“The precondition to freedom is security.” Rand Beers

We, as housing providers, seek to provide good and affordable housing and for that we deserve to be fairly compensated. Security deposits allow us to mitigate against potential damages.

AB12 Will be on the ballot next year, the proposal having passed this May. If this is allowed to pass, security deposits would be limited to one months rent. This is our safeguard against theft, damage and non payment, but if this passes, it will make the rental business more risky.

WHAT’S AT STAKE? The average eviction takes 6-12 months. Quite often the landlords let a month go by before filing an unlawful detainer. Even if you complete the process in 4 months, you have lost 5 months rent by the time the tenant leaves. The attorney costs can easily be as much as another $10,000. or more especially if the tenant using techniques such as multiple bankruptcies and many others. Add to this the cost of repairs, cleaning and removal of trash and you are looking at a major expense. Then, after you get possession, even with a judgement against the tenant, your chances of collecting are slim.

HOW DID IT HAPPEN Sometimes people just run into some bad luck. Divorce, job loss, drugs and alcohol problems (even by a family member) can turn a good tenant into a problem fast. Even with all the investigation you have done, people can change. I find security deposits to be a little insurance for the landlord. Two months security will not pay for an eviction. The same two months deposit probably won’t cover damages, but it is something. In my experience, tenants with large deposits, even without great credit, have paid on time and left their apartments in move in condition when they left. This, of course, will not always be the case, but it will help.

WHAT WOULD IT MEAN? We already have a seriously depleted rental market. We absolutely need builders to build apartments! As I see it, limiting security deposits will also cause potential apartment buyers to feel less comfortable with the commitment required to purchase rental properties in California.

As owners, we should keep abreast of legislation which discourages investment because it is also bad for tenants. More buildings are a positive for everyone.

ALTERNATIVES Alternatives such as insurance or a surety bond could help. This has not currently been proposed, The issue is lack of ability for many renters to afford a larger unit and the inability to afford the rent and deposit. Some type of insurance could be a possibility. Another, which I don’t approve of, is paying the security deposit in parts. Obviously, the trouble with that is the tenant is already in the property. If they don’t pay, you are looking at an eviction. Hopefully we can find a solution that works for everyone.

“I never left the field saying I could have done more and that gives me peace of mind.” Payton Manning

What we at PRS PROPERTIES CAN DO. We can look at your building as the investment property that it is. We can recommend vendors, including attorneys who specialize in evictions, if needed, we can even look over any code violation notices. We can supply you with rent and sale comparables in the area of your property. Then you will know what the true value of your rental unit should be, so that you can get it rented right away. We can look at potential purchases that you may be interested in to make the property more desirable.

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.