Dear Landlords and Investors,
The principles of leverage, supply, demand, and ROI still push appreciation. San Diego has proven to be a wise location for your investment dollars. But, don’t become complacent. Don’t lose track of why you are investing, regardless of how successful you are. Dealing with unexpected issues can make or break your business. So of course, you’re right to want to understand how the current market affects your property values. You deserve expert guidance. Here are details on what you need to know now:
Navigating SB 567. The California Tenant Protection Act Amendments: What Landlords Need to Know
In October, Governor Newsom signed a new bill SB 567. It amended the California Tenant Protection Act of 2019 AB 1842 (Rent Control/Rent Cap). SB 567 brought significant changes that landlords in the state need to be aware of. These changes are set to take effect on April 1, 2024. Their aim was to enhance tenant rights and protections. So it’s crucial for landlords to understand these new add-on rules. And how these amendments impact their property management. After reading a handful of articles, we want to offers insights from the landlords’ perspective.
No-Fault Tenancy Terminations – Owner Move-Ins
The significant change to SB 567 revolves around “no-fault” tenancy terminations. Especially those associated with owner move-ins. The new bill provides a more defined understanding of who qualifies as an “owner”. (As if we didn’t know that already) And introduces new residency requirements.
The amended legislation affects owners who hold their properties as individuals. Or within family trusts. and, in some cases, through a partnership or LLC, are eligible to exercise the “owner move-in” option. While flexibility remains, landlords need to be aware of the following specific timeframes:
- The intended occupant must live in the unit for at least 12 months.
- The intended occupant must move into the unit within 90 days after the tenant leaves.
- This offers a more predictable and reasonable approach to owner/landlord move-ins. While ensuring the protection of property rights.
Changes to ‘Substantial’ Remodel of Rental Units
SB760 amendment also addresses tenancy terminations due to ‘Substantial’ remodels. This option remains intact, but it comes with certain obligations for landlords:
The termination notice changes in the following way. Landlords must detail the specific remodeling work they plan to undertake. Explicitly stating the tenant’s right to reoccupy the property. So if the remodeling work isn’t initiated or completed tenant can move back in. This requirement provides transparency in the process. Ensuring that tenants are informed about their options.
Landlords must provide copies of any necessary permits for the remodel. Along with the termination notice ensuring clarity in the renovation process.
The notice must include language that informs the tenant. If they wish to reoccupy the unit once the ‘Substantial’ work is completed. They must promptly notify the owner and provide their contact information.
These changes appear to add administrative burdens for landlords. The intent is to provide a fair and clear framework promoting transparent communication. For both parties involved.
Exemptions and Mandatory Notices
Landlords need to be aware. Most single-family homes are exempt from SB567 requirements. So are condominiums, certain owner-occupied duplexes, and newer rental housing are also exempt. But, for single-family homes to use this exemption. landlords must provide a mandatory notice.
The recent amendments to the California Tenant Protection Act are stringent. But they also offer a more balanced approach for landlords and tenants. By providing clear guidelines for owner move-ins. And ‘Substantial’ remodel terminations,. These changes create predictability and transparency in property management. Some administrative adjustments are necessary. So staying informed using updated forms is imperative. Plus ensuring compliance will help landlords navigate the new regulations. Effectively, mitigating potential penalties and legal issues. These amendments serve as a reminder to landlords. They need to maintain a strong understanding of California’s ever-evolving rental laws. They have to. If they want to protect their interests and property rights.
Is It the Best Time to Sell Property?
If you remember, last month we shared the shark tank article from Barbara Corcoran. And why she felt it was the best time to buy a property. But, what about selling?
Well, if you own an investment property in San Diego. PAY ATTENTION! We will share some insight that you have to SERIOUSLY consider. Yes, putting that income property on the market.
Right now rates are between 7-8%. And inventory is at record lows here in San Diego. While many buyers are sitting on the fence. They’re waiting for rates to drop. However, there are still buyers out there. And the well-priced properties are seeing multiple offers.
So what happens when rates do drop? Those fence-sitting buyers will come back to the market. Say that happens in 6-8 months. Putting us into late spring or early summer of 2024. You as a seller will have more competition for your property during the traditional buying and selling timeframe of the year. So listing now eliminates that issue. Less competition now = better seller’s market. Plus higher prices and terms in a seller’s favor.
What about the potential changes we’ve all heard about for property owners? Let’s see… Capital Gains are at 20% currently. And the Biden administration has proposed it be raised to 39%. And proposed that they eliminate the 1031 exchange. And don’t forget that we recently discussed that our California Legislature is working towards eliminating Prop 13?!
Instead of gambling on what the future may hold. We’d rather focus on what market conditions are currently. We’ve been helping seller clients who understand and pay attention to the factors mentioned above. And the tenant over landlord laws and favoritism we see at both local and State levels. These sellers have been selling their San Diego investment properties. Doing 1031 Exchanges while they still can. Or even taking the 20%-30% cap gains hit. Just to exit the California market. They are moving their proceeds and business to sales tax-friendly states. Like Arizona, Washington, Nevada, Tennessee, Texas, and Florida. Where they still favor landlord rights over tenants.
RECENT FAQ’s FROM CLIENTS LIKE YOU
- Our kid is about to graduate college. Can I co-sign with them on a multi-unit and use an owner-occupied loan?
The short answer is Yes, with an FHA loan. A borrower is allowed to have a parent co-sign on the loan. Of course, there are guidelines that both the borrower and co-borrower must meet. And this is a discussion to have with a direct mortgage lender.
If this situation applies to you, your kids, or any friends or family. Reach out to Greg Brooks of Guild Mortgage. He has been our go-to lender for mortgage financing since 1991. You can reach him on his cell, 858-945-5626. He can go over all of the specifics of your situation and advise you on your best game plan.
KEEP YOUR QUESTIONS COMING!
We plan on answering your questions monthly moving forward. It’s important that you’re informed and educated about what you buy and why you’re buying it.
AND WHEN YOU’RE AT THE END OF THE GAME… READY TO RETIRE FROM LAND LORDING?
Let’s face it. Being a landlord has its ups and downs. If we had to point you in one direction it would be the Delaware Statutory Trust folks. And here’s why. With the DST, you get all the benefits of ownership. Without the hands-on day-to-day dealings of tenants and property management/maintenance. Plus it provides you with cash flow. And in a lot of instances, it’s even more than the relinquished property provided. Second of all, you’ve got professional management and bookkeeping. It’s automatically done for you. We’ve touched on DST options in the past. Don’t be shy, contact us.
The stats this month are skewed. There were 3 closed sales over $3M. ($3,180,470, $5,250,000 & $7,000,000) Along with 9 closed sales between $2-3M.
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IT’S TIME FOR YOU TO GET THE ROI YOU DESERVE
You’ve worked hard for what you’ve earned, and you’re right to want the best experience. Be confident you have professionals on your side. We use ROI-based marketing. Rest easy knowing we use an organized system to market your property. Employing our highly targeted and proven approach like no one else is what you deserve!
Thinking of selling your property in the next 12 months? Call us today for your strategic marketing consultation at 858-218-4511.