Pros and cons of owning rent stabalized apartments.

[Julio Velazquez]

Hello BP,

What are the pros and cons to owning rent stabilized apartments as an investor ? I’m looking at a property that is rent stabilized. Curious to know if it’s beneficial as an investor.

[Erik W.]

@Julio Velazquez, "So why wouldn’t an investor want such property?"

I can tell you why: because the Govt via the cities of the community/state you are in have made it clear that they have both the capacity (i.e. votes) and willingness (i.e. political ideology) to say that the free market doesn't apply and your rights and an owner will be limited in at least one major way.

Any guesses how that's going to play out down the road?  Me neither.  The Govt is getting broker, people are getting nuttier, and to me that suggests that some day not only will you have your rent increases CAPPED, your current rents might also get CUT.  Because...you know..."fairness."  Even with "rent stabilization", rents are still increasing faster than wages in these markets; ergo, the voters will eventually require their lap dogs....err, I mean representatives to pass new laws to make housing "affordable".  How do you do that?  Cut rents.

If you decide to invest in a market where Govt forces are already meddling with the free market substantially, be prepared to get skinned alive is all I can suggest.  If it doesn't happen, hey, great!  But if it does happen, then you'll have no one to blame but yourself because the signs and actions are already there.  Rent control (I prefer to use accurate words vs. the make up social justice malarkey "rent stabilized") is the first step in crushing property owner rights.  I could see you being required to rent to violent felons, people with multiple evictions, terrible credit, etc.  That has already happened to a limited degree in some markets where you can no longer deny based on background checks or eviction records.   

Don't believe me?  https://www.marketwatch.com/story/a-new-seattle-housing-law-forbids-landlords-from-checking-into-tenants-criminal-history-but-does-it-go-too-far-2018-12-26

The ideology in these markets says that people deserve housing as a basic human right.  If you deny people for any reason, you are violating their human rights.  You really want to own an apartment in a place like that?

The handwriting is on the wall.   Proceed with full knowledge of what you're getting into.