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Rental real estate in California
Old 05-21-2018, 02:13 PM   #1
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Rental real estate in California

I was looking at a way to diversify my portfolio. I was looking at Rental Real Estate but I am holding off for now. There is a measure on the Nov ballot to repeal the Costa Hawkins Housing Act. If it passes you will see rent control all over California. Anyone own rental property in California and if so, what are you planning to do?
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Old 05-21-2018, 04:38 PM   #2
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I own three rental properties in California and I was not aware of this measure. I just read about it and I am planning to do..nothing, beside voting against it in November. I have had very stable tenants by charging fair rents and I don't see this measure having an impact on my rental properties.
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Old 05-21-2018, 04:42 PM   #3
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Aw that’s good to know. What cities are they in?
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Old 05-21-2018, 04:45 PM   #4
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Paso Robles and Atascadero.
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Old 05-21-2018, 04:57 PM   #5
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We own one rental unit in Coronado. We are not taking any action, as even if Costa-Hawkins is repealed, there is practically no chance that rent control would be implemented here.
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Old 05-21-2018, 05:25 PM   #6
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We have a granny flat rental. (1br detached on the same lot as our primary). I plan to do nothing. We have very stable tenants (coming up on 4 years) and don't raise their rent a lot along the way.

I don't think I'd do anything.

I can see how if one were looking to invest in rental purchases it could be a consideration... but it isn't a factor in what we already have. I doubt any imposed rent control wouldn't effect our income too much since we already charge less than full market in exchange for having great tenants.
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Old 05-21-2018, 06:38 PM   #7
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Originally Posted by Mark24609 View Post
I was looking at a way to diversify my portfolio. I was looking at Rental Real Estate but I am holding off for now. There is a measure on the Nov ballot to repeal the Costa Hawkins Housing Act. If it passes you will see rent control all over California. Anyone own rental property in California and if so, what are you planning to do?
If you’re looking in Newark, CA (where you live) or nearby, I think you’ll find rental real estate is a loser at present purchase/rental prices. There are several E-R.org members who have lots more landlord experience than me (Senator comes to mind) who may chime in here but, I personally wouldn’t spend much time looking in the SF Bay Area for profitable rental properties.
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Old 05-21-2018, 08:54 PM   #8
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If you’re looking in Newark, CA (where you live) or nearby, I think you’ll find rental real estate is a loser at present purchase/rental prices. There are several E-R.org members who have lots more landlord experience than me (Senator comes to mind) who may chime in here but, I personally wouldn’t spend much time looking in the SF Bay Area for profitable rental properties.
What my plan was to buy a house near my son in Oakley, Ca which is in the suburbs and rent my house out. My house would rent for 3700 a month. Houss here have passed the million dollar mark. Glad I purchased when I did. It’s because we are in the center of Silicon Valley, and Fremont is even more expensive so they come here to buy. Open houses get 55 people a day coming through. I can buy a house for half the price in Oakley.
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Old 05-21-2018, 09:33 PM   #9
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What my plan was to buy a house near my son in Oakley, Ca which is in the suburbs and rent my house out. My house would rent for 3700 a month. Houss here have passed the million dollar mark. Glad I purchased when I did. It’s because we are in the center of Silicon Valley, and Fremont is even more expensive so they come here to buy. Open houses get 55 people a day coming through. I can buy a house for half the price in Oakley.
Understood.

Don’t forget the opportunity cost when analyzing this move. In your situation, you’re likely have have $1M+ in equity in your current house, and there’s a cost for not capturing & earning a return on it. I don’t know your precise numbers but, median rent in Oakley, CA is $2,400/mo. If you get $3,700/mo for your current place & leave $1M of (dead) equity sitting in it as a rental, you’re $1,200/mo worse off @ a 3% return [$3,700-$2,400-($1M*.03/12)= -$1,200/mo]. I know Prop 13 & 60 can make a difference in such situations but, my point is to not forget that the opportunity cost of the equity in your current house is real.

Just as an aside, there are TON of foreclosures in Oakley (on Zillow). I’m not sure why. You probably know but, it’s worth investigating.
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Old 05-21-2018, 10:42 PM   #10
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That’s a good point. I will have to think about it. I thought about buying two properties in Oakley which might be better. Of course than increased property taxes but maybe the rent on the one would cover that. If I did that I wouldn’t have to spend down my current portfolio
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Old 05-21-2018, 10:44 PM   #11
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I will have to check out the foreclosures. I was unaware of that. I helped my son buy his house there, and he bought at the very low, and it’s almost doubled in price since his purchase
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Old 05-22-2018, 07:28 AM   #12
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Understood.

Don’t forget the opportunity cost when analyzing this move. In your situation, you’re likely have have $1M+ in equity in your current house, and there’s a cost for not capturing & earning a return on it. I don’t know your precise numbers but, median rent in Oakley, CA is $2,400/mo. If you get $3,700/mo for your current place & leave $1M of (dead) equity sitting in it as a rental, you’re $1,200/mo worse off @ a 3% return [$3,700-$2,400-($1M*.03/12)= -$1,200/mo]. I know Prop 13 & 60 can make a difference in such situations but, my point is to not forget that the opportunity cost of the equity in your current house is real.

Just as an aside, there are TON of foreclosures in Oakley (on Zillow). I’m not sure why. You probably know but, it’s worth investigating.
I don't see the foreclosures that you do. There are very few actual foreclosures for sale. There are some potential foreclosures, most of which are defaults that will be cured.

Oakley is not a place I would invest. It's one of those places that is on the edge of both the Central Valley and the Bay Area. People buy in Oakley when they are priced out of the Bay Area. These markets drop in value when the Bay Area markets soften. Quality renters with good jobs in the Bay Area will pay a few dollars more to live closer to their jobs. Outer ring cities get the people that can't compete for closer in rentals for whatever reason. People will drive to buy, but not to rent.

In your shoes, I would stay in Fremont/Newark if you are happy there. When real estate markets drop, you could always pull some remaining equity out of your house and buy a rental in a place that makes sense to own rentals.
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Old 05-22-2018, 08:56 AM   #13
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I don't see the foreclosures that you do. There are very few actual foreclosures for sale. There are some potential foreclosures, most of which are defaults that will be cured.
Correct, most of the listing are ‘pre-foreclosures’, along with several actual ‘foreclosures.’ More than half of the “For Sale” listing are ‘pre-foreclosures’, which seems alarming to me.


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Oakley is not a place I would invest. It's one of those places that is on the edge of both the Central Valley and the Bay Area. People buy in Oakley when they are priced out of the Bay Area. These markets drop in value when the Bay Area markets soften. Quality renters with good jobs in the Bay Area will pay a few dollars more to live closer to their jobs. Outer ring cities get the people that can't compete for closer in rentals for whatever reason. People will drive to buy, but not to rent.
Absolutely agree with this.
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Old 05-22-2018, 09:00 AM   #14
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Oakley is a safe bet because of the proximity to the Bay Area and that means work! Where there’s work there is strong rental markets
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Old 05-22-2018, 09:50 AM   #15
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The real estate prices in the outer suburbs like Oakley and Brentwood really crashed hard in the last recession. I'm not into rentals, but we thought about moving out there at one time - large brand new homes, some on golf courses, were going for around $200K. It would have been like retiring to a lower cost of living area with only being an hour or so out from SF (non rush hour).
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