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Officially it's called a "rent stabilization" which limits annual rent increases to 5% + CPI for multi-unit dwelling.
I think it was actually effective as of 2020 but I wasn't paying attention until I looked into multi-units properties.
How can this be attractive to an investor? It's rent-control no matter what you call it. In the long run, the landlord has no incentive to maintain/ upgrade the building and this can't be good for the tenants neither.
Well I know nothing about California but we have stabilization here in nyc .
It can be very profitable because apartments and properties sell for cents on the dollar because they contain stabilized tenants .
Not here in SoCal as sellers are still asking for top dollar.
As result, this translates into a low Cap rate which doesn't make a deal attractive. After you buy, there's a limited upside how much rent you can increase with existing tenants therefore can not increase the NOI.
Short of doing something like you did, and that would cost a lot of money & time, it's getting less attractive.
Oregon's is 7%+CPI for an annual increase. What I'm seeing here is that landlords that didn't keep up with rent increases are selling their properties below market because the desired cap rate just isn't there for investors. Are they selling those units at top dollar or are they just listing them there? Listing and selling are two different things. I'm seeing price drops here.
5% plus CPI is still a quite high yearly increase.
If you look at the rent historically in California metro areas, they only grew at around 5% per year in the past decade or about 70% in a ten year period (see the rent cafe study). Even in areas without local rent control.
Not here in SoCal as sellers are still asking for top dollar.
As result, this translates into a low Cap rate which doesn't make a deal attractive. After you buy, there's a limited upside how much rent you can increase with existing tenants therefore can not increase the NOI.
Short of doing something like you did, and that would cost a lot of money & time, it's getting less attractive.
If you can raise rents every year 5% +CPI you will be rolling in the dough. A $2,000 rent increased by say 7% gets you $140 a month increase in rent and if you are in a say 5% cap rate market you will also see a value increase of $33,600!
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