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  • You should get insurance on every building that you own. For a relatively small annual premium ($4,000 for a $1,000,000 Building) you can insure yourself against a total loss ($1,500,000 Loss – replacement cost). Multifamily Apartment buildings purchased with a loan are required to have insurance. 2-4 units are covered by residential insurance. 5 units […]

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  • Depreciation is a loss in the value of an asset. The Federal tax code allows you to take a deduction for depreciation on assets used for business purposes (like real estate investment property) each year to offset your investment income and/or ordinary income. Depreciation can be taken for buildings, machinery, appliances, furniture, fixtures, cars, computers, […]

Blog >> Depreciation

Los Angeles Annual Allowable Rent Increase

Allowable Rent Increases 6-6-11 ca update

Multi family property built before 1978 in the City of Los Angeles falls under Los Angeles rent stabilization ordnance (RSO) otherwise known as rent control. Rent control limits the amount you can raise rents, as a result landlords who do not keep up with annual increases will end up with below market tenants in their building that dramatically lower their property’s sale value. If you have trouble raising rents as a landlord, hire a property management company to do it for you.

At some point as an owner of a rent controlled building, you may have a tenant, who is having economic difficulty, and you want to cut them some slack on the rent. Unfortunately as a income property owner, you could really be doing a number on yourself. Consider that when you decide to sell your property, the product of the Gross Rent Multiplier will be much smaller as a result of the below market rent in one or more units.

EXAMPLE:

If your building has a gross rent Multiplier of 12, and you are giving your tenant a $100 break on rent:

12 GRM x ($100 below market rent/mo. x 12 months) = $14,400

You lose $14,400. Staggering that doing a small a favor as saving them $100 a month on their rent isn’t costing you the $1,200 of lost rent upfront- but could be costing you $14,400 when you decide to sell. In this situation, I always recommend that you continue serving your below market tenants rent increase notices each year, but let them know you have no intention on enforcing it- that way you can keep as high a monthly gross as possible on your rents and keep up with RSO. Remember, if you don’t exercise the right to do a rent increase in a given year- you lose it.

Example Rent Increase Form:

Rent Increase Form

Rent Increase Form

 

You do NOT need LAHD approval to raise rents that are the annual allowable increase.

 

The annual increase may be imposed only if twelve (12) months or more have passed since the last such rent increase. Landlords are required to serve tenants with a written 30-day notice before the increase may be collected

Historic Rent Increase Table

Date Annual Allowable Rent Increase
5/1/79 – 6/30/85 7%
7/1/85 – 6/30/86 4%
7/1/86 – 6/30/87 5%
7/1/87 – 6/30/88 4%
7/1/88 – 6/30/89 4%
7/1/89 – 6/30/90 5%
7/1/90 – 6/30/91 5%
7/1/91 – 6/30/92 5%
7/1/92 – 6/30/93 5%
7/1/93 – 6/30/94 3%
7/1/94 – 6/30/95 3%
7/1/95 – 6/30/96 3%
7/1/96 – 6/30/97 3%
7/1/97 – 6/30/98 3%
7/1/98 – 6/30/99 3%
7/1/99 – 6/30/00 3%
7/1/00 – 6/30/01 3%
7/1/01 – 6/30/02 3%
7/1/02 – 6/30/03 3%
7/1/03 – 6/30/04 3%
7/1/04 – 6/30/05 3%
7/1/05 – 6/30/06 3%
7/1/06 – 6/30/07 4%
7/1/07 – 6/30/08 5%
7/1/08 – 6/30/09 3%
7/1/09 – 6/30/10 4%
7/1/10 – 6/30/11 3%
7/1/11 – 6/30/12 3%
7/1/2012 – 6/30/2013 3%