California state legislature approves statewide rent control

[Account Closed]

So California just approved statewide rent control, capped at 5% year over year rent increases over inflation. Governor Newsom will likely sign it. Not sure about the mechanics of how this works when buying rental property. Anyone know? For example, if you're looking at a property that cash flows at $850 a door, but rent is only $700 currently, you could raise it (assuming 3% inflation) a total of 8% to $756 per door. This might be something we have to review when buying depending on how the law is applied. Link here: The New York Times: California Approves Statewide Rent Control to Ease Housing Crisis.

https://www.nytimes.com/2019/09/11/business/economy/california-rent-control.html

[Mike Franco]

rent cap only applies to existing tenants, such as inherited ones.

The first step is to get rid of the existing tenants, and the new bill outlines various ways you can do that.

Once you get rid of existing tenants, then you can re-rent at market rates. But of course, you can't raise rent on new tenants more than market rate + 5% + inflation every 12 months.