Hint: It’s not what you think.
We have cameras because they’re very, very useful in resolving disputes with tenants. Here are a few examples:
- We had a tenant in 2516 Kent St. who insisted that she didn’t have a dog. She hadn’t disclosed a dog when she applied for the apartment and certainly hadn’t paid a pet deposit. So it was awesome to be able to email her 5 video clips of her walking a pit bull out of her unit to the backyard (presumably to have it crap there and not pick up after it) and then back to her unit.
- That same tenant also swore up and down that she lived alone. So it was, again, awesome to be able to send her 5 clips of the three other people she had living with her in her one bedroom apartment (along with the pit bull!).
- Another tenant claimed the gate of our building had suddenly slammed closed, damaging her car. She wanted thousands of dollars to pay for repairs. So we sent her a clip of her opening the gate with her remote, driving half-way through, stopping her car, answering a cell call, and talking for 5 minutes or so before the gate closed on her car.
I just wish we had had cameras when one of our tenants invited some guests into a building, guests who proceeded to vandalize the backyard furniture. This tenant was paying $550 / month for a $1,250 apartment. Video of that incident would have been worth probably $50,000 to me, in the form of a swift nuisance eviction.
If you’re trying to run clean, quite, nice buildings you need to make sure that you keep an eye on things. And there’s no better way to do that with a small staff than to install some unobtrusive cameras.
The LA Times had an interesting article a few days ago about the state of the LA rental market. Here’s the money quote:
“Few new units and tight standards for home loans add to the pressure. The average monthly US rent is at an all-time high, and a 10% jump in Los Angeles County over the next two years is forecast.”
As we know from our discussions about valuing apartment buildings, rents are directly correlated with values, all other things being equal. So a 10% increase in rents should, all things being equal, result in a 10% increase in building values.
To put that in perspective, let’s look at an example:
- Buy an apartment building for $1M, with $250k down and $750k mortgage
- Rents increase by 10%, so building value increases by 10%
- Building now worth $1.1M
- Loan is still $750k, so there is now $350k worth of equity
- Your $250k just turned into $350k
Now, the above is not rocket-science, which is why the market for apartment buildings is so hot right now. So, if you’ve got buildings, hold on to them and look to push the rents. And if you don’t, now might be a good time to get one!
I, for one, welcome our new mixed-use overlords.
You’d think I’d be pissed about a developer coming into Silver Lake and building 300+ rental units. After all, the rules of supply and demand would seem to indicate that this new competition will drive down the rents on my units in the area. But I’m thrilled they’re coming. Why?
Well, first, I obviously have a general preference for dense, in-fill development. Sunset Junction is a human-sized, walkable neighborhood. Putting more rental units there will mean more customers for the amazing stores, restaurants, coffee shops and bars that are already thriving in the neighborhood.
Second, the structures these buildings are replacing are mostly horrible. Yeah, they ripped down the building that formerly housed a noted gay bookstore. And I kind of like 4100 Bar (which is going to be a casualty of the development). But I can tell you with great certainty that no one is going to lament the demise of the Bates Hotel. Overall, I can’t see how these new building won’t end up being an upgrade.
I have a third reason that, I admit, is a bit selfish. You see, the new units are going to rent for tons of money. Right now, the developers are forecasting $2,000 / month for one bedroom apartments. That’s a hell of a lot more expensive than even my highest-priced one beds. So my units are going to look like bargains by comparison.
Nothing like a little price-anchoring by the competition to make sales a bit easier, right?
I’m all in favor of new landlords learning the business by doing. It’s only by making mistakes that we learn. But there is one scenario where I definitely recommend new landlords get some help: When they absolutely must, at all costs, lease out a unit.
No one wants to buy from a desperate salesman. Period.
And when you’re sweating making a mortgage payment, you are desperate. Unless you are an extraordinary, natural salesperson (and there are some lucky people who are), you need to recognize that your desperation is part of the problem and call in a pro to help you get the deal closed.
It’s amazing to me, but there are licensed agents out there who make a living just doing leases. It’s amazing because leases are, in general, high effort / low reward deals for brokers. And yet they exist.
Are they expensive? Yes – they’ll cost you around one month’s rent. But they do leasing much better than 99% of new landlords and they only get paid when they succeed. So don’t be a hero. If you really need your unit leased, get a pro.
LA rent control makes it extremely hard to evict tenants as long as they pay rent. We can argue about whether that’s socially useful or not, but what I want to focus on today are the implications for running your buildings.
The first thing you have to understand is that there are only two ways a bad tenant leaves your rent-controlled building: 1. You negotiate an exit for that tenant, or 2. You win an eviction case.
Therefore, from the moment you decide you’re dealing with a difficult tenant you want out of your building you need to immediately adjust your thinking to account for the following: “How will the next thing I do look to a judge?”
Here are some examples:
- Don’t harass the tenant. It’s not worth it. The tenant will just tell the judge when you do end up in court and, if there’s evidence of harassment, it’s going to lose you the case automatically. And, harassing the tenant just makes it harder to negotiate an exit, which is really how most of these issues end anyway.
- Get evidence. We place video cameras in all of our buildings. They deter crime. But they are most useful when it comes to disputes with tenants, like when one tenant told me she didn’t have a pitbull and I emailed her five clips of her walking said dog in and out of my building. Hard evidence is the only thing that matters in eviction court.
- For notices to cure or quit, always post the notice on the tenant’s door AND mail to the tenant return-receipt required. If you’re noticing a tenant telling him to stop misbehaving or leave, you need to be damn sure you have a record of the tenant receiving that notice to use as evidence in the eviction case if the tenant doesn’t stop. The return receipt from the postal service does the trick nicely.
The LA eviction court is heavily prejudiced in favor of tenants. Even if you do everything I recommend above, you’re probably going to lose. But not doing them guarantees it.