Ways to Still Profit on Rent Controlled Property

Just as The Joker is to Batman and Dr. Evil is to Austin Powers, rent control is the landlord’s enemy. Supporters of rent control claim that without it many people couldn’t afford housing. But what happened to the basics of economics? The law of supply and demand should determine what your rental unit is worth, not the government.

Because of the handcuffs it puts on landlords, rent control creates rundown properties. Utilities, taxes, and insurance keep going up, but landlords of rent-controlled properties are unable to recover those costs through rent increases. This means they have less money for maintenance and improvements.

If you take notice you’ll see that in areas where rent control is in place, few new apartment buildings are going up. Condos are usually built instead because it is common knowledge that a landlord will have a hard time making any profits with apartments in these areas. For this same reason, rent controlled apartments are often turned into condos and sold in order to make them profitable for owners.

When an area has no quality rental units, it negatively affects the very same people the law claimed it was designed to help! On top of this, investors, like me, end up experiencing a lot of frustration.

So what are the available options to protect against losses with rent controlled properties in either U.S. or Canada? Here’s what my husband and I advise doing with rent controlled properties:

1. Raise rent annually by the maximum percentage permitted. This number could differ depending on which city/province you are in and is known to change every year.

2. In most cases you’ll be able to move rents back up market rate once tenant vacates.

3. Check to be sure the person who signed the lease is actually occupying the unit. A friend of mine once had a fabulous apartment with views of Central Park for which she paid next to nothing. She didn’t even know the person’s name that was actually listed on the lease. Had the landlord been paying closer attention he or she could have evicted my friend and gotten market value for the apartment.

4. Update/renovate the unit. A landlord, in many cases, can ask a tenant to vacate premises while improvements are being made. When renovations are complete you can begin charging higher rents based on the improvements you’ve recently completed. For example: if you spend $2000 to make the property better and could possibly charge an additional $500 in rent per month, your renovation will be paid off in no time and you will be able to earn a nice profit each month moving forward.

Pay attention to what’s going on in the market and with your property and you’ll stand a good chance of making a profit. While it may be challenging to record profits with your rent controlled properties, it is not impossible.

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