Hey thanks for reaching out @Logan Allec !
I own one rent controlled building in Los Angeles. It's a 23 unit (so sadly no evictions for owner occupancy ).
Here's The Good, The Bad, and The Ugly on Rent Control...
The good:
Your tenants will NEVER LEAVE! They will pay rent on time because if they give you cause to evict them they will have to go and pay market rent somewhere else. You will never have vacancy issues because THEY WILL NEVER LEAVE. No matter how run down you let your building get, they will never leave. They may call the housing authority who will force you to do minimal repairs but THEY WILL NEVER LEAVE.
Before you buy the property ask the Seller if he can deliver it vacant and/or if he will find out exactly how much it would cost to deliver it vacant. Even if you were going to scrape the lot there would be relocation fees dictated to you by the city. Sometimes it's worth it. So in the end, whether you have a lease or a month to month, there is no getting rid of tenants.
The Bad:
The Socialist Republic of the City of Los Angeles will be kind enough to allow you a rent raise each year. The Housing Authority gets together once each year and decides what they will allow the residential income property owners to raise rents by each year. Usually that rent raise is 3 to 5% depending on the economy. There are almost NO years that they disallow any rent raise. So you are pretty much guaranteed a rent raise of 3% each year - which is MORE than most areas; especially if you are considering crappy little houses in the mid-west.
So if your tenants will NEVER LEAVE and you are basically GUARANTEED a 3% RENT RAISE each year... What's the problem with rent control, you ask?
Sounds like a pretty safe bet to me. That is precisely why you will pay a lower cap rate in Los Angeles, New York, San Francisco, Santa Monica: because it's a pretty SAFE real estate play.
Now the UGLY:
The Ugly thing about the concept of rent control is that there is absolutely ZERO incentive to fixing up a property. This is ugly for the tenant. This is ugly for the property owner. This is ugly for the city.
In a free market, capitalists can be rewarded for meeting peoples needs and solving problems; like improving dilapidated buildings. In a socialistic society there are no incentives for the smarter more capable people in society (you) to work harder, or expend extra effort to help those that are less fortunate (your tenants). After all, that's the governments role (dontcha know?) because there are more of them then there are of you - and this is, after-all, a democracy.
With rent control the government tells you how much to raise the rents, when your tenants can move, what repairs you need to make, etc.
You collect checks and hope your tenants don't ***** too much to the city.
If you buy right, and there is no negative cash flow, rent control can be like an ATM machine as your tenants retire your debt.
Note: When you have a vacancy, you may rent that unit for full market value. This is the only time it makes sense to do any upgrades to the unit.
If you tear the building down and build something new, you would not be subject to rent control (if it's built after 1978) in Los Angeles.
With rent control, it's better to have your tenants on a month to month (since they're not leaving anyway) so you can implement the rent raises immediately when they are granted. We literally take the notice sent out by the Housing Authority that tells us how much the rent can be increased, make copies, and send it to the tenants with a letter that says: "They City politicians you elected have increased your rent. Starting next month, your $1000 rent will now be $1,050. Please call the Mayors office if you have any questions."
