Improving rent-roll in Rent controlled property

[Nhi Nguyen]

Hello all BPers.

Happy New Year to all!  Hope everyone is bank-rolling lots of $$$ at new year already!  :D

I've been doing mostly flips, only some of buy-n-holds in the past 10 years (some SFHs, and some MFs, all in CA). This year my main plan is to finish all my flips, pull out all equity (cash out or HELOC) to mainly focus on buy and hold MFs.

I know most will advice to go elsewhere other than CA.  I hear you.  For this thread though, my questions are on some properties I'm looking at in Northern CA.

1) What's the best methods (and associated costs) you've been using to buy-out tenants, specially in the Bay Area?  

2) For current MTM tenants, how to go about having them paying for utilities?  Right now it's not separately metered yet.  Can we just add individual meters and require everyone to pay separately?  

3) Please share your experience on remodel cost pass-through.  

Thanks much.

[Account Closed]

Nhi,

I don’t think you will get a lot of responses on this thread unfortunately given the misconception about our market being too expensive, and folks just take their hard earned money and squander it with OOS investing. To answer your questions:

1) Give @Account Closed a ring. He’s the only one I know who had done tenant buy-outs. For me, I let the seller do it before I take ownership. If I have to inherit low-rent tenants, I expect a big discount for it. Then I let time do the heavy lifting.

2) RUBS pass through is considered a rent increase in MY market. I don’t know about YOUR market. Maybe @Sandeep S. can shed some lights for you as that’s his turf. For us, when we add new individual meters, we still have to pay for the utilities until the next turnover. Then we have the new tenant pay for them. 

3) You’re talking about capital improvement pass through here. This varies from city to city. In general, if the improvements have to do with “health and safety”, you can pass it through. Look up the rent control ordinance and find out which improvements are allowed for capital improvement pass through, and it’s being calculated. If you need help, go to the city housing department and have someone help you. Learn the rent control ordinance as it will help you navigate the land mines and get paid. Every $50/unit rent increase = $10k in pay-out so it’s worth the effort. 

Good luck.