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EAST BAY
RENTAL HOUSING ASSOCIATION
Volume XXXVIII Number 31 | July/Aug 2024
EBRHA OFFICE
3664 Grand Ave., Suite B, Oakland, CA 94610
TEL 510.893.9873 | FAX 510.893.2906
ebrha.com
CHIEF EXECUTIVE OFFICER
Derek Barnes aemail@ebrha.com |
EBRHA BOARD OF DIRECTORS Francisco Acosta, Luke Blacklidge, Maya Clark, Carmen Madden, Chris Moore, Courtney Morse, Fred Morse, Joshua Polston, Wayne C. Rowland, Jack Schwartz, Maria Recht, Aaron Young
PUBLISHED BY East Bay Rental Housing Association
PUBLISHER Derek Barnes
EDITOR Michelle Gamble
ART DIRECTOR Bree Montanarello
Rental Housing (ISSN 1930-2002-Periodicals Postage Paid at Oakland, California. POSTMASTER: Send address changes to RENTAL HOUSING, 3664 Grand Ave., Suite B, Oakland, CA 94610.
Rental Housing is published bimonthly for $9.95 per issue by the East Bay Rental Housing Association (EBRHA), 3664 Grand Ave., Suite B, Oakland, CA 94610.
NO ON PROP 33 Protect Costa-Hawkins 2024 Contribution Campaign
UNDER ATTACK...AGAIN
To help stop the so-called "Justice for Renters" initiative, which will be Proposition 33 on the ballot in November, the East Bay Rental Housing Association is asking for your support. We need to fight this third attempt to repeal Costa-Hawkins, led by the same anti-housing activists who failed twice with Propositions 10 and 21 in 2018 and 2020. We are helping our state affiliate, CalRHA, raise $5 million towards this campaign, so we are all in this together.
Protect Vacancy Decontrol
Protect New Construction, Single-Family
Homes, and Condos from Rent Control
WHAT IS COSTA-HAWKINS?
The Costa-Hawkins Rental Housing Act is a California state law that It also protects VACANCY DECONTROL - a policy that allows rental housing providers to reset the rental rate on any rent-controlled apartment after a renter moves out. Costa-Hawkins is extremely important because it exempts single-family homes, condominiums, and new construction built after 1995 from RENT CONTROL.
To learn more AND determine out how much you could lose on your rental property after 5 years if Costa-Hawkins gets repealed, scan the QR code.
Welcome
A LETTER FROM
EBRHA CEO DEREK BARNES
We’ve made it through the first half of 2024! A lot has happened since January and EBRHA has been actively advocating on behalf of rental property owners at the state and local levels. However, there is more work for us to do together in this ever-shifting housing landscape.
Despite enormous opposition from Concord property owners, Concord City Council passed an ordinance with more stringent renter protections and rent caps beyond what AB1482 already provides. While a more watered-down version of the initial ordinance was ultimately passed, it fired up a group of engaged property owners who are extremely motivated and clearing a path to identify alternative council member candidates who will protect the rights of housing providers. In Berkeley, a fourth attempt to advance a Tenant Opportunity to Purchase Act (TOPA) proposal was successfully killed in committee. After public and private discussions with councilmembers that included EBRHA and APRA owners, Albany City Council is advancing a proposed business tax for rental property owners as a ballot measure in November to fund emergency rent payments and legal assistance programs. Some of the more onerous provisions were removed due to owner advocacy.
Alameda County continues its efforts to pass stronger renter protections beyond AB1482 in the unincorporated areas of the county and a Mediation-First ordinance that would require owners and renters to engage in mediation first to resolve a variety of housing disputes – except unlawful detainer proceedings. After multiple stakeholder meetings over nearly two years, groups are still at an impasse. Alameda County District 1 Supervisor David Haubert has supported small rental property owners through this process. In this issue of Rental Housing, Haubert provides insights into the continued housing challenges and successes in his district.
While there is always a lot to keep track of locally, many industry eyes are on a critical state ballot measure. Proposition 33, “Justice for Renters” (the repeal of Costa Hawkins), will also make its way to the California state ballot in November, and we are encouraging all rental property owners to take action, contribute, and join us in the fight to protect Costa-Haw-
kins – which ensures vacancy decontrol. If you are unfamiliar with Costa-Hawkins or vacancy decontrol, or you don’t think a repeal will impact you, head immediately to www.ebrha.com to learn more and to use our custom calculator to determine how a repeal will affect you financially.
Closer to home, Oakland has had its own set of continued challenges with public safety, a business exodus, unresolved structural deficits, and a shrinking tax base. A recall of Oakland’s Mayor Sheng Thao will successfully advance to the ballot in November with over 40,000 signatures – joining the Alameda County recall of District Attorney Pamela Price, which will also be added to the ballot this fall. In June, the FBI also raided Mayor Thao’s home, along with the office of California Waste Solutions (CWS) and its owners, the Duong family, who have deep political ties locally, statewide, and nationally for years. More recently, the FBI also served the City of Oakland a subpoena as part of its political corruption investigation.
Here’s another interesting point of reference in this corruption investigation. In 2014, CWS, a small family-run recycling company, secured a massive contract with the city of Oakland for recycling that raised many eyebrows. EBRHA raised concerns at the time. How could the Duong family’s small trash company, with little to no infrastructure, secure a contract worth tens of millions of dollars annually?
The Oakland city leaders and legislators ignored several letters written by EBRHA Board President Wayne Rowland. In turn, EBRHA filed a lawsuit in 2016 (Zolly vs. The City of Oakland) against the city on behalf of rental property owners who experienced enormous increases in garbage and recycling fees since Oakland awarded the contract to CWS. EBRHA is currently in active discussions with the city, and we are confident the matter will be resolved soon. However, the recent events involving Oakland elected officials, CWS, and the Duong family are beyond coincidental. A riveting historical account written by EBRHA’s Marketing Communications Manager, Chris Tipton, is in the July Rentrospect newsletter.
East Bay residents and property owners face many challenges, and most days, things appear to be rapidly deteriorating around us. A brilliant book by Pema Chodron, When Things Fall Apart, explains the wisdom gained in life’s setbacks and disruptions as part of the natural transformation process – the phenomena of finding order in chaos. Stability is an illusion because everything around us is constantly changing and in a state of decomposition. When things feel like they are falling
Derek Barnes
apart, they’re actually falling into place – toward the next temporary stasis. It is an important concept to understand. When we embrace it and support each other in our communities, we can more effortlessly navigate shifts and thrive during times of change that seem chaotic.
As we navigate the complex landscape of maintaining rental housing businesses in the East Bay, we face a triad of moving objectives: production, protection, and preservation. Financial challenges and ineffective policies may impact these objectives significantly. EBRHA is constantly examining these shifts, identifying persistent problems, and promoting alternative ideas to better solve these problems in support of the housing community.
PRODUCTION
The demand for rental housing continues to outpace supply in most markets, but it is softening in Oakland due to high crime and other factors pushing people out. However, high land costs, construction, and regulatory compliance make it difficult to develop new rental properties. Budget deficits limit the availability of public funds and incentives that could support housing development. This financial strain reduces the ability of local governments to streamline approval processes, offer tax credits, or provide subsidies essential for spurring new construction and bringing vacant units back into the market.
PROTECTION
Ensuring the safety and security of rental properties is paramount. Fiscal constraints within local governments can lead to reduced funding for critical services such as roads and infrastructure, fire, building inspections, law enforcement, and emergency response. This reduction affects our ability to maintain safe living environments for our renters. Moreover, legal protections for housing providers are also at risk, with budget cuts potentially impacting the efficacy of eviction courts and more cost-effective routes like mediation services.
PRESERVATION
Preserving existing rental housing stock is another significant challenge. Older buildings require regular maintenance and upgrades to remain habitable and compliant with current codes. Financial deficits mean fewer public resources for grants or low-interest loans that help property owners undertake necessary renovations and major repairs. This lack of funding can lead to the deterioration of properties, reducing the overall quality of rental housing available and potentially leading to the displacement of renters.
In light of these challenges and opportunities, EBRHA members must stay informed and engaged with local and state policy developments. Advocacy for supportive legislation, innovative solutions, and collaborative efforts with local governments and community organizations is essential. By working together, we can overcome these hurdles and ensure the continued availability of quality rental housing in the East Bay.
rental housing?
NEW MEMBER PROMO
New members receive a $40 account credit when they join.
REFERRAL PROMO
Existing members refer a new member to EBRHA and receive a $50 account credit.
* JULY 4 Independence day
JULY 9
2—3:30PM The Roundtable Presented by Wayne Rowland
JULY 16
3—4:30PM Member meeting
JULY 18
2—3:30PM How liability insurance & asset protection work together Presented by Jerry Conrey and Harry Barth
JULY 27
4:05PM Summer event Giants baseball game vs. Colorado Rockies
JULY 30
Asset protection Open Forums Presented by Paul Hitchcock and David Calderon
AUGUST 13
2—3:30PM The Roundtable Presented by Wayne Rowland
AUGUST 20
3—4:30PM Member meeting
AUGUST 22
2—3:30PM The Forum Presented by Dan Lieberman
* NON-EBRHA EVENTS
If you would like to submit an event, please send an email to editor@ebrha.com .
Historical brick building on Main Street, Pleasanton.
EBRHA members can earn a 2% annual rebate on all in-store and homedepot.com purchases. Sign up for your free Home Depot Pro Xtra account and use program code HDNAA-EBAA to start earning today.
Plus, save up to 20% OFF BEHR® Paints, Stains and Primers. Contact a BEHR PRO® Account Manager at behrpro.com/rep for details or sign up at homedepot.com/ProXtra.
*For in-store and homedepot.com purchases. Annual purchases mus t total a minimum of $25,000 to qualify for the rebate. See homedepot.com/c/ProXtra_TermsandConditions for Pro Xtra pro gram details.
Out & About
EBRHA MEETINGS, SPECIAL EVENTS, AND MEMBER MIXERS
EBRHA Board Member Chris Moore, wife Sabina and friends, at his May birthday celebration in Piedmont
CCIM President Tony Rishell with EBRHA's Derek Barens, at the CCIM (Certified Commercial Investment Member) PropTech Luncheon in May
EBRHA Legal Fundraiser in May. Hosted by Board Member, Chris Moore
Wayne Rowland speaks at the EBRHA Legal Fundraiser in May. Hosted by Board Member, Chris Moore
EBRHA's April Networking Mixer at Left Bank Brasserie.
EBRHA Staff, Gurleen Kaur and Shani Brown t EBRHA's April Networking Mixer at Left Bank Brasserie.
EBRHA's April Networking Mixer at Left Bank Brasserie.
EBRHA Membership Specialist Gurleen Kaur at the May Legal Fundraiser. Hosted by Board Member, Chris Moore
Out & About
EBRHA MEETINGS, SPECIAL EVENTS, AND MEMBER MIXERS
EBRHA CEO Derek Barnes and EBRHA Board Member, Francisco Acosta. Alameda Chamber of Commerce mixer in May at the USS Hornet Sea, Air and Space Museum
EBRHA CEO Derek Barnes and Chief of Staff Oakland D6 Patricia Brooks. Once Upon a Time annual gala, Children’s Fairyland, Oakland in May
Apartmentalize 2024 held in June at the Philadelphia Convention Center
Alameda County Supervisor Lena Tam African American Chamber of Commerce President Cathy Adams Alameda County Sr. Policy Advisor Julie Yim. Juneteenth Celebration, Oakland Ballroom
CalRHA Association Executives at Philadelphia City Hall (June), Apartmentalize 2024
Oakland Chamber of Commerce annual awards. Loren Taylor, Derreck Johnson, Derek Barnes, Michael Houston at Children’s Fairyland, Oakland in June
June member mixer and Shani Brown’s farewell party at Bocanova, Oakland
Spotlight
EBRHA MEMBER SPOTLIGHT: AIRE SERV: AIR CONDITIONING AND HEATING EXPERTS
Aire Serv is a trusted name in the field of heating and air conditioning installation, maintenance, and repair. Aire Serv is proud of its reputation for putting clients first and getting the job done right the first time, every time. Property owners and operators who use Aire Serv are choosing qualified professionals who are leading the way in the AC and heating industry.
Aire Serv uses licensed air conditioning and heating experts who know how to perform all types of AC and heating maintenance and repairs and guarantee their service. Our friendly, respectful service includes service tailored to your unique situation,
unsurpassed professionalism, and 24/7 availability for your emergency needs. Aire Serv wants renters to stay comfortable and breathe clean air all year round!
According to the company website, “There are a number of factors that set the company apart. For example, our experience in this field is simply unmatched. We understand how to properly service all types of heating, ventilation, and air conditioning (HVAC) systems. Our AC and heating technicians are licensed and knowledgeable. We emphasize customer service and always get the job done right the first time, guaranteed!”
Aire Serv works with both residential and commercial property owners.
“...our experience in this field is simply unmatched.”
Aire Serv makes property owners’ jobs easier by focusing on excellence in customer service and quality AC and heating services. We are proud of our reputation for putting clients first, with a brand synonymous with excellence since 1992. Wherever you see the name Aire Serv, you can expect quality services and customer attention.
The company’s commitment toward customer service shows in the little touches. For example, they recently didn’t charge for additional material and labor when taking care of other minor issues that popped up during a main job. This demonstrates the aforementioned dedication to ensure their customers are well-serviced and satisfied with the work.
Since this issue spotlights Pleasanton, Aire Serv works in the area where experts noted an increasing trend in replacement of older units with new energy efficient systems, and maintenance plans to prolong the life of the systems, and adding multizones for better air flow, heat/cool and temperature control.
Also, they are seeing more heat pump installations. A heat pump is a device that uses work to transfer heat from a cool space to a warm space by transferring thermal energy using a refrigeration cycle, cooling the cool space and warming the warm space. Heat Pumps are more efficient than traditional HVAC system and are eligible for tax credits/rebates and save the environment.
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Spotlight
FOCUS ON PLEASANTON
BY BREA HARPER
Rent Control: No
Just Cause Evictions: Yes
Special Smoking Ordinance: Yes
Percentage of Residents Who Rent: 32.46%
Average Rent for 1 or 2 Bedrooms Housing: $2,795
DEMOGRAPHICS
According to the World Population Review, “Pleasanton has a 2024 population of 73,702. Pleasanton is currently declining at a rate of -1.99% annually and its population has decreased by -7.5% since the most recent census, which recorded a population of 79,676 in 2020. The average household income in Pleasanton is $230,936 with a poverty rate of 5.28%. The median age in Pleasanton is 41.5 years: 41.1 years for males, and 42 years for females.” Translated, the region population has a high percentage of millennials, who frequently rent. According to Axios, “There are still 17.2 million millennial renters, which is still considered the dominant renter generation.”
According to the most recent ACS, the racial composition of Pleasanton was:
• White: 45.66%
• Asian: 41.13%
• Two or more races: 7.13%
• Other race: 3.69%
• Black or African American: 1.66%
• Native American: 0.37%
• Native Hawaiian or Pacific Islander: 0.35%
LEASE AGREEMENTS
According to “FAQs about Lease and Rental Agreements in Pleasanton, CA” by Bret Michaels, the following recommendations should be addressed in
lease agreements:
• How long is the renter period
• Deposits and rent that the renter will pay
• The actual number of people who can live on the rental property
• Utilities and who will pay for it
• Pets are allowed or not
• Can the renter sublet the property
• Property owner’s access to the rental property
• Who will pay the lawyers fee if there is a lawsuit concerning the meaning or implementation of the lease or rental agreement
RENT CONTROL
Although many single-family homes in Pleasanton are exempt from rent control, property owners can only apply it when the language around it is stated in the lease agreement. Exemption from rent control must be provided to renters in written form. This rule went into effect July 1, 2020 for any renter whose lease began or was renewed on that date. Property owners who fail to provide notice can have their home or condo subject to rent control regulations.
JUST CAUSE EVICTIONS
The Tenant Protection Act of 2019 bifurcated the eviction process into two areas: evicting for cause and premature
and mandated ending of a lease agreement before it expires. Property owners can use Just Cause Evictions for renters who fail to pay rent or violate the lease agreement rules. Owners are permitted to take legal steps to evict. A no-fault lease agreement cancellation requires property owners to pay a relocation fee equal to one month’s rent.
PLEASANTON SMOKING ORDINANCE
Property owners are required to enforce a ban on smoking in “indoor or outdoor common areas such as hallways, lobbies, community rooms, playgrounds, and parking lots,” along with private outdoor areas including balconies, decks or patios, but will not apply inside individual units unless stated in a rental lease agreement.
REQUIRED DISCLOSURES
Pleasanton requires the following disclosures:
• Lead-Based Paint
• Pest Control Treatments
• Presence of Toxic Mold
• Registered Sex Offender Database
• Smoking Policies
Brea Harper is a Bay Area writer.
A cool, sunny day in Pleasanton
Alameda County Fairgrounds, Valley Avenue, Pleasanton
Local Leader
INTERVIEW WITH ALAMEDA COUNTY SUPERVISOR DAVID HAUBERT
DAVID HAUBERT COUNTY SUPERVISOR
EBRHA Communications Manager, Chris Tipton, recently spoke with Alameda County Supervisor David Haubert to talk about housing in Pleasanton and throughout the county. Supervisor Haubert represents District 1, which includes the cities of Dublin and Livermore; most of the city of Fremont; the unincorporated community of Sunol; a portion of the City of Pleasanton; and most of the unincorporated area of the Livermore-Amador Valley.
Our focus for this issue of Rental Housing magazine is on Pleasanton, which is a city that is part of your district as county supervisor. How is the rental environment there and what are some rental housing issues the city is facing? Pleasanton is a very well-planned community that has existed on the books here for over a hundred years. It’s a mature city that was well-planned. It has a diverse housing stock. There are apartments, duets, and duplexes, mobile home parks, affordable housing complexes like Irby Ranch, which is a residential community providing affordable, independent housing for people with intellectual and developmental disabilities. So, it has a wide range of housing opportunities.
What are some of the profound challenges you see for providing housing in Alameda county?
The challenge moving forward is to continue to maintain a similar proportion of affordable housing as all prices rise. So, as the rising tide lifts all prices above living wage levels, it becomes less and less affordable, and therefore more difficult to provide. And so, in some sense, I think the entire Bay Area is somewhat cursed by its own success. As we become more successful and the average median home slips further and further away from average salaries, that becomes a challenge.
What are some changes you’d like to see to provide more rental housing growth in Alameda County? Part B –any legislation and policy changes? I think to maintain the proportion of affordable housing is to continue to require affordable housing be a part of our state housing elements. It’s not a county
policy, but a state policy; the regional housing allocation numbers require a proportion of homes to be affordable.
So, you think it’s important for cities to take ownership of the housing element requirements and work toward that proportion, because if they don’t, they would lose control to the state on what and where housing gets built in their city?
Yes, and you can even point to a while back when the city of Pleasanton was found non-compliant and it was up to a judge to decide land-use decisions. Cities are well incentivized to follow state rules, and if they don’t, they’re punished.
Are there cities in Alameda county that you believe are successful or innovative in providing more housing?
Sure! Right across the street in Dublin. They’ve added quite a bit of more dense and therefore affordable housing. So, when I mention a more diverse housing stock, just look at the city of Dublin. Just like Pleasanton, they have very high-end gated communities, but all the way down to condos, duets, and apartments. They just have more of it. So, their diversity is proportioned a little bit differently.
Are you supportive of more mixed-use housing, near public transportation, with businesses on the ground floor and housing above, and create more urban communities where you don’t need a car and less single-family sprawl? I think, indeed, height is something that we’re going to have to consider. If we want to have urban growth boundaries and protect open space and enjoy nature with hiking trails and supporting the East Bay Regional Park System
and continue to have open space like the vineyards out in Livermore, as we continue to protect those amenities, we’re going to have to choose to grow up instead of out.
How do you think the County could help with the affordability crisis that some cities are facing?
I think the county just needs to have strong communication with the cities. Land use is at the city’s discretion, so the county needs to be focused on its jurisdictions and continue to have good communication with the cities.
Any new programs or policies that you see the county being actively involved in that relates to housing? Is there anything you’d like to share about any upcoming housing policies or programs that you would like to share or talk about?
As you know, we’re wrestling with protections for renters, which is a little different than the housing stock; but to that point, I’m concerned that we not create burdensome policies that drive the unintended consequences of land owners choosing to pull out of the rental housing market, and I am concerned that if we aren’t conscious of it, that it would happen. So, I guess I would say that my policy direction is to hold the line at the state of California’s Rental Housing Policy and go no further. There’s no reason we would be different from anyone else in the state of California … just because we want to be more progressive … just because we want to be on the pushing edge and going beyond the edge of California?
The California State Legislature makes decisions for the state, and I don’t see why we have to be any different.
East Bay Apartment Advisor
As an owner of East Bay multiunit properties for 25 years, John Caronna has the knowledge and 14 years of invaluable experience to assist in anything regarding your property!
USING LIMITED LIABILITY COMPANIES TO PROTECT YOUR RENTAL PROPERTY FROM LIABILITIES
BY DAVID R. CALDERON
Dealing with unforeseen liability involves proper legal asset protection. Insurance will provide basic liability protection in many instances (depending on the nature and scope of coverage). Insurance will not protect you from fair housing or discrimination cases or wrongful eviction. Mold issues may be excluded. Insurance will not protect you from a dispute with a contractor. Punitive damages are not covered by insurance in any situation.
The best basic asset protection strategy you can take if you are a property owner is to get your property out of your name (and out of the name of a family trust) and get it into a Limited Liability Company (LLC). An LLC operates as a shield against risk. If the property is held by a general or limited partnership or corporation, you may want to consider converting those to LLCs as well.
LLCs are formed to protect assets and limit liability. Forming an LLC to hold rental property protects the owners (also known as “members”) from personal liability for the debts and obligations of the LLC. If the LLC is properly formed (including the drafting of a solid operating agreement) and managed, creditors of the LLC can only look to the LLC’s assets to satisfy claims against the LLC. Creditors cannot require the members to pay LLC debts from personal assets.
As a property owner, you have two primary types of risk that a properly formed and managed LLC can help guard against.
Inside liability: Risk associated with the debts and obligations of the property. Without inside liability
protection, a property owner can be personally liable for debts and obligations of the property.
If there is no inside liability shield, a judgment related to the rental property is enforceable against the owner. The creditor can look to the personal assets of the owner to satisfy the debt. The owner’s home, personal bank accounts, and even other assets such as other rental properties held in the owner’s name are at risk.
If the LLC is properly formed and operated, then the owner has no liability for the business obligations unless the owner signs something in his or her personal capacity (like a personal guarantee for a loan). The debts and liabilities of the business are confined to the business. The owner’s other assets are not at risk for debts of the business.
LLCs and corporations both provide a shield against inside liability, but only LLCs provide a shield against inside and outside liability.
Outside liability: This deals with the debts and obligations of the owners and how the personal liability of an owner could affect the ongoing operation of the business or the other business owners.
Without outside liability protection, the creditor of an owner could seize his or her interest in the business and act in ways that are detrimental to the going concern of the business. Depending on the circumstances, the creditor could force liquidation of the business or otherwise override the decisions of the other business owners.
If there is no outside liability shield, a judgment against one owner is enforceable against all the owner’s assets, including the business.
Charging order protection: LLCs are the go-to business entity for outside liability protection. This is due to a remedy called a “charging order” that LLCs borrow from partnership law. A “charging order” is a statutory remedy that limits the creditor to seizing distributions that an owner would receive. Although the creditor will receive any distributions that would otherwise go to the owner, the creditor receives no management or voting rights and cannot force a liquidation of the property in the LLC. If the LLC is properly structured, the creditor is blocked from getting to the underlying assets of the company.
As discussed below, it is important to understand the reason for charging-order protection. Charging orders protect the business – and specifically the other owners of the business – from the repercussions of one owner’s legal problems. Without charging-order protection, innocent owners of the business would be unfairly penalized by the seizure of the business assets by one of the owner’s creditors. The charging order prevents this by limiting the creditor’s right to manage or otherwise interfere with the business. This limitation protects the other business owners from being forced into a partnership with the creditor.
Corporations do not provide the same protection against outside liability. The shareholder’s creditors can seize the shares held by the shareholder. When the creditor owns the shares, the creditor has all the management and voting rights associated with those shares. In most small businesses, the ownership rights associated with the shares create a risk that the
creditor could take control of the business or even liquidate the corporation to satisfy the judgment.
The charging-order protection offered by LLCs can be further bolstered by proper planning. For example, the LLC can be structured to be manager-managed, and the operating agreement can be drafted to give the managers control over when distributions will be made. Separating the economic ownership of the company from the managerial functions provides an added layer of protection. A creditor of a member would have no managerial rights. If the members are also the managers, there is no downside to using this structure.
“ The best basic asset protection strategy you can take if you are a property owner is to get your property ... into a Limited Liability Company (LLC).”
The charging-order protection can also be enhanced by including provisions in the operating agreement that assigns “phantom income” to the creditor. Phantom income is income that is taxable to the creditor, even if the creditor does not receive any economic distributions from the company. The possibility of taxable phantom income without a mecha-
nism to compel distributions could make an LLC interest an unattractive asset for a creditor and better protect the business.
Hopefully, this article provides a little more insight into how you can better protect your rental properties from liability using LLCs.
David Calderon is an attorney at law and senior partner at BarthCalderon, LLP.
Inspire
AN EFFECTIVE BUSINESS PLAN CREATES SUCCESS
BY MICHELLE GAMBLE
Some people don’t plan for anything and fly by the seat of their pants. Sometimes this approach works just fine. However, most of us don’t use spontaneity as a strategy for success. Business planning, whether for your property management or ownership business, can provide a solid roadmap and guide to keep you on track with your goals and impact growth. Do you have one? If not, keep reading and find out why you need one.
“The business plan is invaluable to our success,” said Marco Picano, co-owner of Picano Landscaping. “It helps us set measurable goals, assess risks, and efficiently allocate our resources. Without a structured plan, it’s easy to lose sight of long-term objectives, especially when dealing with the day-to-day challenges of running a business.”
“The business plan is critical to our success,” added Kristin Hintlian, co-owner of Bonsai Builders. “It helps us set realistic goals, manage budgets, and allocate resources effectively. For instance, by including detailed timelines and cost estimates, we’re less likely to encounter unexpected delays or cost overruns, ensuring each project runs smoothly.”
“A prominent example of our business plan guiding us to success was during a period of rising demand in 2018,” explained Scott Beloian, broker/owner of Westcoe Realtors. “By outlining steps to address the housing market’s tightening inventory and emphasizing fixed-rate mortgages, we successfully navigated our clients through a challenging market. This plan not only stabilized our operations
but also resulted in a notable 20-percent increase in client acquisitions, demonstrating the power of proactive, informed planning.”
ELEMENTS OF A PLAN
When writing and organizing your business plan, what should it include?
“To ensure that all parties engaged in this business plan understand what’s going on and what to anticipate, every single detail, including potential cost, potential income, risks, advantages, drawbacks, expectations, and objectives, should be written clearly,” said Karl Tippins, editor-in-chief, Interest Rate. “Additionally, this will help you stay out of trouble or be ready for any issues that may arise; failing to fully explain this plan might damage your reputation, particularly if things don’t work out as expected. If you overlook even one detail, it could completely derail your business plan and give the impression that you have a hidden agenda. Keep in mind that the purpose of this business plan is to generate revenue, so each and every detail is critical to achieving the objectives.”
Picano added, “The most important elements of our business plan include a detailed market analysis, operational strategy and financial planning. For example, we outline equipment needs and staff requirements in our operational strategy. This ensures we’re ready for peak seasons, like when we started our snow removal services based on our analysis of demand and competition. A significant example where our business plan guided us towards success was the launch of our snow removal service. We anticipated
the unpredictable nature of snowfall and structured our operations to handle it efficiently. By outlining our logistics, such as equipment acquisition and staff training, we were fully prepared for the winter season. As a result, we saw a 30-percent increase in our revenue during the first winter we offered this service, proving the efficacy of our planning.”
“The most crucial elements of my business plan include market analysis, financial projections, and strategic initiatives,” said Tim Choate, founder and CEO of RedAwning.com, Inc.
“Market analysis ensures we understand and anticipate trends, financial projections keep our investments and expenses balanced, and strategic initiatives drive growth and innovation. An anecdote here would be our integration with major online travel agencies, a strategic move identified in our business plan that significantly
“Without a structured plan, it’s easy to lose sight of long-term objectives, especially when dealing with the day-to-day challenges of running a business.”
boosted our visibility and bookings.”
Max Williams, founder and CEO of Herobot said, “Several key elements in our business plan ensure that Herobot. app remains on track and thrives and these include:
Market Analysis: Understanding the current market trends, competitive landscape and customer needs is crucial. This analysis informs our strategic decisions and helps us identify opportunities for growth.
Clear Objectives: Setting specific, measurable, achievable, relevant, and time-bound (SMART) goals allows us to focus our efforts and track our progress.
Financial Planning: Detailed financial forecasts, budgeting, and cash flow management are essential for maintaining our financial health and ensuring we have the resources to invest in growth opportunities.
Operational Strategy: Outlining our operational processes, from
property management to technological innovation, ensures efficiency and consistency in our day-to-day activities.
Risk Management: Identifying potential risks and developing contingency plans helps us mitigate challenges and stay resilient in a dynamic market.
Marketing and Sales Strategy: A robust plan for reaching and engaging our target audience is key to driving revenue and expanding our customer base.
Performance Metrics: Regularly monitoring key performance indicators (KPIs) allows us to assess our success and make necessary adjustments to stay on course.”
SUCCESSFUL OUTCOMES
As is the case with all business endeavors, it’s one thing to put your plans together on paper, but it only matters if it works. Measurable results matter. If you steer your business in the right
direction and the numbers follow, you accomplished your goal. However, if you follow a plan and it fails, you don’t quit planning; you adjust your plan.
“A notable example where our business plan guided us to success was during the launch of a new property management software feature,” said Williams. “Initially, we identified a growing demand for integrated AI-driven solutions in property management through our market analysis. Our business plan highlighted the need to innovate and stay ahead of technological trends.
“With this in mind, we allocated a portion of our budget to research and development, assembling a dedicated team to work on this project. The plan also included a detailed timeline and milestones to keep the project on track. Throughout the development phase, our operational strategy ensured that the team followed best practices and maintained quality standards.
“Upon launching the new feature, our marketing and sales strategy effectively promoted it to our existing customer base and new prospects, resulting in a significant increase in user adoption and satisfaction. The financial projections in our business plan allowed us to anticipate the revenue growth from this launch, which we achieved and even exceeded.
“In this instance, having a clear, comprehensive business plan was instrumental. It provided the structure and direction needed to turn an innovative idea into a successful market offering, demonstrating the tangible benefits of strategic planning.”
Michelle Gamble is the editor of Rental Housing Magazine.
We queried property owners about their favorite business books. Here are the results.
Ben Broch, CEO and founder of Cover Letter Copilot
Rich Dad Poor Dad by Robert T. Kiyosaki
This classic book provides invaluable insights into wealth-building and financial management. Kiyosaki contrasts the financial philosophies of his two “dads” — his real father (Poor Dad) and his best friend’s father (Rich Dad). The book emphasizes the importance of financial education, investing in assets, and understanding how money works. For property owners, it underscores the value of investing in real estate as a key strategy for financial independence.
Matt Morgan, Licensed California Real Estate Salesperson, IPA
The Book on Rental Property Investing by Brandon Turner
Turner’s book is a comprehensive guide that covers all the essentials of owning rental properties. What sets it apart are the actionable insights and systematic approach it offers. I appreciate his attention to detail in areas like renter screening, property management and financial analysis. His detailed case studies resonate with my own experiences at IPA, particularly in managing retail and office spaces effectively.
strategy for buying and selling properties without significant capital. Merrill provides step-by-step instructions on finding properties, negotiating deals, and closing transactions quickly. For property owners, this book is valuable for understanding the wholesaling process and how it can be a lucrative entry point into real estate investing.
Your Money or Your Life” by Vicki Robin and Joe Dominguez
This book is a holistic approach to financial independence, emphasizing the relationship between time, money, and life satisfaction. Vicki Robin and Joe Dominguez guide readers through transforming their relationship with money and achieving financial freedom. Property owners can benefit from its principles on mindful spending, saving, and investing, including insights on how real estate can play a role in achieving financial goals.
Simranjeet Singh, co-founder of Search My Expert,
The Real Estate Wholesaling Bible by Than Merrill
This book offers a comprehensive guide to real estate wholesaling, a
Max Williams, Founder and HRO, Herobot.app
Crushing It in Apartments and Commercial Real Estate by Brian H. Murray
Brian Murray’s book is a goldmine for property owners looking to expand beyond residential real estate. He provides detailed insights into the world of commercial real estate investing, including apartments, office buildings and retail spaces. The book is filled with real-world examples and step-bystep guidance on how to find, finance and manage commercial properties. Murray’s success stories and practical
“Brian Murray’s book is a goldmine for property owners looking to expand beyond residential real estate.”
advice make this an inspiring and informative read for any property owner looking to diversify their portfolio.
Krixelle Sant, Founder and CEO of Sell
My House Fast For Cash
The Millionaire Real Estate Investor by Gary Keller, Jay Papasan and Dave Jenks
This book focuses on the mindset and strategies of successful real estate investors. It delves deep into the techniques and habits that have helped these individuals achieve significant wealth and financial independence through property ownership. It covers crucial topics such as setting clear and achievable goals, creating a comprehensive and effective real estate business plan, identifying and securing profitable investment properties, and building a strong, reliable team of professionals to support your endeavors. The authors also share their personal experiences and insights, drawing from their extensive careers in real estate. Additionally, the book includes valuable lessons and anecdotes from interviewing over 100 millionaire real estate investors, offering readers a diverse range of perspectives and strategies. This book is a must-read for anyone looking to build wealth through property ownership, whether you are a novice or an experienced investor seeking to refine your approach.
Inform
OF PROPERTY MANAGERS
BY LYNN KREHER
Why is it important to learn about best practices of other property owners?
Experience teaches owners the lessons to do it better next time. Using practical property management skills can make your business more efficient, effective, manageable, and successful.
1 STRATEGIC COMMUNICATION
“My top tip for improving property management efforts is to embrace proactive communication and continuous feedback loops. Implementing customer feedback surveys regularly allows us to understand renter needs
and make necessary adjustments in real-time. For example, feedback from our automotive manufacturing clients led us to innovate our maintenance schedules, reducing machine downtimes by 20 percent.” – Austin Jones, CEO of Millennium Facility Services
“From my experience, the best property managers are great at communicating, staying organized, and solving problems quickly. They need to talk clearly with renters, property owners and contractors to keep everything running smoothly. Being organized helps them juggle multiple properties and tasks without missing a beat. Plus, being a good problem-solver means they can handle any issues that pop
up, whether it’s a renter complaint or a sudden repair.” – Adhip Ray, Founder WinSavvy
2 RENTER ENGAGEMENT
“My top tip for improving property management is to implement a robust renter engagement process. We’ve found that regular interaction with renters helps anticipate and address their needs promptly. For example, proactive check-ins and feedback surveys have allowed us to tailor our services and retain renters longer, reducing turnover and maintaining steady occupancy rates.” – Matt Morgan, Licensed California Real Estate Salesperson
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“My top tip to improve property management efforts is to proactively engage with renters. For instance, I’ve often sat down with renters to understand their future plans, which allowed me to anticipate their needs better and adjust lease agreements accordingly. This not only preempted potential vacancies, but also helped in creating custom solutions that maximized renter retention.”
– Joe Stance, Stance Real Estate
3 ENHANCED MAINTENANCE
“My first suggestion about enhancing property management efforts is that maintenance problems should be addressed before they arise. Through routine checks and fixing of any defects, as they arise, property managers can avoid complex problems arising from small problems. This not only guarantees the satisfaction of the renters, but also contributes to the increase of the lifecycle of the facility and the decrease of maintenance expenses.” –
Chase Hughes, Founder and CEO, ProAI
4 HAPPY RENTERS
“Happy renters keep costs low. The time and effort it takes to manage move-outs, clean apartments for new renters, advertise vacancies, and vet applicants, not to mention the time that apartments sit vacant between renters, are the biggest drags on profit in established properties. Make sure you’re prompt in making repairs, addressing complaints, and making upgrades if you want good renters to stick around.” – Martin Orefice, CEO of Rent To Own Labs
5 PROBLEM-SOLVING SKILLS
“Property managers face various challenges, from unexpected maintenance emergencies to renter disagreements. Quick problem-solving abilities allow for renter satisfaction and preservation of property value.” – Alex Coffman, Co-Owner at Teifke Real Estate
CASE STUDY: YOUR SKILLS IN ACTION
By Saddat Abid, Senior Property Buyer and CEO at Property Saviour
Effective property managers possess a strong combination of effective communication, organizational, and problem-solving skills. Communication is important because it will be the bridge between the property owner and the renter, such that their needs and challenges will be quickly realized. Organizational skills are reflected in the ability that is needed to juggle schedules for maintenance, renter requests and financial records to ensure that the property runs smoothly. Problem-solving is critical in the wake of property management problems, which range from maintenance emergencies to renter conflicts.
The need to, first of all, create and maintain a strong relationship between the renter and the service providers takes priority. Good rapport built with a renter will ensure open communication, which in turn guarantees high renter satisfaction, and by extension increased retention. A team of reliable service providers will ensure that maintenance and repair items are rectified promptly and professionally. In a nutshell, this will make your job easier to perform.
Although some situations are sometimes just inescapable. For example, a problem developed in one of our units, which involved a central plumbing problem that wreaked havoc for the renters. Right then, my effective communication and problem-solving skills were put to the test. I informed the renters about the problem and the tactics to solve it that we were doing with the timeline of repair. Simultaneously, I used my organizational ability to arrange something with the seamless repairs to a trusted plumbing service.
We didn’t want to bother our renters more than necessary with clear communication and effective management of the repair process so we did not ruin our reputation as responsive and effective property managers for these renters. We had another very good lesson some years back with a renter who lived in the winter season with an annoying situation of going to sleep without the central heating at full capacity. And this problem wasn’t solved after several repairs done during the winter. Of course, the renter grew very angry about this. That’s when I recognized the necessity to change the mode of our operations with respect to recurring maintenance issues.
I enrolled in some preventive maintenance learning and endowed all of our properties with an updated, more proactive list of the same activities. I soon caught onto how that could prevent such recurring problems and increase renter satisfaction since every potential problem was uncovered and mitigated before its appearance. This taught me to be more proactive than reactive in property management.
Advocate
JUST CAUSE ORDINANCE – WHAT’S “JUST” ABOUT IT?
BY MICHELLE GAMBLE
The state and local government establishment continues to make property owners’ businesses struggle by supporting issues like the Just Cause Ordinance. Do you know what is Just Cause? If you’re a property owner, let’s explain. The state of California continues to make it difficult to operate your business by supporting legislation that is so biased toward renters, it has made it difficult to own property.
If you don’t know what is Just Cause, here is a description from a Tenant Planet article titled “What is ‘Just Cause’ Eviction in California?” “Just Cause Eviction is a recent restriction passed into law by the California State Legislature that limits a property owner’s ability to terminate a lease for a renter once that renter has occupied the property for longer than 12 months throughout California. This is separate from the California eviction moratorium extension for COVID; this is a permanent legal change.”
How does Just Cause translate in the real world? The article goes on to describe how a property owner must serve the renter with a three-day written notice to address the “at-fault” reasons that can be fixed breaches before eviction.
• Default in payment of rent
• Breach of material term of the lease after notice to cure is served
• Maintaining, committing or permitting a nuisance
• Committing waste
• Renter’s lease terminated on or after January 1, 2020 and, after written request from the property owner,
the renter fails to execute a written extension or renewal of the lease for an additional term of similar duration on similar provisions.
• Criminal activity
• Assigning or subletting in violation of the lease terms
• Renter’s refusal to allow the property owner to enter the premises after being given notice to enter due to health/safety issues.
• Use of the premises for an unlawful purpose
• Employee, agent, or licensee’s failure to vacate after termination as an employee, agent or licensee
• Renter’s failure to vacate and surrender possession after giving the property owner written notice of
renter’s intention to terminate the tenancy.
Let’s drill down into the issues. First, California has a squatter problem (see Derek Barnes, CEO East Bay Rental Housing Association, Welcome Letter) addressed in the May-June issue of Rental Housing Magazine. Property owners already face insurmountable issues to remove nonpaying renters. Renters can fake leases and make false claims about evictions – and the challenge is that the legal system, as noted from that list, favors renters. Some egregious squatter situations have arisen where squatters take over a property, create fake leases, and then hold the property owners hostage to force what is no more than free rent.
Now, renters want to use Just Cause to continue to illegally hold a property hostage until the legal process has been exhausted and cost the property owner sometimes thousands of dollars in losses.
Just Cause favors renters while allowing property owners’ businesses to suffer. If Just Cause is adopted, it does not protect property owners from the following (source: California Tenant Law):
• Nonpayment of rent
• Breach of an important part of the rental agreement
• Causing a nuisance
• Seriously damaging the property
• Refusal to sign a lease extension on similar terms
• Criminal activity including threats of serious violence against the property owner
• Illegally assigning or subleasing
• Refusing to let the property owner legally enter to make repairs or show the property
• Using the premises for an illegal purpose
• A resident manager failing to leave when terminated
• Failing to move after giving notice to the property owner of that plan. To get around the “just cause” protections to conceal a retaliatory eviction, the property owner would try to evict for one of these reasons.
Review the list and consider its fairness. Why aren’t property owners given basic consideration for issues like nonpayment of rent? Even that problem in and of itself is intrinsically unfair. In society, we have what is called exchange of service: I rent your property and I pay you for the service to live there. It’s common sense.
Breaching any agreement – whether it be in business or civil disputes –creates cause for legal recourse. Yet, here in California the overwhelming favoritism toward renters continues to show up at both the state and local levels.
Let’s discuss a few of the considerations on that bulleted list. It makes sense that should a renter damage property, it’s not the owners who did it. It’s obvious that when things like walls get smashed, carpets torn up from errant pet ownership, yards and landscaping destroyed by lack of maintenance, or interior appliances wrecked by abuse, then it
shouldn’t be on the property owner to pay for those repairs.
However, it is important that owners realize daily living and the usual decline should not be put on renters. For example, a 20-year old sprinkler system going bad for normal use should not be charged back to the renter. After all, the renter does not own the property and didn’t cause the problem – time and use created it. When owners become unreasonable about basic repairs and believe it all should be paid for by the renter, then conflicts arise that should be properly mediated. How about criminal activity?
A property owner is supposed to allow something like a meth house to operate on their property and do nothing, because the law says you can’t do anything about it. This law doesn’t work in anyone’s best interest. Neighbors get impacted by the corollary crimes that pop up surrounding drug trafficking and abuse. Just Cause ties the hands of property owners and actually protects illegal activities.
Finally, it’s time to quit treating property ownership like a charitable contribution to the masses. Property owners use their funds to acquire properties to rent. They make a living from it. When lawmakers so favorably protect renters to the point of unfairness, then private property ownership comes under fire. The most basic issue, nonpayment of rent, boldly communicates the intrinsic unfairness of allowing renters to live for free on private property. What about that sounds just?
Michelle Gamble is the editor of Rental Housing Magazine.
2024 HOUSING MARKET
A Mixed Bag and An Exciting Future
BY GRANT CHAPPELL
2024
started with fresh optimism that we would return to more of a seller’s market as inventory remained tight in 2023 and sales were sluggish. The hope has faded as interest rates peaked near highs achieved in fall of 2023 and the gap between buyer’s and seller’s expectations widened further. A steady economy and strong national job market, along with persistently high inflation can mostly attribute to the interest rate levels, however, there are bright spots to highlight in the local real estate market. Nationally, the market new and existing home sales were down 8% in April compared to 2023, even though median home prices are 6% annually due to low inventory, despite mortgage rates north of 7%. Locally, we are witnessing some positive signs, though multi-unit sales, especially in Oakland, remain sluggish.
The SF Biz Times and Chronicle continue to report on near weekly distressed sales in SF, primarily of office and hotel/ hospitality properties going back to the lender, along with several thousand rent controlled residential units. What seemed unfathomable pre-Covid is unfolding at a rapid pace and high vacancies and declining rents on office and other commercial properties have wiped out the equity position in many of the institutional-sized assets. As SF and Oakland office markets boast vacancy rates well north of 30%, a long recovery to return to a healthier vacancy rate at significantly lower rents will take years to achieve.
Local and national developers continue to face hurdles in securing construction loans and capital partners for new projects. Student housing in Berkeley is a minor exception as market rents and values have proven more resilient, though rents on new construction in Berkeley in non-campus locations has declined nearly 8% year to year according
to Zumper. A 2023 study by Berkeleyside that analyzed reported rents from the Rent Stabilization Board noted that rents have increased by 3% per year since 2018.
AI companies securing new lease and sublease spaces in SF provides some positive news as the next wave of firms to take large chunks of space. Office property owners with newly acquired properties at .30¢ to .50¢ on the dollar compared to pre-Covid values are able to charge much lower rent to entice a variety of companies and industries into their buildings at rents well below 2020 levels. Gradually this brings more employees and renters back to the Bay Area, even though SF’s payrolls are still 45K below pre-Covid levels compared to 60K in Los Angeles, according to Zumper’s latest national rent report.
As we reflect on the sales market throughout the year, most of the industry continues to cope with stubbornly high interest rates. With predictions that The Federal Reserve would lower interest rates continuing to get pushed back from spring to summer and the latest predictions from experts, September or later. Housing and energy remain two of the elements that have not eased on a national level, where the Bay Area has witnessed a drop in rents largely tied to lower employment levels and an increase in new construction deliveries.
The single family market has shown resilience with reports showing sales of homes in the $3-million and $5-million-plus range, reaching their highest levels in two years and up 66% compared to April 2023, according to a recent article in SF Biz Times. That market segment runs counter intuitive to lower segments with more price elasticity tied to higher interest rates in the 7% range, where higher ranged purchases often trend with values of equities/stocks and the recent growth in Bay Area Technology AI firms. As the arti-
Aerial view of Berkeley and north Oakland on a sunny day.
cle noted, “There is an enormous amount of wealth sloshing around the Bay Area.”
Oakland is one of the worst performing rental markets in the country with an approximate 9% drop in rent median rents, with Sacramento not far behind with an 8% drop in median rents. In 2024 alone, more than 1,300 new units were delivered in Oakland, with a total of approximately 8,700 units in the last five years. We can debate whether the decline is a supply/demand issue or quality-of-life/safety issue to explain the decline in rents, but the impact on sales persists as investors look elsewhere for cash flows and stronger demand from renters.
Navigating the sales market requires patience as inventory active versus pending sale for 5-plus unit apartment buildings in Oakland and surrounding areas remains high. Obviously there is a pricing element to this as Oakland investors in particular seek positive cashflow out the gates versus waiting for turnover/rent growth. As we alluded above, rents declined significantly in Oakland and arguably could fall more as new construction is delivered and absorbed in the marketplace.
Berkeley and Alameda rent control laws do not differ greatly from Oakland, but tend to attract a broader buyer pool due to rental market strength, partly due to excess new supply and quality of life issues in Oakland. At a recent open for a listing we have in Berkeley, a buyer noted they will still buy in Berkeley but not Oakland due to the four-plus period to lease a recent vacancy. Early in my career, we would hear the opposite as buyers were spooked about the rigidness of Berkeley’s rent control laws.
Insurance remains a hot topic as major carriers continue to leave California all together, leaving further options for property owners. An investor in Berkeley relayed a story on a recent acquisition in which the only options available due
to electrical and age were coming more than three times the premium of the current policy. Even for the most experienced buyers and operators, securing a competitive policy often requires shopping around with two to three insurance brokers before securing an adequate policy that doesn’t break the bank.
Now that we are two-plus years in the Fed’s interest rate hike cycle, the effects are starting to hit the mid-sized apartment market as some owners do not qualify for refinance when their fixed rate period expires and moves to an adjustable rate. With declining rents, higher operating building costs and longer lease-up periods for vacancies, banks show more scrutiny with cash-flow statements and often scale back on loan dollars they are willing to lend. This forces some owners with a dilemma: Do we pay down existing debt now to qualify or ride it out in the hope that rates will decrease enough by next year to qualify for a refinance?
Buyers and agents often ask about seller financing or assumable financing in the first call on our listings. Most brokers will advertise those options when the seller is willing or capable to offer financing. Aside from Chase, Fannie/Freddie government-backed loans and few local banks, assuming below market debt is not easy as some banks saw significant deposits and savings flee to the nation’s largest banks after the Silicon Valley Bank and First Republic went under last year. A bank may require significant principal paydown, co-guarantor with existing ownership or an increase in borrower strength and financial liquidity. These sub 4.5% loans simply are not very profitable in this environment.
The issues we’ve discussed highlight opportunities a buyer can take advantage of to negotiate a better price when purchasing investment real estate. We see a lot of “fatigue” in the market with sellers, especially since COVID and all
“Insurance remains a hot topic as major carriers continue to leave CA all together, leaving further options for property owners. ”
“San Francisco is also seeing a generational reset on apartment values, also luring wouldbe East Bay buyers to that side of the bridge for better returns.”
the issues with eviction moratoriums and vacancies. Taking on a major capital project to comply with seismic or upgrade electrical is the last thing they want to do once they’ve made a decision to sell and part ways with the property. Consequently, we are seeing buyers more focused on intrinsic value with price/foot and price/unit taking priority before really diving into the numbers. The sales data in Oakland and Berkeley highlight trends in these metrics, though Berkeley’s data fluctuates more as values within a few blocks of UC Berkeley remain buoyant. In studying the sales for Berkeley over the last year, there were a few examples in which an apartment building sold at a premium for land value or entirely vacant for a non-profit. We also expect to see higher per/unit metrics in the 2 to 4 unit segment as some properties have traded around $1 million per unit, yet at a GRM of around 10 to 11 given the high level of bedrooms per unit.
2–4 UNIT SALES
Berkeley experienced a modest drop in transactional volume with 17 sales in Q1 24’ for an average price of $1.65 million versus 20 sales in Q1 23’ for an average of $1.3 million. This seems to echo the national trends with lower transaction volume, yet higher prices. I suspect many of these sales are going to be single family home buyers priced out of Berkeley’s market or unable to find much due to lower inventories. Oakland showed the opposite as 68 sales for an average of $905,000 sold in Q1 24’ compared to 60 sales for an average of $975,000 in Q1 23’. Oakland’s average sales price has consistently performed below the $1 million midpoint, largely reflecting high borrowing costs and declining rents. Similar to SF in 2022, Oakland is going through a DA recall as city residents are frustrated with high crime and quality of life issues.
5-PLUS UNIT SALES
Oakland sales volume declined back to $30 million in Q1’ 24, down from two prior quarters in the $40 million range. Much of the volume was allocated to a larger East Oakland portfolio that went to market last year and gradually started selling in mid-2023. At $195,000/unit and $244/Sq Ft, it’s the lowest point for those metrics we’ve seen as far back as our data goes.
Berkeley sales figures are all over board as transactional volume has mostly plummeted with institutional-backed buyers on the sidelines. Only $73 million traded in all of 2023, which is almost the amount of the combination in any given quarter in late 2021/2022. Q1 24’ started with $10 million in sales and Q1 23’ reported $8 million in sales. Based on pending sales and closings we observed in Q2, we expect to see an increase in sales volume. A two-building, mainly student portfolio sold by Colliers near the Southside of campus traded around a 6% Cap Rate on actual numbers. Even with some long-term deferred maintenance, the Cap Rate and GRM reflects the cost of debt and challenge in finding a buyer unless there is decent cashflow day one.
In summary, debt costs and interest-rate trends will continue to hang a heavy cloud over the market, both psychologically and the loan to value issues that discourage investment due to lower cash on cash returns. The sales data shows buildings are trading at per/foot and per/unit valuations not seen in 10-plus years in the Oakland/Berkeley markets. San Francisco is also seeing a generational reset on apartment values, also luring would-be East Bay buyers to that side of the bridge for better returns. The longer we endure higher interest rates and stagnant rents, the more downward pressure we’ll see on prices. The second half of 2024 will be exciting to watch.
Grant Chappell works with NAI Northern California.
Protecting Property from SQUATTERS
BY MICHELLE GAMBLE
The term “squatters’ rights” seems like a contradiction of terms. How does a person acquire actual rights (aka renter protections) when it comes to illegally taking over a property and acting as if they have the right to not pay rent in exchange for living on the property? While not all property-renter disputes over the right to remain on a property are based on unlawful entry and occupation, a growing contingent of squatters do it illegally while afforded protections and cost property owners thousands of dollars to lawfully evict them – even when the squatter may have created a fake lease agreement.
“Addressing lost revenue, the financial impact of managing squatter incidents is substantial,” said Joe Stance, vice president of Stance Real Estate. “Legal fees, repair costs, and the loss of rental income due to prolonged vacancies can severely strain resources. In our experience, costs escalated over $15,000 due to both legal proceedings and repairs.”
How did squatters become a problem in the first place? The concept of squatters’ rights originated from British property law designed to ensure abandoned property could be lawfully used by those claiming to live in it. These laws were written to protect occupants from being evicted without proper notice. Now fast forward to the state of California and policies geared toward continuing such protection, even when the property may have been vacant a short period of time in-between renters.
According to America’s New Now in the article “Fact Check Team: What you should know about squatters’ rights” by Courtney Rau and Konner McIntire, “In California, for example, squatters can claim rights if they occupy and pay taxes on the property continuously and openly for five years. In Florida, it is seven years and if they leave halfway through, the timeframe starts over. In New Jersey, it is 30 years for real estate or 60 years for ‘uncultivated lands’ like woodlands.”
The costly reality involved in squatters unlawfully living on your property is that despite the circumstances in which a squatter takes over the property, these people cannot be forcibly removed from a property without prior notice. Property owners, regardless of whether the renter actually had a legal agreement or simply claimed to have one, must serve eviction notices as if the squatter were an authorized renter. This requirement costs owners while seemingly protecting those illegal activities. This situation behooves property owners to become watchdogs on their properties lest it become an expensive procedure to evict squatters. One note: eviction becomes more challenging when the property was neglected and squatters took residence, which translates to squatters now entitled to be served evictions using the legal eviction process.
“As someone who has extensive experience in real estate law, including serving as a general counsel for some of the largest businesses in my area, I have encountered various
legal issues associated with ‘squatters’ rights’,” said David J Greiner, Esq. “One of the primary problems I’ve seen is the lengthy and costly eviction process. Squatters can exploit legal loopholes to delay evictions, which forces property owners to spend a significant amount of time and money on legal fees and court proceedings.”
“In my experience as a real estate professional in California with a focus on retail and office properties, dealing with squatters has indeed been a challenge,” said Matt Morgan, a real estate pro with IPA Commercial Real Estate. “One of the main legal problems associated with squatters’ rights is the arduous eviction process. Squatters can exploit various legal protections meant for renters, which results in lengthy court battles and increased legal costs. The process of securing an unlawful detainer and clearing out squatters can be time-consuming, often stretching over several months due to procedural delays and the defense tactics used by squatters.
“In one example, we had a retail property in Riverside overtaken by squatters,” he said. “They entered the premises at an odd hour and initially claimed they had a verbal agreement with a previous renter. We had to gather evidence, file for an eviction notice, and spend substantial time in court to prove our case. Eventually, with thorough documentation and by partnering with local law enforcement, we were able to reclaim the property, but it took over eight months.”
“One major legal problem with squatters’ rights is the extended, often convoluted eviction process,” said Stance. “In California, we once faced a situation where squatters took over a commercial building. They falsely claimed they had a verbal lease agreement with a former renter, necessitating an unlawful detainer action. Gathering concrete evidence
and navigating them through the legal system took nearly eight months, costing the property owner roughly $12,000 in legal fees and lost rental income. The building required significant repairs due to neglect and damage.”
A major issue involves uninhabited properties, which sometimes occurs when it takes longer than average to rent a property or someone inherits a property and doesn’t immediately move in or rent it.
“One client I helped with property concerns after a squatter took up unwelcome residence shared an experience this person had two years ago in a rental property that was uninhabited,” explained Ryan Carrigan, CEO and co-founder of MoveBuddha. “My client discovered the squatting situation when tasked with home maintenance to re-list the property. After a verbal conversation, his inadvertent renter refused to leave the location. My client then served an eviction notice after the squatter refused to leave, but he ultimately was forced to file appropriate legal paperwork to regain occupancy control. Luckily, the squatter finally complied with the eviction notice and independently left the premises within a couple of days.”
PREVENTING UNLAWFUL HABITATION
Property owners don’t have to be at the mercy of these squatter problems. While it’s true all preventative measures aren’t fireproof, at least property owners can feel like they have taken a positive, proactive stance. Getting out ahead of the problem and making smaller investments (consider how much legal fees could cost you) in preventative measures can save long-term hassles.
What are some first steps owners can take to protect their
“If I could alter the existing laws, I would streamline the eviction process to allow for quicker resolution, eliminating excessive red tape.”
assets from invasion? First, consider overall property management and security measures. “To proactively manage this issue, I recommend implementing robust security measures such as installing gates, surveillance cameras, and conducting regular property inspections,” said Morgan. “Employing a property management team experienced in dealing with such issues can also expedite the resolution process. Additionally, keep meticulous records of any incidents or unauthorized entries to support your case legally.”
“First, implement stringent security measures to prevent unauthorized entry – this includes proper gating and frequent inspections,” said Greiner. “Second, consider hiring a property management firm with experience in dealing with squatters. They can take immediate action and often resolve the issue faster. Third, maintain comprehensive records of property conditions and any trespassing activities. Documentation is crucial for a strong legal case.”
If all else fails and a squatter takes over your property, unconventional methods exist to remove him/her. “It can seem like the legal guidelines favor squatters over property owners, especially when the process to get squatters off your property can become quite lengthy, not to mention expensive,” said Ben Michael, VP of Operations, Michael & Associates. “You can, however, avoid all of that with a unique approach to your squatters. Offering them cash to vacate the premises is one way to get rid of your squatters without having to involve the courts. Whatever legal fees you would be spending can be put toward an offer to the squatters. It’s unorthodox, but has worked on a number of occasions and keeps your property from becoming completely destroyed in the process.”
“The financial impact of managing squatters can be significant,” said Greiner. “[In one] case, the property owner lost several thousand dollars in legal fees and potential rental income. The prolonged vacancy and the costs of repairs post-eviction added to this burden. If I could change the laws, I would advocate for a streamlined legal process for property owners to reclaim their property. This could include shorter notice periods for evictions and fewer opportunities for squatters to delay proceedings.”
Morgan added, “If I could alter the existing laws, I would streamline the eviction process to allow for quicker resolution, eliminating excessive red tape. Implementing stricter penalties for repeat offenders would also discourage the misuse of renter protection statutes, balancing the rights of property owners with those of legitimate renters.”
Michelle Gamble is the editor of Rental Housing Magazine.
Industry Partners
ACCESSORY
DWELLING UNITS
Adapt Dwellings, Inc.
510.749.4880
adaptdwellings.com
Perpetual Homes ADU
925.980.2351 perpetualhomesadu@gmail.com
SYMBIHOM LLC
510.930.8900 symbihom.com
ACCOUNTING & TAX
Hunter Tax Associates
925.362.1350 huntertaxassociates.com
ACCOUNTING SOFTWARE
Balanced Asset Solutions
805.284.1950
balancedassetsolutions.com
AFFILIATIONS
ALN Apartment Data
800.643.6416
alndata.com
ATTORNEYS
Barth Calderon LLP
714.704.4828 barthattorneys.com
Bornstein Law
415.409.7611
daniel@bornstein.law
Burnham Brown
510.444.6800 burnhambrown.com
California Strategic Advisors 916.447.7229 calstrategic.com
Quake Brace Manufacturing Company 510.495.1575 quakebracing.com
WASTE & RECYCLING
Bay Area Bin Support 888.920.2467
bayareabinsupport.com
Thermostat Care 510.224.5086
thermostatcare.org
WEALTH MANAGEMENT
Bay Area Mortgage Group 925.719.0660
lendersteve@gmail.com
First Foundation Bank 510.250.8133
firstfoundationinc.com
Investment Property Capital 415.215.5590
mark@ipcap.net
King Hou Lam, Home Mortgage 510.517.3253 kinglamloans.com
City of Oakland Rent Adjustment Program
Rent Registration in Oakland
The City of Oakland is requiring property owners to register their rental units this year by July 1, 2024, and annually thereafter by March 1. For more information on Oakland’s new rent registration requirements, go to RAP’s website at www.oaklandca.gov/RAP and click on "Rent Registry” .
Questions? Contact RAP's Rent Registration staff at 510-237-3721, option 2, or rentregistry@oaklandca.gov.
Rent Increase Moratorium
Oakland's Emergency Moratorium on rent increases ends June 30, 2024. Banked and petition-based rent increases will resume July 1, 2024. Banked rent increases are capped at 7.5% through July 31, 2024.
CPI Announcement
Effective August 1, 2023, to July 31, 2024, the CPI is 2.5%
Questions about the Emergency Moratorium? Contemplating a rent increase? Contact a RAP Housing Counselor at 510-238-3721 or rap@oaklandca.gov.
Upcoming Workshops
Rent Registry Workshop: How to Register May 15, 2024, 5:30 pm- 7:00 pm
The Moratorium Workshop (Owner Focused) May 22, 2024, 5:30 pm- 7:00 pm
Rent Registry Workshop: How to Register May 29, 2024, 5:30 pm- 7:00 pm
Rent Registry Workshop: How to Register June 5, 2024, 5:30 pm- 7:00 pm
Rent Registry Workshop: How to Register June 12, 2024, 5:30 pm- 7:00 pm
Security Deposits Workshop July 10, 2024, 5:30 pm- 7:00 pm
To stay updated on the 2024 Workshop Calendar, please visit our website at www.oaklandca.gov/RAP & join the RAP listserv at tinyurl.com/rapsignup.
Last Look
JACK LONDON INN TO SHELTER VULNERABLE CITIZENS
“Jack London Inn has 110 rooms which will all be converted into housing units for individuals and families facing homelessness.”
Good news for some seniors and medically vulnerable people, the Oakland City Council announced the approval of a $6.7 million grant for a nonprofit to lease the Jack London Inn. Residents from the Lake Merritt Lodge will be moved to the 110-room building to the inn. This comes as a win for the original lodge residents who needed to transition to permanent housing to hopefully return to mainstream housing. The lodge was used as a shelter during the COVID-19 pandemic when the Housing Consortium of the East Bay used relief money to operate a shelter.
According to the article “Oakland City Council Approves Funding for Homeless Shelter in Jack London Square” by Yimby Team, “The scope of the project includes leasing the Jack London Inn. Jack London Inn has 110 rooms which will all be converted into housing units for individuals and families facing homelessness. The project will offer housing to Oaklanders who are medically fragile and/or age 55 and older. There are 80 parking spaces available for staff and participants. Additionally, it has an adjacent dining area, formerly a restaurant that may be used as a multi-purpose space.”
The article continues and says, “The estimated annual cost for the Jack London Inn and the adjacent diner space is approximately $4,700,000, a considerable decrease from the nearly $6,000,000 annual budget for the Lake Merritt Lodge (LML) lease. The Lake Merritt Lodge, a COVID-era shelter, is closing.”
According to The Oaklandside article “Oakland’s Jack London Inn is Becoming a Homeless Shelter by Natalie Orenstein, “For many homeless people moving off the streets, the Lake Merritt Lodge is the most desirable temporary location to land. According to the city, 268 residents have come through the program, 105 of them transitioning into permanent housing. Most spend more than eight months at the lodge.”
While this deal will pull people off the streets, some critics have argued about the cost. A common argument has centered on the question of a lease versus an all-out purchase of the property. Some critics say this scams $4.7 million a year out of taxpayers while others believe $6.8 million is a deal. However, overall the goal is to help get homeless and medically challenged people off the streets.
EAST
LOCAL KNOWLEDGE, LOCAL SUPPORT, LOCAL ADVOCACY, WHEN YOU NEED IT.
BAY RENTAL HOUSING ASSOCIATION (EBRHA) is a nonprofit trade organization representing rental owners and managers of apartment buildings and communities, small multi-unit properties (2-4 homes), condominiums, and single family homes. EBRHA members range in size from small investors with just one property to large property management companies that own or manage hundreds of units. Our membership consists of more than 1,500 rental housing owners, property managers, attorneys and other service contractors. Altogether, EBRHA represents over 43,000 rental units and serves over 25 cities throughout Alameda and Contra Costa counties.
EDUCATION, NETWORKING, & EVENTS:
• Monthly Mixers to meet other housing providers in our community
• Annual in-person events to learn about industry resources and trends
• Open Q+A sessions with board members, industry experts, and other seasoned providers
• Weekly Webinars featuring new services, products, laws, forms, and more!
INDUSTRY UPDATES:
• Subscription to bi-monthly Rental Housing magazine, monthly Rentrospect newsletter, and weekly digest.
• Newsflash, Red Alerts, and more virtual message updates from EBRHA
COMPLIANCE
• EBRHA RPM Certification Courses included with membership
• 1:1 support to help you navigate current laws
• The latest Rental Forms with optional 1:1 consultations (available 24/7 through our digital library)
• Reliable renter screening services through Intellirent
ADVOCACY
• Committees organized around our efforts and mission
• Legal & Political Action Funds
• Rallies, designated lobbyist efforts, and active bill tracking
WHY SHOULD YOU RENEW YOUR EBRHA MEMBERSHIP? ASK YOURSELF:
Has managing rental property expectations/ relationships been a challenge in recent months? Are there unit vacancies you need to fill right now?
Is it difficult to constantly navigate all the housing legislative changes?
Are you worried about the protection of your property rights?
Do you have at-risk renters who have been paying rent reliably this year? Have any of your renters not paid rent OR are they paying reduced rent?
Are you unsure who’s defending your business interests?
8. Why not join EBRHA?
Are you concerned about the health of your rental housing business in 2023?
If you answered “YES” to any of the questions above, then EBRHA is a partner that you can’t afford to be without. Membership provides endless benefits!
DID YOU KNOW? EBRHA SERVES ALAMEDA AND CONTRA COSTA COUNTIES
