Increase Your Rental Revenue: A Guide to LA Market-Rate Rents

Publish date: Oct 24, 2024

Maximize Rental Income in Los Angeles: Aligning with Market Rates

As a property owner in Los Angeles, it’s essential to regularly assess whether your rental rates align with current market trends. With the average rent in LA increasing by approximately 65% over the past decade, reaching around $2,527 in 2019, failing to adjust your rents accordingly could mean missing out on substantial income.

Why Staying Competitive with Rents Matters

The Los Angeles multifamily real estate market is rent-controlled, which adds complexity to optimizing rental income. However, understanding and leveraging the tools available to you can significantly close the gap between controlled rents and what renters are willing to pay today.

Consider this:

• Rents are rising. Even with a slower 2024 forecast, Los Angeles multifamily properties remain one of the most competitive rental markets in the U.S.
• Missed opportunities add up. Not adjusting rents can lead to:
  • Lost revenue compared to similar properties.
  • Longer vacancies if rents aren’t competitive.
  • Lower ROI on property upgrades and maintenance.

Prime Opportunity: Tenant Transition

When tenants move out, you can legally reset rents to match current market rates. This is your best chance to maximize income in a rent-controlled market. By aligning turnover rents with market rates, you can boost property revenue by 15-20% per year.

What Happens If You Don’t Act?

• Lower income compared to your peers.
• Longer vacancies due to non-competitive pricing.
• Unoptimized property upgrades and utilities.

Two Ways to Keep Rents Competitive

1. Annual RSO Increases: Implement the allowable 4% increase (plus 1% for utilities, if applicable) to keep pace with inflation and market trends.
2. Capital Improvement Pass-Throughs: After significant property upgrades, landlords can apply for rent increases to recover some costs through programs like LAHD's Capital Improvement Program.

Financial Impact of Below-Market Rents

Consider this scenario: owning a 10-unit building with rents 10% below the market average of $2,784 (as of May 2023) results in an annual loss of approximately $27,000. In high-demand areas like Marina del Rey, where two-bedroom apartments average $4,574, being 15% below market equates to a monthly loss exceeding $6,800, totaling over $81,600 annually.

Three Steps to Maximize Your Rental Income

1. Schedule a Revenue Analysis: Assess your current rent roll against market rates.
2. Review Findings: Identify units priced below market and determine potential increases.
3. Implement a Plan: Develop a strategy that may include opportunistic rent adjustments, capital improvement pass-throughs, and utility billing optimizations.

Don’t Wait—The Market Shifts Weekly

The Los Angeles rental market changes rapidly. The sooner you review your numbers, the sooner you can start capturing lost revenue.

Curious about your property’s potential? Schedule a Free Consultation Today.

Taylor Avakian is a multifamily investment expert and the host of No Vacancy, a podcast dedicated to exploring the latest trends, strategies, and insights in the real estate market. As the founder of The Group CRE, Taylor specializes in helping landlords and investors navigate the complexities of multifamily ownership in Los Angeles.