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Post Fires Furnished Rental Market Update

Mon, 27 Jan 2025 04:55:42 GMT

New landlords in the Beach Cities need to be careful with the new anti-price gouging rules

The furnished rental market in the South Bay is a bit like the wild west right now.

As we have all seen, a large number of affluent families have flooded into our area, victims from the catastrophic fires in the Pacific Palisades.

They are all scrambling for housing, and they have high budgets.

Price gouging and bidding wars abound.

Enter the sheriff, aka the government, trying as quickly as they can to reign in some semblance of order to the rental market in our beach towns.

They set anti-price gouging rules that are going to stay in place until March 8, 2025.

Necessary, yes, and some of the basic rules should stay in place, but the sherif does not understand our local rental market.

The rules need to be amended.

One of the problems concerns first time landlords:

If you own a home with 3 bedrooms in Los Angeles County, and have not offered it for rent within the last year, according to the Times, the maximum you can charge is $9,554 / month.

Yes, you read that correctly.

Rent can't be higher than 160% of a federally-set fair market value, and that maximum is $9,554.

For this area, that cap is absurdly low.

Since Feb 6th, the government has changed the rules for 4 bedroom homes in certain zip codes, MB, being one of the, but NOT Hermosa.

In Manhattan Beach, if you own a 'mansion' defined as a 4+ bedroom home, you do not have a rent cap.

That's wonderful for those homes, but what about the 3,000 sqft homes close to the water, or the Hermosa Beach homes?

We live in the Beach Cities and our maximum rental cap should be based on OUR data, not data from sprawling Los Angeles county.

For example, say you own a nice 3 bedroom home in Manhattan Beach's sand section.

Owning a home here is an expensive proposition.

Let's pretend that home is valued at $5 Million. Your property taxes alone are $5,200 / month.

Add a mortgage, utilities and possible property manager on top of that, your expenses are likely much higher than $9,554 / month.

According to the MLS, the median rent for Manhattan Beach sand section 3 bedroom furnished homes (not including The Strand) from the last 30 days (Dec 25 - Jan 26), is $16,250 / month.

In our furnished 3 bedroom rental market in Manhattan Beach's sand section, where homes are worth millions, and expenses are high, people simply can not afford to rent out their homes if they receive only $9,554 / month.

In a twist to the story, if you have rented out your home in the past year at a monthly rate exceeding $9,554, you are not subject to that cap.

Why are first time landlords who want to help with the housing shortage penalized from obtaining Manhattan Beach's fair market rent if they don't own a 4 bedroom house or own a 4 bedroom in Hermosa or Redondo?

None of this micro-data currently matters to our sherif.

Do we need protections against price gouging?

Absolutely.

Do we need to have those rules shift so more home owners entering the rental market as landlords for the first time can afford to offer their homes for rent in our Beach Cities?

Absolutely.

For more info, here's a great article to check out:

https://www.thecentersquare.com/california/article_644c993c-d909-11ef-a4c7-abcb5f669a26.html

Decorative Pillows? Yes. Don't fight it.

Mon, 20 May 2024 22:35:29 GMT

Push your space to look the best it possibly can. It's worth it.

Decorative Pillows.

Yes, they're unnecessary for a good sleeping experience, and honestly probably quite unnecessary for the comfort of your sofa.

Simply put, as many of my clients have pointed out, decorative pillows are highly impractical items.

"Dust collectors", as my dear mom would call them.

I mean, where on earth do you put those things when you go to bed?

That said, as investors and sellers, we're not scrounging the shelves of Home Goods for pillows to be practical.

We're purchasing them for the photographs.

It's our modern day reality. We're entrenched in a digital society, and photos are what sells your property.

Appealing to the consumer is what's important, and those pillows can make a home look a lot more inviting and complete.

They can be used to pull together colors and textures in a room, helping to create a mood, or for popping in an interesting accent to a bland or neutral space.

I'm embarrassed to admit that back in the day, I also tried to fight the pillow trend.

The bottom photo was my first attempt at decorating this particular bedroom in one of my investment properties.

Yuck.

I cringe whenever I look at the photo.

I knew better.

The bed is exceedingly comfortable, with sateen sheets and down filled pillows and comforter, but you'd never know it.

You wouldn't care.

It looks messy and uninviting.

A quick visit to the store for a duvet, some throw pillows, a throw blanket that matches (along with a couple other touches, but we're not talking about balancing spaces in this post) and now we're in business.

The transformation is complete, and the resulting increased number of renters are well worth the $200 spent on the extra bedding.

If you need help picking out appealing finishing touches, aka pillows and the like, please let me know.

Always happy to lend a decorating hand to make sure you maximize your real estate rental or sale potential.

Furnished vs Unfurnished

Thu, 16 May 2024 23:55:04 GMT

Should you furnish your investment / rental property?

"Should I make my house into a furnished or unfurnished rental?"

This is a question I get a LOT, and the answer will depend on your situation.

For those of you who want to use your home on a part time basis, and rent it out when you're not there, the answer is easy. Furnished.
For those that are using your property purely as an investment, you'll have to do some math:
What are you average utility bills? For a furnished rental you'll need to provide the tenants with utilities.
Can you afford to furnish your home? AND make it look on par with the other rentals in your area? Everything rents at the right price, but a home that is staged / furnished well is more desirable, can ask a higher price, and rents much faster.
Neutral reigns. Don't fight it. I violated this rule and paid the price. The living room walls in one of my properties were green. Yes, green. Not that soft almost white green, but a green that bordered on day-glow neon. I loved the color, but no one else did. My property didn't start renting out until I painted the walls.
Calculate in a 20% non-occupancy for your furnished rental. Those gaps between reservations can add up. I'm not saying you'll have that kind of non-occupancy rate, but it's best to be prepared.
Whether furnished or unfurnished, make sure you can afford the holding cost of having your property vacant until it rents.
You can charge more for furnished rentals than non-furnished, about 20% more.
In the summer, rates for furnished rentals go up, earning you extra profit during the peak season. A nice summer bonus.
Don't forget, you'll be able to write off the furnishings on your taxes, offsetting the income.
Another question you may want to ask yourself before deciding whether to own a furnished or unfurnished rental, is how long do you plan on owning the property? If you are only going to own it for a few more years, it might not make sense to furnish.

If you'd like us to take a look at your home and help assess which alternative would work best for you, please feel free to reach out.

We'd love to help.

Marry the House, Date the Rate

Thu, 16 May 2024 22:16:55 GMT

Don't become one of 'those people'

We've all met those people...

The ones that have been living in the area 'forever' and never pulled the trigger to purchase a home.

Perpetual renters telling "I should've..." stories with a sad shake of their heads, home prices now well out of their reach.

Food for thought to those of you wishing the rates were lower to purchase a home:

In 1971, the interest rate for a residential mortgage (nationwide) was 7.33%.

If you waited for interest rates to come down significantly, chances are you wouldn’t have purchased a home until 1993.

So, those that rented for 22 years waiting for rates to go down while the value of real estate quadrupled, got priced out of the market.

Here in the South Bay, prices double every 10 years.

That's a great investment!!

Don’t become one of 'those people' and wait for the market to cycle and reach the rate you wish you had.

You can always refi when they finally do go down.