Question for those who live in California

[California]

little choice but to have a local presence to be my boots on the ground.

Oh heck yeah.

One of the first pieces of advice I received from the broker when I bought the first multi-unit rental, was 'show the flag'. That is, be visibly present, often, so the tenants don't think they run the place. Doing this saved me many misunderstandings (or worse).

 

[plowhog]

'show the flag'

The world has changed, and moved on, from an owner in control "showing the flag" to help command respect for their property. (No disrespect meant, from your posts here I have confidence you were a quality owner and landlord ... as hopefully I am as well.)

The CA government decided to reign in greedy, underhanded landlords. Which in their view is all of them. Now, in many ways, the tenant is in control, not the owner. Such as if the owner decided they don't want to rent their property anymore. The tenant says "no, I am staying." The tenant's wishes prevail over the property owner, and the tenant has the power of the government to back them up. Maybe the owner is undergoing chemo treatments for cancer and cannot keep up with a rental, nor has the money to hire a manager. It doesn't matter-- the tenant rights have become superior to the property owner.

So a new mantra is in play. No more owners "showing the flag." Now it is the tenant "showing the statutes." That is progress?

 

[California]

The world has changed, and moved on, from an owner in control "showing the flag" to help command respect for their property. (No disrespect meant, from your posts here I have confidence you were a quality owner and landlord ... as hopefully I am as well.)

The CA government decided to reign in greedy, underhanded landlords. Which in their view is all of them. Now, in many ways, the tenant is in control, not the owner. Such as if the owner decided they don't want to rent their property anymore. The tenant says "no, I am staying." The tenant's wishes prevail over the property owner, and the tenant has the power of the government to back them up. Maybe the owner is undergoing chemo treatments for cancer and cannot keep up with a rental, nor has the money to hire a manager. It doesn't matter-- the tenant rights have become superior to the property owner.

So a new mantra is in play. No more owners "showing the flag." Now it is the tenant "showing the statutes." That is progress?

So in an ideal world buying rental property should simply be priced to make a decent return after figuring in all these new costs. Times change.

 

[plowhog]

So in an ideal world buying rental property should simply be priced to make a decent return after figuring in all these new costs. Times change.

Yes, I agree that in a normal world, investors build a proforma of income vs expenses, potential profit, then evaluate the risk and decide whether to continue. But we are no longer in a normal world.

Let's take Ultrarunner's case. He figured all that in, then the government enacted Covid restrictions where he was legally prevented from collecting rent for about 3 years. He was denied income with no mirror-image about his costs. He was required, out of pocket, to provide all tenant services, pay property taxes, etc. Fix broken pipes or appliances and more. As an investor, that sort of bombshell cost (zero income multiple years) is far beyond what any reasonable person would include in a proforma. If you added *possible* bombshells like that into your projections, which there are likely dozens or more, nobody would ever invest in anything. Smaller bombshells are the explosion of tenants rights which overwhelm property owner rights.

I believe he also has a tenant in another property who has not paid rent since January but is trashing his property. He can't get them out. I am a licensed real estate broker and I know that under the most ideal circumstances, an eviction takes at least 6 months. It can easily go double that. Because of all the changes it is now risky to proceed on your own without an attorney. Then, at the end, the property owner finally gets a destroyed property back once the Sheriff moves them out.

I will conclude my rant with this. I planted two hybrid maples at a rental property a few months ago. $800. Today the toilet was leaking. I authorized the tenant to have a local plumber do the repair. Plumber replaced an angle stop on the wall, put on a new hose, and a new fill valve in the toilet tank. Cost was $866. I am rent restricted on this property (by law) so two trees and a drippy toilet overwhelmed the entire year's rent rate increase with much more to come-- like the insurance renewal. So the regulations are bleeding me, just at a slower rate than Ultrarunner.

I will conclude by commenting that I am extremely lucky and appreciative to own the properties that I do and be in comfortable financial circumstances. I worked very hard to achieve that and took many risks along the way. But if any investor approached me today about buying rental property in California, I would tell them the investing climate has been pretty much destroyed. I'd advise to instead put the entire nest egg on either black or green on a casino roulette wheel. At least there is a chance of winning-- and fewer headaches!

 

[ultrarunner]

Know several well placed California firms that were movers and shakers in the development biz that have flipped to anywhere but California…

For their legacy holdings they are divesting of anything with a bed as another way of saying anything residential.

The folks with hundreds of millions are looking beyond the West Coast States…

A 16 story San Francisco office tower just sold at a 90% discount.

995 Market Street sold in 2016 for 62 million and sold this month for 6.5 million.

I’ve always been careful and built equity through improvements and being hands on… my peasant mindset is to be mortgage free.

 

[ultrarunner]

Related… work has just had the 4th garbage audit over a 3 year span…

We continue to do well but not doing well managing waste stream can easily put a business under.

Waste Authority auditors show up unannounced, enter dumpster areas and place tarps on the ground and start dumping trash recording as they sift.

Everyone I’m sure knows the bleach or alcohol saturated disinfecting wipes that became mandatory during Covid.

Auditor will find a emptied container and pull off the lid and turn over looking for liquid… one drop of bleach or alcohol residue is one drop too much…

Just like recyclables in the trash or trash in the recyclables…

California business and property owners is where the buck stops and sorting tenant trash gets old real quick.

 

[two_bit_score]

Know several well placed California firms that were movers and shakers in the development biz that have flipped to anywhere but California…

For their legacy holdings they are divesting of anything with a bed as another way of saying anything residential.

The folks with hundreds of millions are looking beyond the West Coast States…

A 16 story San Francisco office tower just sold at a 90% discount.

995 Market Street sold in 2016 for 62 million and sold this month for 6.5 million.

I’ve always been careful and built equity through improvements and being hands on… my peasant mindset is to be mortgage free.

But, but, but....the weather.....

 

[California]

Weather? Today.