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#50 How Much Can Landlords Raise Rent in 2025? (California Law Update) · Own More Doors

• 0:00
  SPEAKER_00: What's up, everyone?
• 0:01
  SPEAKER_00: It's Juan Weizar with another Own More Doors podcast.
• 0:05
  SPEAKER_00: Thank you guys for tuning in.
• 0:06
  SPEAKER_00: Today will be short and sweet, but it's a very important one is how much can landlord raise their rent in 2025 and 2026?
• 0:14
  SPEAKER_00: For those of you who've been listening, you know that uh every 12 months under um AB 1482, which is state law that passed a few years ago, we are able to raise rents 5% plus CPI.
• 0:28
  SPEAKER_00: Now, for those of you who want to tune in and tune out, I'm gonna get straight to it right now because uh um I'm gonna I'm gonna give you the answer now.
• 0:35
  SPEAKER_00: So starting August 1st of 2025, you could raise the rent 5% plus CPI.
• 0:41
  SPEAKER_00: Now, the April CPI is 3%.
• 0:44
  SPEAKER_00: So starting August 1st of 2025, you could raise rents by eight percent.
• 0:50
  SPEAKER_00: Okay, so if you didn't want to tune in to the rest of this, um, you have the facts.
• 0:56
  SPEAKER_00: It's eight percent moving forward.
• 0:58
  SPEAKER_00: Okay.
• 0:58
  SPEAKER_00: Um, and that just so you know, it's coming down from 8.9 um from last year.
• 1:06
  SPEAKER_00: Every year it's changing.
• 1:07
  SPEAKER_00: And I know sometimes I talk to people and they're like, yeah, yeah, yeah, I know I could raise the rent like 10%, right?
• 1:12
  SPEAKER_00: And they're always wrong.
• 1:13
  SPEAKER_00: And sometimes they're like, yeah, I could raise it by 3%.
• 1:16
  SPEAKER_00: No, 5% plus CPI.
• 1:19
  SPEAKER_00: That's the way that 1482 AB 1482 was written.
• 1:23
  SPEAKER_00: Now, um, if you're gonna stay along, I'll talk about a few other things just to kind of give you guys some context on how this works and where this is coming from.
• 1:33
  SPEAKER_00: So there's gonna be certain cities that have their own citywide rent control.
• 1:40
  SPEAKER_00: Okay, so Los Angeles City has their own rent control.
• 1:44
  SPEAKER_00: And so if you're listening to this and you're like, man, that's great.
• 1:47
  SPEAKER_00: I didn't realize I could go 8%.
• 1:49
  SPEAKER_00: Know that that's most of Southern California, um, but it's not all of it.
• 1:54
  SPEAKER_00: Okay, so there's gonna be certain cities.
• 1:56
  SPEAKER_00: Santa Ana has their own rent control, um, San Pedro has its own rent control because it's part of Los Angeles City, Santa Monica has its own rent control, San Francisco has its own rent control.
• 2:06
  SPEAKER_00: So there's gonna be certain cities that had or have implemented their own rent control, which supersedes the state.
• 2:15
  SPEAKER_00: Okay, so a couple things.
• 2:16
  SPEAKER_00: And the most interesting thing is because I work in real estate, I get calls all the time from appraisers and they're calling me on my buildings.
• 2:25
  SPEAKER_00: Hey, you sold this one building, this eight-unit building, or this 12-unit building, or this four-unit building, um, and I'm appraising it, or I'm gonna appraise one similar to it.
• 2:34
  SPEAKER_00: But why did you put there's rent control?
• 2:36
  SPEAKER_00: So when we input data into the multi, um, into the multiple listing service, it asks, is this subject to rent control?
• 2:44
  SPEAKER_00: Now, because I specialize in multifamily, I'm I'm gonna know whether it's it's part of it or not.
• 2:51
  SPEAKER_00: But what amazes me the most is how many real estate professionals who sell residential real estate, commercial real estate, they don't know that we have statewide rent control.
• 3:02
  SPEAKER_00: I've had appraisers argue with me, saying I live in the city of Orange or Laguna Hills and Laguna Beach, and we don't have rent control.
• 3:09
  SPEAKER_00: We're not like you, LA.
• 3:11
  SPEAKER_00: And I have to remind them like, uh, you guys are idiots.
• 3:14
  SPEAKER_00: You guys are idiots.
• 3:16
  SPEAKER_00: All of California is subject to rent control.
• 3:18
  SPEAKER_00: So there's statewide rent control, and then there's citywide rent control.
• 3:23
  SPEAKER_00: So there's different, it depends on what city you're in.
• 3:26
  SPEAKER_00: So, how did they determine where to get CPI?
• 3:31
  SPEAKER_00: For some of you guys out there that that that want to learn, I'm gonna get into this now.
• 3:35
  SPEAKER_00: And so um, before I do that, I kind of want to show you guys something.
• 3:39
  SPEAKER_00: Back in 2021, the the allowable increase for call it like Long Beach, Anaheim, Orange County, um was eight point six percent.
• 3:53
  SPEAKER_00: In 2022, it went to 10% that you were allowed to do it during that 12-month span.
• 4:00
  SPEAKER_00: And then it dropped back down to like 8.8% in 2023 and 2024, which we're just coming out of, but we're still in it because it's June, 8.9%.
• 4:12
  SPEAKER_00: And in 2025, it went down to eight.
• 4:15
  SPEAKER_00: So this is constantly shifting.
• 4:17
  SPEAKER_00: No one is really, really keeping track.
• 4:20
  SPEAKER_00: We are here at Sage Real Estate.
• 4:21
  SPEAKER_00: We want to make sure that we that we gather this data, we give you guys the information so that if you're an independent apartment owner, you're not these big corporations, you don't know everything.
• 4:31
  SPEAKER_00: Sometimes I'll be surprised property managers don't know this stuff.
• 4:34
  SPEAKER_00: Okay, so I want to give you guys the tools so that you're better owners, you're better managers, and you know what you're doing, and you know more than a tenant.
• 4:41
  SPEAKER_00: Because if a tenant knows more than you, they're gonna eat you up alive.
• 4:43
  SPEAKER_00: I'm gonna tell you that right now.
• 4:45
  SPEAKER_00: You have to know more than them.
• 4:47
  SPEAKER_00: So thank you guys for tuning in.
• 4:48
  SPEAKER_00: So, right now, moving forward, August, it's 8%.
• 4:52
  SPEAKER_00: I'm gonna show you guys a graph here.
• 4:56
  SPEAKER_00: Okay, where does all this information come from?
• 5:00
  SPEAKER_00: So, CPI, it's the consumer price index.
• 5:05
  SPEAKER_00: So, this is kind of the basket of goods that the government tracks, and they want to know well, how much are goods and services going up?
• 5:13
  SPEAKER_00: Okay, um, and they track this every single month.
• 5:16
  SPEAKER_00: They track it on a 12-month scale for every single month.
• 5:20
  SPEAKER_00: And so when they passed AB 1482, they they told us, they said, use the month of April.
• 5:26
  SPEAKER_00: Now, they could have chosen any month, but they chose the month of April.
• 5:30
  SPEAKER_00: That's fine.
• 5:30
  SPEAKER_00: And so here's what I want to show you guys.
• 5:34
  SPEAKER_00: In the month of April, 2025, it's 3%.
• 5:37
  SPEAKER_00: So this is where that 8% comes from.
• 5:40
  SPEAKER_00: So I'm not just picking it out of the sky.
• 5:42
  SPEAKER_00: I'm saying 5% plus 3%.
• 5:44
  SPEAKER_00: Some easy math.
• 5:45
  SPEAKER_00: It's 8%.
• 5:46
  SPEAKER_00: And great.
• 5:47
  SPEAKER_00: Now, if we go back one year, it was 3.9.
• 5:50
  SPEAKER_00: Okay.
• 5:51
  SPEAKER_00: And that's so you could say that these last 12 months, as a as a landlord, because inflation went up a little higher, you were able to raise rents.
• 6:02
  SPEAKER_00: So let's talk about raising rents.
• 6:05
  SPEAKER_00: Um, in the past, before rent control statewide rent control, most owners, and and I work with a lot of owners in Long Beach and around the surrounding Southern California cities, most landlords, although there's this mentality of like raise the rents every year, and you read this in books and you hear it in podcasts.
• 6:24
  SPEAKER_00: I'll be honest with you, they weren't really raising the rents every year.
• 6:27
  SPEAKER_00: I wasn't either.
• 6:28
  SPEAKER_00: I wasn't raising the rents every year.
• 6:31
  SPEAKER_00: But what ended up happening was they passed rent control.
• 6:36
  SPEAKER_00: Now all of a sudden, owners feel the pressure, like this is my only time to raise it.
• 6:42
  SPEAKER_00: So I'm gonna take advantage of it.
• 6:43
  SPEAKER_00: So it's, I feel like it kind of backfired.
• 6:46
  SPEAKER_00: Um, like most things that uh that are passed at the state level.
• 6:50
  SPEAKER_00: The goal was like, we need to cap these rental increases and and we need to do this.
• 6:55
  SPEAKER_00: But what ended up happening, owners who never raised the rents are now having to raise them.
• 7:02
  SPEAKER_00: Owners who didn't care what the allowable was, because there before there wasn't really a cap, you could do whatever you wanted to do, but most weren't doing it.
• 7:11
  SPEAKER_00: Most the mindset of a housing provider before was this if the tenant's a good tenant and they're taking care of my property, I want them to stay.
• 7:21
  SPEAKER_00: I don't want to lose them because I don't want to have a vacancy, because a vacancy is gonna cost you anywhere between 10,000, 20,000,$30,000, depending on how much renovations the property needs.
• 7:31
  SPEAKER_00: So owners don't want to take that on.
• 7:33
  SPEAKER_00: And if they have a good tenant, they're like, yeah, I don't need to be maximizing the rent.
• 7:37
  SPEAKER_00: And I know that that's not what we're hearing because the public perception is greedy landlord, slumlord, and all these things that they're saying.
• 7:47
  SPEAKER_00: That's not really true.
• 7:48
  SPEAKER_00: A lot of these housing providers wouldn't raise rents, but now they're gonna raise rents because now there's this new law.
• 7:55
  SPEAKER_00: So it's kind of an interesting thing that I've seen.
• 7:57
  SPEAKER_00: But um, so again, this is the consumer price index.
• 8:01
  SPEAKER_00: And you could tell that like um it's been 3% March, April, May, and it actually came down.
• 8:08
  SPEAKER_00: Uh it increased in January, February, and then March and April kind of came down.
• 8:13
  SPEAKER_00: So it's not that you need to know this data and that you needed to be digging this up because we're gonna do the work for you.
• 8:21
  SPEAKER_00: But as soon as the CPI is announced, we have that on our calendar and we're gonna grab that data and bring it to you.
• 8:28
  SPEAKER_00: Um, how it works is just because you're allowed starting in August 1st of 2025 to go 8% doesn't mean that you have to go 8%.
• 8:36
  SPEAKER_00: Can you go less?
• 8:37
  SPEAKER_00: 100%.
• 8:38
  SPEAKER_00: If you wanted to do 3% increase, fine.
• 8:42
  SPEAKER_00: You want it to go 5%, fine.
• 8:44
  SPEAKER_00: You could do everything, but you can't go past 8%.
• 8:49
  SPEAKER_00: Can't do it.
• 8:50
  SPEAKER_00: Um, some owners just kind of pick a number and they they go with it.
• 8:57
  SPEAKER_00: Sometimes they go with a lower number.
• 8:59
  SPEAKER_00: Other owners I'm seeing, and and I don't, it just depends on the way that you own and manage units, but sometimes they'll say, you know what?
• 9:06
  SPEAKER_00: Since I'm allowed to go 8%, I'll do 4% now, and six months from now, I'll go another 4%.
• 9:11
  SPEAKER_00: I don't like that.
• 9:12
  SPEAKER_00: I think that if you're gonna decide to do it, and now why should you do it?
• 9:16
  SPEAKER_00: Well, let me ask you a question.
• 9:18
  SPEAKER_00: Did your insurance just go up?
• 9:20
  SPEAKER_00: Yeah.
• 9:21
  SPEAKER_00: Yeah, it went up by a lot.
• 9:23
  SPEAKER_00: It could have doubled, it could have tripled.
• 9:25
  SPEAKER_00: It went up by a lot.
• 9:27
  SPEAKER_00: That's what we're talking about.
• 9:28
  SPEAKER_00: Okay.
• 9:29
  SPEAKER_00: So all of a sudden your expenses went up.
• 9:32
  SPEAKER_00: Is your plumber and electrician uh charging you more now than ever before?
• 9:37
  SPEAKER_00: 100%.
• 9:38
  SPEAKER_00: They're charging you much more.
• 9:40
  SPEAKER_00: Water heater goes out, it was more, it costs more now than it did before.
• 9:45
  SPEAKER_00: And so for those reasons, you should be keeping up with um, you should be keeping up with what you're allowed.
• 9:53
  SPEAKER_00: The other reason to keep up with this, now anyone could if you're an owner and you're not gonna sell and you're cash flowing because you've added for uh because you've owned it forever, as a housing provider, you have the option to do whatever.
• 10:04
  SPEAKER_00: You don't have to do rent increases, or you could, you could go the full 8%, but you don't have to.
• 10:10
  SPEAKER_00: Um folks that are buying real estate now and they're paying in some cases a premium and the interest rates are high.
• 10:19
  SPEAKER_00: When that's happening, when that is happening, um, they come in and they want to get to market rent as soon as possible.
• 10:27
  SPEAKER_00: Okay.
• 10:28
  SPEAKER_00: So someone, someone asked me, I I got a chance to speak at an event, and um I got a chance to speak at an event two weeks ago, and they said, So what's the goal of buying multifamily?
• 10:42
  SPEAKER_00: Like what like what ends up being the actual purpose?
• 10:46
  SPEAKER_00: And I said, for every investor, the main main goal is how do I increase the income?
• 10:53
  SPEAKER_00: How do I maximize the income?
• 10:56
  SPEAKER_00: If there's a way to add a second parking spot, we're gonna add a second parking spot.
• 11:00
  SPEAKER_00: Okay, why?
• 11:01
  SPEAKER_00: Because now we've made the asset better and we could offer that parking spot to a tenant, we've raised the income.
• 11:07
  SPEAKER_00: Why do we want to raise the income?
• 11:10
  SPEAKER_00: Because in the world of real estate, the most important thing that I that I learned from my mentor, Mark Milan, is one, in the world of real estate, the higher the income, the higher the value.
• 11:19
  SPEAKER_00: The higher the income, the higher the value.
• 11:21
  SPEAKER_00: And so if you bought a property and it's an eight-unit building and it brings in$150,000 a year, I'm gonna guarantee that you're gonna eat all that up in the first couple of years, meaning that there's really no cash flow.
• 11:33
  SPEAKER_00: We talk about cash flow 30, 40% down.
• 11:36
  SPEAKER_00: There's really no cash flow.
• 11:37
  SPEAKER_00: Um, it's it's tough.
• 11:39
  SPEAKER_00: Now, at the five plus level, there should be cash flow because lenders are gonna give you a loan dependence that that is making money, right?
• 11:47
  SPEAKER_00: So that's the way it works.
• 11:48
  SPEAKER_00: Not necessarily the case at the fourplex level.
• 11:50
  SPEAKER_00: The banks won't care if you lose money so long as you have the resources to cover the difference.
• 11:54
  SPEAKER_00: So, really important thing to know that.
• 11:56
  SPEAKER_00: But um cash flow, it will be hard to come by, although there is tons of opportunity right now because values are have softened significantly.
• 12:07
  SPEAKER_00: So I highly recommend if someone is a growth mode, not every and listen, there's tons of investors, and I'll tell you what, not every investor is in growth mode.
• 12:20
  SPEAKER_00: Some investors are in defensive mode, meaning like, I made it, I'm comfortable.
• 12:26
  SPEAKER_00: Now, after years of trying, now I have cash flow.
• 12:30
  SPEAKER_00: Now I have lots of equity, I'm good.
• 12:32
  SPEAKER_00: And that's fine.
• 12:33
  SPEAKER_00: And I respect that.
• 12:35
  SPEAKER_00: But I'm in growth mode.
• 12:37
  SPEAKER_00: I have to go acquire, I need to go invest.
• 12:39
  SPEAKER_00: I need to bring in, I need to take on risk so that there's a reward at the end.
• 12:45
  SPEAKER_00: And that is the main motivator for what I'm doing and how I'm advising my clients.
• 12:49
  SPEAKER_00: Okay.
• 12:51
  SPEAKER_00: And so right now, if you're in growth mode, this is the perfect time to get into the five plus market because it's selling at a discount.
• 12:59
  SPEAKER_00: 17% of active properties that are five plus on the market today are selling for less than five years ago.
• 13:06
  SPEAKER_00: Wow.
• 13:07
  SPEAKER_00: Less than five years ago?
• 13:08
  SPEAKER_00: Yeah, that's amazing.
• 13:09
  SPEAKER_00: That means that you're buying an asset that in most cases, in the last five years, uh, the prior person who's gonna lose, they're gonna lose in most cases.
• 13:18
  SPEAKER_00: Maybe and listen, just because someone lost doesn't mean you lose.
• 13:22
  SPEAKER_00: When someone loses, you could win.
• 13:23
  SPEAKER_00: Now, in some cases, it's a win-win.
• 13:26
  SPEAKER_00: And I'll tell you right now, in some of these cases, it's a win-lose.
• 13:29
  SPEAKER_00: Uh, meaning someone lost and you're gonna and you're gonna buy smart.
• 13:34
  SPEAKER_00: Okay, so five years ago, someone bought a 12-unit building.
• 13:38
  SPEAKER_00: Okay.
• 13:39
  SPEAKER_00: They they did some substantial renovations, they were able to negotiate cash for keys with some of these tenants.
• 13:46
  SPEAKER_00: They were able to get them to move out, they were able to do renovations to the kitchens, to the bathrooms, to the electrical, to the plumbing, to the roof, to the electrical panels.
• 13:55
  SPEAKER_00: They painted the building.
• 13:56
  SPEAKER_00: Okay, so the property's better now.
• 13:58
  SPEAKER_00: They got rents in most cases all up to market, so that's terrific.
• 14:02
  SPEAKER_00: So the asset is improved, it's making higher income.
• 14:07
  SPEAKER_00: Oh, their loan is coming due.
• 14:10
  SPEAKER_00: It's switching, it's going from 3% to 6%.
• 14:14
  SPEAKER_00: And by the way, in order for them to take on this new loan, they have to put up another$250,000.
• 14:22
  SPEAKER_00: That is just an example of what is happening.
• 14:25
  SPEAKER_00: And for that reason, they're talking to their brokers.
• 14:29
  SPEAKER_00: Hopefully, we're their broker, maybe, maybe not.
• 14:31
  SPEAKER_00: And then they're realizing I want out.
• 14:34
  SPEAKER_00: This, this, this property to me is a loser.
• 14:36
  SPEAKER_00: I overpaid for it.
• 14:38
  SPEAKER_00: I settled for a very low cap rate because during that time that was the norm.
• 14:41
  SPEAKER_00: Cap rates have significantly increasing and it's driven the price down.
• 14:45
  SPEAKER_00: And so, this is for someone who's been patient, for someone who still believes that multifamily is the best way to um to build wealth.
• 14:54
  SPEAKER_00: Perfect time to get in.
• 14:56
  SPEAKER_00: So, anyhow, um, would love to hear your comments.
• 14:59
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• 15:01
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• 15:05
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• 15:09
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• 15:10
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• 15:13
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• 15:14
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• 15:18
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• 15:31
  SPEAKER_00: Okay.
• 15:32
  SPEAKER_00: And so thank you guys so much.
• 15:34
  SPEAKER_00: Um, thanks for tuning in.
• 15:36
  SPEAKER_00: That's all for now.
• 15:38
  SPEAKER_00: Until next time.