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We Should All Be So Lucky to Have This Guy as Our Landlord

Scott Lucas | April 15, 2014 | Story Real Estate

Reddit—it's not just for men's rights advocates and My Little Pony fans anymore. In fact, yesterday evening, a Bernal Heights landlord who rents out one of his two units (he lives in the other) took to the San Francisco subreddit to field questions in an AMA. The whole thing is well worth reading, but here are the highlights:

Q: When I was first apartment hunting in SF, my fiancee and I found what we thought was the perfect apartment. We applied and the landlord called us the next morning. "You're great applicants and I want to rent this to you, but I can't. We just bought this house and it's a rent controlled unit. I think you're too stable, will stay here too long, and [...] I'll lose money on my mortgage renting it to you[.]"Is that a legal reason to pass on a tenant?
As far as I know, it is not illegal to discriminate based on "stability" as landlords may discriminate for any reason other than race, color, national origin, religion, sex, familial status, or disability and certain other forms of legislatively protected classes. If, theoretically, I were to rent out my rental unit to anyone other than my current tenants, I would look for someone based on how likely it was that (i) the person would not be there forever and capture the benefit of the delta between the controlled rent and the market rent […] and (ii) that had a reliable source of income. By way of example, a medical student at UCSF would be a good candidate because s/he would have reliable, stable income via student loans, but would also be likely to move out when s/he matched for residency.

You're one of those small-time landlords we hear about (that some allege are leaving units unoccupied instead of putting them on the market), so if you were not dealing with someone you knew and trusted, would you still be in this business? What would you rent this unit at if it was someone you did not know at all?
The biggest risk is just being unable to get a bad tenant out of the unit. Eviction (even for basic stuff, such as non-payment of rent) would take months, be far from having a certain outcome, and the legal fees would eat up any revenues from rent over many years. In the end, I would probably need to pay the tenant to move out. I cannot speak for other landlords, but we personally couldn't take that risk.

You're basically handing your tenant a lifetime lease.
Yes. I actually also own property in a non-rent controlled jurisdiction, and was comfortable renting that property out to a complete stranger. At the end of the lease, the tenant moves out.

Do you own just one unit or a whole building? What are the monthly expenses compared to the monthly income for the apartment?
I own a whole building, but it is only two units. I live in one unit and rent the other unit out. As for expenses […] I am probably breaking even at the moment. If you include depreciation, I have a loss.

Would you care if one of your tenants started doing Airbnb, or would you rather just not know about it?
I would object, as I live in the same building, and would not want to deal with the safety and additional maintenance issues that arise from Airbnb folks having access. But my tenants are also very close friends, so that wouldn't happen in my circumstance.

Bernal is definitely one of those neighborhoods that many believe is being hit hard by gentrification. What do you think about the gentrification issue?
This is a tough question and doesn't lend itself well to quick answers, but I will do my best. I think that anytime a neighborhood changes quickly, it can be disconcerting for the existing residents. At the same time, cities and neighborhoods are not static - they do change and that is a good thing. I also see some ugly nativism in the some of the anti-gentrification protests - some of the protests echo the anti-immigrant nativists you meet in Arizona. Which is really bizarre. Anyway, in the long run, I think the people most hurt by our crazy rents are not existing tenants (many of whom are protected by rent control), but the new people who want to move to the city but cannot afford to. The only thing that can fix that is to build up and build additional units. (Even though I benefit from the current situation which puts crazy limits on supply of new housing).

As a property owner in SF, do you think building upward will negatively affect the values of your existing property? How do you think it would affect the quality of life?
Yes, I think if there are significant changes to zoning, permitting, the discretionary review process and the various other impediments for building new buildings or expanding new buildings, then many more units would be built faster, and rents / housing prices overall would decline (or at least not rise so quickly). But generally it wouldn't affect me too much (because I own the land underneath my building), and I'd much rather SF be an interesting and growing city than stagnant and dying one. Certainly, if zoning changes, my own quality of life (and that of neighbors) would change. Part of why I moved to Bernal is that it is composed of single family homes and small multifamily dwellings -which makes it much easier to get to know your neighbors, etc. However, putting aside NIMBY-istic self-interest up-zoning would be good for the city overall.

How did you wind up being a landlord?
I was in the market for a single family home. But my spouse and I noticed that 2 unit buildings were cheaper than single family homes in the area we were looking at, so we did that. We are very fortunate to have old friends as tenants. They are a couple, and I have known one member of the couple since 4th grade—so we aren't really worried about lease issues. We gave them a break on rent in part because we wholly trust them not to exploit the tenant-friendly laws to screw us.

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