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You mentioned cash flow from day one. We don't care if an asset is cash-flowing from day one. Our question is how long does it take for us to get it to cash flow positive? 3 months or 6 months? How much reserves do we need to set aside to get there? How much equity would we gain once we got there? How much equity would we gain once we've fully stabilized the asset? Does it worth our time and efforts?
Hey @Account Closed - I'm curious. For the buildings, you're buying how are you repositioning the buildings' cashflow?
I looked it up, and San Jose has a rent control ordinance where you have to have a tenant leave via "Voluntary Vacancy" in order to set the rents to market rate. I'm facing exactly that challenge here in Oakland. What are the tools you're using to get rents increased to market rate when considering the rent control ordinance?
When I look up the ordinance, under San Jose’s new 2017 law, it says landlords must demonstrate one or more of the following grounds in order to terminate a month-to-month tenancy:
- Nonpayment of rent (excluding rent withheld as permitted by law).
- Material or habitual violation of the terms of the tenancy.
- Damage to the rental unit.
- Refusal to agree to a new rental contract.
- Nuisance behavior.
- Refusing access to the rental unit.
- Unapproved subtenants holding over after the end of the term.
- Substantial rehabilitation of the rental unit, subject to certain conditions, including payment of relocation assistance and refund of security deposit
- Removal of the tenant under the Ellis Act, subject to compliance with the new relocation assistance requirements (see below).
- Owner move-in, subject to payment of relocation assistance and refund of security deposit.
- Governmental order to vacate.
- Vacating an unpermitted rental unit.
So it seems like you can use these 3 as a tool for getting rents to market rate:
- Substantial rehabilitation
- Ellis Act
- Owner Move in
Are those the tools you're using? Or are there others to get the rents up, and get from cash-flow negative (when you acquire a building) to cash-flow positive?