Bob Nelson – The Fallout from Rent Control

Let’s take a look at the effects from the new rent control legislation.

Featuring:
Bob Nelson, Eugene real estate investment broker
Marcia Edwards, Eugene residential real estate broker

Marcia Edwards: With the rent control, what we call rent control, legislation that’s coming through, Bob, do you think that people will start to look back toward smaller investment properties? Like, unbundling a small apartment complex and put it back into duplexes, four-plexes, things like that?

Bob Nelson: Yes. I would anticipate that would have that impact. It’s interesting that we have excluded four-plexes, three-plexes, duplexes et cetera. I’m not exactly sure that would be. But, that’s the way it is and that’s what’s been legislated. That’s not to say that the legislature couldn’t get together tomorrow morning and come across with something that changes the whole thing. That’s the uncertain part about government control of any capitalistic even. In this case, the amount of rent that can be charged by an asset that is owned by a private party.

Marcia Edwards: My concern is another sectors going to be hit negatively. Not just dealing with navigating for the landlords. But if the landlords move into first time buyer homes and start trying to buy single family, and smaller, units we are losing ground on what we already have, as a huge inventory shortage for first time buyers. First time buyers cannot compete with the wherewithal of a cash out of a 1031 exchange. So we will be tightening another market inadvertently as a residual, I think.

Bob Nelson: Sure. I can understand that. But again, that partially happens to aging landlords. They get to a point where they say, “You know, I’m not sure if I really want to do this. I’ve got 10 heirs that I have to take care of. I think I’ll go out of this thing, one large thing, into 10 smaller things and give one to each of the heirs. Then between here and there I will continue to own a rental property that will support my retirement.” There’s lots of logic that would cause that to happen. It’s a logical succession plan in ownership for those that have started small, and they got bigger, and bigger, and bigger through tax deferred exchanges and just simply logical maneuvers. It’s a logical thing to maybe break it into pieces. Because as you break something into smaller pieces I could refinance one of them if I needed additional cash and so forth. I can sell one of them without triggering all of my gain and so forth. So, that’s a logical step.

Join Eugene, Oregon, real estate experts: Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments, and Marcia Edwards, Residential Real Estate Broker with Windermere Real Estate, daily at 5:30 on KPNW for the “Real Estate Today” radio show.