How Rent Control Impacts Real Estate Investors

Rent control is gaining traction as some rental markets heat up! Learn more about how this impacts real estate investors.

It is not news that rents are skyrocketing in many markets around the U.S., generating a lot of talk and some action around rent control. Rent control, or rent regulation, is a government program that places limits on the amount landlords can charge for rent in an effort to create more affordable options. The idea is to establish more stability within the housing market, however, rent control is a short term solution that may not provide enough benefit to outweigh the long term risks.

How does this impact investors?

While rent control has great intentions for tenants, it has the potential to simultaneously burden private investors and may even discourage future investments for the regulated area, leading to less growth and development. Inflation, rising interest rates, and the cost of building materials and labor has increased significantly over the last two years. Therefore, investors are required to charge higher rents in order to make any profit on their investment. Markets that have passed rent regulation policies now hold less incentives for investors and developers, so they are taking their money elsewhere. This would cause a slow or even stop in rehab and development, which overtime would cause harmful effects on the municipality.

Some investors are willing to stick it out and play the long game, however, others are retreating, selling their properties in rent controlled areas, and looking for new areas to invest in. However, there is no way to know for sure that rent control won’t make its way to those areas in the future.

Supply and demand is a major driver in the implementation of rent control. When not enough housing is available to fit the demand, rents increase. This is primarily an issue affecting apartments and multifamily properties, however, for the single family rentals (SFRs) impacted, investors are taking the opportunity to supply more housing by building accessory dwelling units (ADUs) on SFR properties. Even areas who have adopted policies around rent control are approving the addition/renovation of ADUs. Accessory dwelling units are a great way for investors impacted by rent control to still experience a good return on their properties.

No one invests in real estate assuming there is no risk. It is all about navigating the changes and patterns of the market and getting innovative with investment types and strategies.

If you’re planning to invest in multifamily, single family rentals, or accessory dwelling units, reach out to one of the experts at CALCAP Lending to discuss your financing options.

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About CALCAP Lending

A division of CALCAP Advisors, CALCAP Lending benefits from the expertise of a seasoned team of professionals with extensive, successful track-records covering a variety of disciplines and leading large, nationally-recognized institutions. A private money direct lender, CALCAP Lending provides short to mid-term financing for property investors and businesses looking to purchase, refinance, renovate, and construct residential or commercial properties.

Lending FAQs

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What is private money lending?

Private money lending is a collateral-based lending strategy that is often associated with shorter terms and more attractive features. A private money loan offers more flexibility than a conventional mortgage or bank loan.

How does a private money loan work?

Private money lenders provide financing using money from private entities. Private money loans often work as bridges to help investors gather funds to achieve their short term real estate goals, but long term, permanent options may also provide.

Why would I choose a private money lender?

There are many advantages to using a private money lender for your real estate investments! Private money lenders can be more lenient when it comes to borrower credit issues, often there are no prepayment penalties, you can leverage your cash to buy multiple properties, and private money loans are quicker when compared with institutional loans.

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How long does the lending process take?

Private money lending can be a quick and painless process. From start to finish, 30 days is common, however, turn around times can be as short as 10 business days.

Can I still be approved for a loan if I have bad credit?

Generally yes, we understand that people have temporary financial issues that come up, and we want to work with you to help you rise up financially to a better place. Offsets to credit concerns may include experience as a real estate investor, good cash reserves, and/or larger down payments.

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