Caps on Rent Increases

Investing Strategies Real Estate Investing
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Some time ago we had a nice thread here about ‘Nationalizing Rental Housing’.

And I agree with the premise - it won’t happen on a national basis but I continue to be conscious about local measures which are happening. Furthermore, a Generation Chipotle runs more of the country, I foresee more such rules popping up. Does this mean I run from rental housing? Heck no -closing on another home this month. BUT - speaking for myself- I continue to be mindful of the political climate in cities and states. Tenant selection - more important than ever. A Just posting this on an FYI basis…

https://www.cnbc.com/2022/02/11/what-to-do-if-youre-worried-…

“Rents are up 30% and more in some cities. What to do if you’re worried about a big hike”

“In Oregon, most hikes are already limited to 7%, plus inflation. Recently, Santa Ana, California, passed legislation capping rent increases in most buildings to no more than 3% during any 12-month period. And residents in St. Paul, Minnesota, voted last year in favor of a rent control policy that will also limit increases to 3% a year beginning May 1”

“In Seattle and Portland, Oregon, your landlord may be required to pay for your moving costs if you can’t afford to stay in your home after a hefty rent increase.”

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I’ll be fine as long as the rent can be moved to market rent upon vacancy. While there’s
been talk of controlling vacant rent increased, nothing has passed.

For existing tenants, CA has a YOY rent increase cap of 5%+inflation, usually totaling 7%-8%/year. For the last 20 years my average existing tenant rent increase has been well under 5%.

As I explain to my tenants, a rent increase cap motivates me to keep rents close to market so the building sales price doesn’t deteriorate. Thus under rent caps I raise rents more and more often.

A friend inherited a 4-plex where rents were probably 50% of market. Due to the low rent he probably sold $500k lower than if rents had been at market. The new owner is a young single person. We guess unit-by-unit the new owner will move in, rehab and re-rent at market.

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