what are the pros and cons to rent controlled apartment complexes? specifically the la area.

In Buying Property - Asked by susan m. - Apr 30, 2010
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Answer(s)

marc s.
Lender/Mortgage Broker
Los Angeles, CA

Pros to Purchasing Rent Controlled Building is that you won't have to worry as much about occupancy. You will almost invite a tenant to say they are leaving.
The obvious con is that your income is a little tight with an unclear forecast of when you will get better returns on your money.
Rent Controlled buildings also come with some maintenance issues since the old owners weren't that motivated to renovate or improve the property in their effort to maximize their net cash flow during their hold.
Give me a call if you want a more detailed explanation or if you need any help finding a good deal or getting a good deal financed.
Marc Schillinger
310.210.2612

Apr 30, 2010
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Cutting Edge R.
Broker/Agent
Decatur, IL

I live in an area that does not have rent control- but the basic differences between the two have been obvious. Here I can raise the rent at the end of a lease any amount I feel is necessary and the tenant can choose to pay the higher rent or move out- with a rent coltrolled building the rent is the same as long as the same tenant lives in the unit no matter what the market may dictate. If you need a higher rent in a rent controlled building, you will need to force tenants out somehow, and I have heard of some pretty odd ways to do it- example- one owner I know, to force a tenant to move from his LA rent controlled building, simply took all the parking away from all the OTHER tenants, forcing them to park farther away from their homes- so that ticked off the entire complx, and turned them against the one tenant who did not get his parking changed (now he's the target) and the other tenants did this owners dirty work and forced this tenant out. Once the tenant moved, the rent was raised with a new tenant and everybody got their parking back. This is a sad but true story.
Also, if your income is restricted, so is your maintenance allowance. Owners are not as likely to keep the property in the best condition.
I, personally, will not purchase a rent controlled property. I like raising my rents when I need to, I have money to keep my properties well maintained, and I can move with the market demands.

Apr 30, 2010
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William C.
Broker/Agent
Pasadena, CA

Hi Susan,
I own both rent controlled and non-rent controlled buildings in L.A. I prefer non-rent controlled since I have more control. With L.A.'s rent controlled law, not only do they dictate the annual increase (which generally runs around 3 - 4%), but when you have a problem tenant it is much more difficult to evict them. Aside from non-payment of rent it is virtually impossible to oust a bad tenant that is making your good tenants leave. Additionally, tenants are generally reluctant to move since after a few years their rent is below the market level. I have some tenants who have been in their units for over 20 years. The only real positive to rent controlled is that the tenants do expect a rent increase every year. In non-rent conrolled properties rent increases are based on the economy and where the tenants rents are in relation to the surrounding buildings. Let me know if you have any other questions. Good Luck, Bill Clark

May 5, 2010
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