CHARLOTTE LAWS - DREAM AND ACHIEVE TOGETHER
Control Rehab for the Well-Heeled
those who don't need it, rent control can become an addiction, resulting
from too many years of a sweet deal. It can leave the real estate
muscles paralyzed and the investment portfolio sick. "Penny
wise" might have a "pound foolish" problem.
get me wrong. I'm not talking about those who live in rent-controlled
apartments because they cannot afford to move; I'm referring to the
thousands of well-heeled ones. The affluent --with greater job
stability—move less frequently than the needy, thus retain the
treasured units. Those who can least afford it must re-rent at higher
stumbled upon this "housing disorder" as a Realtor, when
encountering dozens of well-to-do Westsiders tucked away in dilapidated
rent-controlled apartments, determined to stay for the appealing price
tags. Landlords have no incentive to make improvements when they collect
rents below market-rate.
didn't matter that these tenants had higher incomes than their
landlords, qualified three times over for a loan, or possessed the down
payment to purchase rentals of their own. It didn't even matter that
they were losing thousands of dollars in tax write-offs and hundreds of
thousands in equity. They were proud bingo winners, and under no
circumstances would they sacrifice that for a bigger pot.
years ago, I almost convinced Anne to buy. She was living in a $509 per
month rental in West L.A., having assumed a new identity in order to
dupe the building's owner. He still thought Gwendolyn--who lived there
prior to James, Henry, Erica and now Anne —was the tenant. Most L.A.
landlords cannot raise the rent more than three percent a year until the
unit becomes vacant; and some tenants succeed in pretending they are
someone else just to keep the price low.
refused to buy the $280,000 townhouse in Burbank we had selected for her
purchase. First, it was in the Valley, and many Westsiders have
convulsions about investing "over the hill." Secondly, she
planned to put tenants in her new place, but worried that they couldn't
why would you think that, Gwendolyn? Sorry, I mean Anne."
townhouse is now worth $550,000, a loss of $270,000 in equity, and
her apartment—where she remains a psychological prisoner--has saved
her a grand total of $18,000.
date, Lindy is the only "rent control client" who has closed
an escrow with me. In 1993, she agreed to abandon her unit in Santa
Monica in order to buy a six bedroom, tennis court estate for $600,000.
To afford the mortgage, she rented rooms, transforming the property into
a virtual dormitory. The income sustained her unemployed status until
2004 when she sold the property for $1.8 million.
Property values have risen an average of 425% in California since 1980 and 115% in Los Angeles since 2000. If you have the means, escape the "perpetual tenant syndrome" and enter the rent control rehab program before it's too late.
To Comment, go to Charlotte's BLOG