Appraising Units In Rent Control Areas (downtown La)

[jackimoya]

How do you handle the income approach when there is rent control? I realize I need to determine market rent. I'm wondering if I should factor in the cost to relocate current tenants, so that market rent could be achieved?

What do you do different when there is rent control, if anything?

 

[Tim The Enchanter]

Stick with using rent controlled rental and sale comps.

 

[jackimoya]

Yes, I will be using only rent controlled comparables. My concern is that in order for units to obtain market rent, they have to become vacant. From what I understand, an owner can vacant a tenant, but at great cost ($20,000 to $30,000 per unit?). Seems like this should be factored in to both income and sales approaches?

 

[nstanbru]

In what city is the property located?

 

[jackimoya]

Downtown Los Angeles

 

[George Hatch]

In a 2-4 I would just report the contract rent and leave it at that. A large percentage of those properties are purchased by owner-users, so the rents aren't the thing in their value anyway.

 

[jackimoya]

It's a triplex. For opinion of market rent for the subject, you would use actual rent because of rent control and explain (of course).

 

[nstanbru]

It's a triplex. For opinion of market rent for the subject, you would use actual rent because of rent control and explain (of course).

Except for some minor reasons, increases are basically limited to CPI increases. As George said, stick with the actual rents. To answer the above question: yes

 

[Tim The Enchanter]

What George said. The rentals are a distant second to the sales approach.
I make sure to use actual rents as reported, not some estimated rent the agent dreamed up.
I'm guessing you are in one of the DTLA adjacent hoods.

 

[glenn walker]

Rent controlled areas Los Angeles or LA County are the highest rents! - Because they set the rate - So don't get a mindset that rent control is lower NO it's the highest - because many tenants only pay 40% to 60% percent and the remaining amount is paid by the government or some other local agency- Because we can't rent some of this stuff because nobody wants to live in some of these areas - So thank God for the government otherwise the rents would drop by 50%- the next day - Look at New York City or San Francisco the highest rents are in areas with rent control ?