Success with the Just & Reasonable Rent Adjustment Program in LA?

[Aliz Raksi]

Hello,

I'm considering a triplex for buy-and-hold in Los Angeles, whose current rents are 45% below market, but if you could raise rents, it would mean the difference between us having -$200 versus +$1500 in cashflow. With rent control laws in Los Angeles, as I see it, options to increase rents consist of:

a) Cash for keys. Offer cash for them to "voluntarily" leave. - not my first choice, unethical, needs cash

b) Get to do a 13% or 19% rent increase if rents haven't been increased since May 1977 or May 1976, respectively - I will find out if there are records going this far back in due diligence phase, if offer gets accepted

c) Operate with a loss or very low NOI for 1 year, after that we will be eligible to apply for a Just & Reasonable Rent Adjustment. - with this, we can potentially increase rents by up to 145% depending on a comparison with baseline 1977 level rent amount.

I have 2 questions:

1) If there exists these 2 other, legal ways to increase rent in a rent controlled area, why does it seems like the only option most investors consider is cash for keys? I get that it's fast and easy, all it costs is some cash. But have you ever considered the rent adjustment program? Did you know about it?

2) How likely is your application to the J&R Rent Adjustment program to be accepted or rejected? Has anyone tried this? If it were as easy as filling out a single (albeit very long) application, I don't understand why many more landlords aren't doing this to bring rents back up to market.

Thanks ahead for any insight!