Posted by Frank Chin on January 31, 2002 at 19:33:50:
Hi Ralph:
Technically, I agree with you.
Rent control is a generic term for government regulation of rents. In NYC, they try to distiguish between the draconian older form, Rent Control, and its newer cousin, Rent Stabilization.
When I mention Rent Stabilization to someone outside of NYC, I get a blank stare. You’ll have to explain its the New York version of a updated variety of rent control. So I don’t bother anymore.
There are numerous “rent stabilized” apartments out there, especially buildings converted to coops where tenants elected to stay, and not buy. I looked into deals where investors try to sell blocks of them, all with negative cash flows, and the only upside being the tenant moving or dying.
But I encountered one commercial property with two apartments upstairs. An elderly lady still paying a rent controlled $132.00/monh rent as of a few months ago.
Here’s the situation:
Los Angeles city and unincorporated Los Angeles county is rent controlled (if the property was built before 1978)
A home built in 1925, later converted into a duplex (rent controlled)
Bank owned
Bank unwilling/unable to evict tenants
I was thinking of buying the property and lease-optioning it to the tenants. Are they still tenants under the rent control laws? Is it harder or easier to evict them if they don’t pay on time, or can’t/won’t qualify for the loan at the end of option period?
I live in the unincorporated area of Los Angeles, we have no rent control that I know of here! I suggest you check out the rent control issue first, then if it is under such control, what are the rules.
Posted by Frank Chin on January 31, 2002 at 06:35:11:
Hi BCat:
I don’t know the rent contol laws in LA. But in NY where I have rentals and San Francisco where my brother in law have rentals, it is not possible to evict tenants as long as they are paying the rent. In mnay cases, the rents are so low that it would be crazy for the tenants not to pay the rent.
The only rare exceptions in NY and SFR is if you want to live in one of the units yourself, or a close relative. You may want to check LA regulations.
One thing about low rent tenants is they love being a low rent tenants. The landlord subsidizes then till he goes broke and the bank takes over. That’s probably what happend here.
Here in NY, the rents cannot cover the mortgage, taxes and utilities. When the landlords walk away and hand the keys over to the City in lieu of back taxes, the City found itself unable to cover just the maintenance and utlities, even without the bank mortgage and taxes.
A friend of mine who took a “no money down” course found many of these types of properties in NY where landlords are begging to deed you the property. I laugh when people say you can do property in NY no money down if you looked hard enough.
My friend found them and couldn’t tun away fast enough.
I think these tenants would be crazy to go for lease option when they are paying cheap rents and everyone else is going broke.
Posted by Ralph Taylor on January 31, 2002 at 15:19:18:
Rent control in NYC is a result of WW2 market conditions. To be rent controlled, an apartment must have been in continuous occupancy since that time by the same tenant. These are “statutory” tenants and hold on to these apartments at all costs. Obviously, there are not many tenants in this category any more and the numbers are dwindling. When an apartment becomes vacant, it can be immediately brought to market rent and then it enters the rent stabilization system.(What a mess!)
I have not lived in NYC for 15 years, but I remember at that time a number of operators with deep pockets had purchased buildings, primarily for co-op conversions with the idea that time would take care of rent control.