We can supply you with rent and sale comparables in the area of your property, so that you know what the true value of your rental unit should be. We can look at potential purchases that you may be interested in.

If you should decide to sell your building, we can help you exchange into a larger or smaller properties. We can even help you move into something with less management responsibilities. We can also help with getting the paperwork together for a refinance if that is your desire. We can also recommend experienced licensed contractors who can perform any repairs or installations you may need prior to selling. We can also look at your building for other easy and inexpensive changes that might allow you to get a higher value. 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, deferred maintenance 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 currently 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.