Learn how you can make rent-controlled policies work for you.
As communities move towards rent control laws, many investors are stepping away from the multifamily real estate market. While investing in rent-controlled properties does pose a challenge, proper management and informed strategies can lead to considerable returns. Interested in jumping into the rent-controlled real estate market? Then consider this advice from your experts in commercial landlord representation.
There are many reasons why a company may choose to invest in a rent-controlled property. For starters, the price of rent-controlled buildings tends to be more affordable, typically $100,000-$150,000 less than standard buildings. Additionally, the bidding process for rent-controlled buildings is less competitive, allowing the investor to avoid stressful and time-consuming price wars. Finally, there is less institutional money being invested in rent-controlled properties, meaning that most of the competition is between smaller investors.
Because investors save money when acquiring a rent-controlled building, they can reinvest extra capital into improving the property. This is essential as rent-controlled buildings tend to be older and in need of major repairs. Many rent control laws also allow the landlord to temporarily increase rent to help cover the cost of certain repairs. Typically, these repairs need to benefit the tenant directly, so things like roof replacements, new carpets, and common area upgrades will likely be covered.
Many investors worry about tenant turnover when investing in rent-controlled properties. While turnover is typically slower, this does not mean that tenants stay forever. Additionally, there is some power in a slower turn-over rate. It saves the landlord from having to find qualified tenants and also ensures a steady stream of revenue regardless of how the rental market is looking. However, slower turnover means that investors need to be patient. When investing in a rent-controlled property, the investor needs to have a long-term plan and should not expect a quick return.
When preparing to invest in a rent-controlled building, there are some things to look for. For instance, if a considerable number of tenants have lived at the property for more than five years or if rents are more than 50% below market value, then these are both signs that the building will take too long to turn. Before investing in a rent-controlled property, investors need to do their homework and understand the ins and outs of rent-controlled buildings, the market the property is located in, the local regulations, and the state of the building itself.
This is what investors need to know about rent-controlled buildings. Are you looking for more advice or assistance with your commercial real estate needs? If so, then turn to the commercial landlord representation experts at California Commercial Realty Advisors, Inc. We are ready to serve you today.