The San Francisco Rent Board sets price controls on residential housing effectively acting as a price ceiling, except when an apartment becomes vacant. Then the owner/manager can bring rents up to market rate. If the unit was occupied for 10 or even 20 years, market rate represents a big increase. In fact when a building with long standing tenants comes up for sale its a great selling point. Its not hard to see future value when you are looking at a few units renting for $350 that would easily rent in todays market for $1500.

Not Everything Is Rent Controlled

In San Francisco, limits to rent increases are mandated and administered by the Rent Board with some exceptions:
1. New Construction: Mandated by state law, all building constructed after June of 1979 are exempted
2. Subsidized Housing: such as HUD housing projects.
3. Dorms, monastery's and nunnery's
4. Residential Hotels: If you have less than 28 days of continuous tenancy.


Base Rent: A landlord can increase the tenant's base rent by an annual allowable increase. This year its 2.2%. So, if a tenants rent was $1000, the most you can increase in 2009 is $22. Next year the rent board will declare the maximum allowable increase for 2010. There are other types of rent increases such as capital improvements, increased operating and maintenance expenses and utility costs, but they need rent board approval.


Here's the problem: You have a vacancy or a recent tenant wants a rent reduction and the unit rents for $1500. But similar units are now going for $1400. Its bad enough to have to forgo $100 a month, but if lower your base rent you may be paying for that long after the market has recovered, perhaps even 10 or 20 years.

Here's why: lets assume your base rent was $1500 and it becomes clear that you have to reduce it by $100. At $1400 (assuming this years maximum annual increase of 2.2%) it might take you three years just to get back to $1500. One down year affects the entire future income stream if you lower the base rent to accommodate new market realities.


1. Attractive Gifts: Keep the rent at $1500, but offer gift certificates or other amenities. A rent reduction to $1400 is a $1200 annual loss. Maybe an offer of a new Dell notepad ($350) is attractive enough. If this worked, you would have kept your base rent at $1500 and saved $ 850 this year. In forward years, rent board increases would be based on $1500 and not $1400.

2. Skip a Month: Offer one months free rent. Tenants are open to this and it allows you to preserve your $1500 base rent. Never make it the first months rent, since you may find yourself with a tenant that doesn't pay in the second month either and now you have a squatter.

3. Improvements: A really great idea is to offer amenities that increases the value of the unit. Consider amenities  tenants cant take with them such as: stackable washer/dryers, microwaves or dishwashers. Tenants really do like the added convenience and it adds value to the unit. A good win-win choice.

4. Increase Market Depth: Consider pets. You can reduce risk by asking for a pet deposit in addition to the security deposit. Be sure not to exceed 2 x rent for unfurnished or 3 x rent for furnished rooms rules for San Francisco.
 
5. Section 8: Increase your applicant base by considering Section 8     

6. Advertise: Maximize your marketing presence by using Craigs List and an internet listing company such as apartments.com

7. Hire a property management company: If it saved you just one month, because of their leasing expertise or visibility, you would be ahead of the game.

REsourced from www.yourpropertypath.com

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