All Forum Posts by: Thomas Azoury

Ive had wonderful tenants since buying the property in late 2017 and have raised the rent just twice (still WELL under market value rent). They signed an initial one year lease but have opted to go month to month ever since.

I would like to convert the garage into a one bedroom and rent either to another long term tenant or mid term (30 day min for professors or traveling nurses).

My question is really around the legality and process of taking back the garage from the existing tenants for this project. Of course I want to minimize as much of the inconveniences possible with such a situation but some is inevitable.

What legal right do I have to do this? Again they only signed the one year lease back in 2017 and have opted to keep month to month after offering a lease at each of the two rent increase intervals.

Any thoughts on how I might approach the conversation with them? Ive done all my research (plans, permits, contractors, etc) and feel like it's a no brainer and a fairly streamlined approval process in my area. My heartburn is mostly around how to handle the tenant situation. Thoughts welcomed.

Your ADU application will likely need to be signed by the tenants occupying the property so having a conversation with them is important.

I had a similar situation in Chino except instead of losing out on a garage my tenants lost out on parking. We had a paved area for parking where we built the ADU. My tenants had also been in the property for a couple of years and were under-market on rent (not $1200 but still under). There is plenty of street parking so it wasn't a giant issue.

The conversation was pretty straightforward. I approached them and told them our plan to convert the space (assumptive sale style) and offered to renew their lease and lock them in for the same rate for 18 months at the same time. I made the new rent agreement easy for them to terminate, just a 30-day notice like m2m without penalty. The new lease didn't mention any off-street parking. I wasn't going to bump rents anyway and they got to feel good about locking their rate in.

Everyone there is happy now.

This is helpful, thanks @Andres Murillo. I think I just need to bite the bullet and have the conversation like you said. I get the whole 'dont fall so far behind market value' narrative but this is a long term play for me to gradually trade less of my time for w2 income if you will. It's doing that but maximizing that when the time is right is also what I'm eyeing.

0 Votes

Santa Barbara, California

Quote from @Nathan Gesner:

Quote from @Thomas Azoury:

1. Honor your contracts. You agreed to rent the entire property to them for $X. It would be immoral to tell them they can't use the garage any more because you aren't charging them enough rent.

2. Stop charging below market!!! You may think it helps you retain tenants and prevents costly turnovers, but you are wrong. Low rents attract low-quality renters that will eventually cost you even more money.

They are on a month-to-month lease. I believe you have to give them a 30-day Notice of termination in your market. Get them out and rent the home at market rate without the garage. Let any potential renter know that you intend to convert the garage into an ADU and address any potential issues created by adding the ADU (parking, shared yard, quiet hours, etc.)

@Nathan Gesner I have honored my contract, the contract was for a one year lease and the tenants have opted to go month to month ever since (2017). As @Lucas Martinez mentioned, FMV rents in Santa Barbara have exploded, I'm trying to be considerate of my tenants while also exploring a path to adding value to the investment--which I know probably falls into the oxymoron category. Thanks for the input.

0 Votes

Santa Barbara, California

Quote from @Lucas Martinez:

Quote from @Theresa Harris:

They are renting the entire house including the garage and yard. I'd talk to them. You will likely have to lower the rent because you are taking space away from them AND making them share space. My bet is they won't be happy about it.

If they’re on a month to month lease, and you’ve offered them a year long lease that they have opted out of, you can adjust the terms of their lease once their month ends. If they don’t like it, they can try to negotiate the rent down, or they can vacate. @Theresa Harris is right that they won’t be happy, but she’s not right that you would have to lower the rent. Santa Barbara rents have exploded over the last 5-10 years, and they likely won’t find a better deal out there.

Obviously the best thing is to come to a compromise civilly, assuming they’re strong tenants. But if they spend more than 5 minutes looking at the SB rental market, they will likely see that they are in a great situation and won’t fight too hard.

That's right @Lucas Martinez, rents have gone up substantially here which is why the adu makes a lot of sense. I was thinking I would give them like 90 days notice w the option to stay for a temporary rent reduction through construction phase.

0 Votes

Santa Barbara, California

Quote from @Theresa Harris:

This is true but they're also under market value rent by more than $1200/mo. Agree a conversation is in the cards but if anything it would be more than fair to agree to keep the rent flat vs any type of reduction (at least that's my logic). Thanks for the reply :)

0 Votes

Santa Barbara, California

Hi all. Long time BP fan, first time poster. I own a SFH in Santa Barbara County (it's in an unincorporated area between SB and Goleta.)

I would like to convert the garage into a one bedroom and rent either to another long term tenant or mid term (30 day min for professors or traveling nurses).

What legal right do I have to do this? Again they only signed the one year lease back in 2017 and have opted to keep month to month after offering a lease at each of the two rent increase intervals.

0 Votes

Santa Barbara, California

First deal ever. Rent in Hayward CA was about to go up almost 40%. Bought a condo in Oakland CA in December 2013 for 295k. Sold in 2017 for 647k. Bought a rental SFH in Santa Barbara for retirement that's being rented. Positive CF.

0 Votes

All Forum Posts by: Thomas Azoury

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