“Look forward with hope, not backwards with regret.” Alba Douek

A recent article from the Orange County Register talked about the decline in multi family permits for new construction. The first quarter of 2024 was down 22% from 2023. With increased interest rates and significant governmental restrictions, many builders are leery of taking the plunge with construction of new apartment buildings.

WHAT HAPPENED? Even though vacancies are up 0.2% after COVID but that in itself shouldn’t be cause for concern. After COVID, many people were not as motivated to find larger spaces, More concerning is that the number of investors interested in starting a project has lulled. Single family permits were up 26% in the first quarter for California, even though the yearly numbers after COVID seem static. The many additional regulations from rent control to limiting security deposits to an amount equal to one month’s rent seem to have convinced some builders that it is a safer bet to build and sell single family homes.

HOW DOES IT AFFECT ME? As an owner of multi family investments, this eliminates some competition. Even though you must now navigate all the new restrictions, there is a smaller pool of competitors. The other problem however, is that with rent control, people are less likely to move to larger units because of the increased cost. So even though there is less competition, people are hanging on to units with lower rents, knowing that even with allowable rent raises, they might not get a better deal.

WHAT CAN I DO? One thing you can do is to make sure you keep up with yearly rent raises. With a rent controlled property, if you miss a rent raise you can never get it back. You can’t “double-up” on the next raise, so if the tenant stays, your rent and your gross scheduled income will be less. If you do get a vacancy, make sure you do a good rent survey. Take a look at available units inside if you can. You may get some ideas that could make your unit more desirable at a reasonable cost, like a different type of blinds or cabinet hardware. You never know when that unit will be vacant again. Screen your tenants well so you find the best possible potential neighbors for your next vacancy. I always like to see where the prospective tenant currently lives. That can tell you a lot about cleanliness, housekeeping pets and additional guests.

“Don’t stop when you’re tired. Stop when you’re done.” Johnny Sins

What we at PRS PROPERTIES CAN DO. We can give you a good idea of the current value of your building. We can suggest changes you might want to make before sale to give you an idea what type of building you would be able to exchange into. You may decide to stay in the rental business. We are always available to chat. We can give you referrals for professionals, such as lenders, contractors, and engineers, so that you can decide who you feel best with. We can supply you with rent and sale comparable in the area of your properties, so that you know what rental values are in your area. It is important that you know the true value of your rental units, so that you can get them rented right away at market value, or at least as much as possible with rent control restrictions. We can look at potential purchases that you may be interested in to make the property more desirable, and maybe look at potential issues that an insurer might require you to repair.

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 are currently looking for “as-is” properties and are willing to purchase with low rents, deferred maintenance or even with a problem tenant in place. We can offer a 7 day escrow and all cash at closing. Give us a call. We have also 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.