It is not all that uncommon to purchase a residential income
property where the current tenants are paying below market value rents. As the
new landlord, how much can you legally raise the rent?
Under California Law there is currently no maximum limit for rent
increases. However there are regulations that must be followed.
- If the tenants have leases, the leases carry over to your new ownership. The rent cannot be increased during the terms of the lease unless the lease provides for rent increases
- If the rent increase or cumulative rent increases are greater than 10% of the lowest rent during the past 12 months, you must give a minimum of a 60 day notice.
- If the rent increase or cumulative rent increases are 10% or less than the lowest rent during the past 12 months, you must give a minimum of a 30 day notice.
For specific details on advance notice requirements please
refer to the California Landlord Tenant Guide which can be found on the California
Department of Consumer Affairs web site at www.dca.ca.gov.
Local rent control ordinances may also limit rent increases,
or impose additional requirements on landlords. If your investment property is
in an area with rent control, check with your local rent control board to find
out what additional restrictions apply.
Having tenants that are paying market value rents are a
valuable asset when selling a residential income property. It is highly recommended
that you renew leases annually and adjust your rents accordingly to maintain
tenants that are paying market value rents.
