R is for Rent Control Hacks

How to Maximize Rental Income in Regulated Markets

You want to make money in real estate. But in certain cities, the government’s got its thumb on the scale with rent control laws. And if you’re not careful, you could find yourself boxed into a corner with low rents and high expenses. That doesn’t sound like a winning game plan, does it?

Here’s the thing: Rent control doesn’t have to mean the end of your rental income. In fact, with the right approach, it can be the beginning of your winning streak. So don’t fold. You can still maximize your returns even in the most regulated markets.

But how?

Understand the Rules Before You Play the Game

Listen up. First things first, you need to understand rent control laws inside and out. Too many investors jump into rent-controlled markets without fully understanding how the laws work. They just assume they’re capped out at a certain rent price and then wonder why they aren’t making the money they expect. This is your first mistake.

Know the rent increase limitations, the exemptions, and the different rent stabilization policies in your area. In some places, you can increase rent more than you think, especially if you’re improving the property. So get the legal knowledge first. There’s no excuse to walk into a deal blind.

Leverage Rent Control Exemptions

Now, here’s where the rubber meets the road. Rent control laws usually come with exemptions. That means not all properties are subject to rent caps, and not all rent increases are automatically restricted.

Start by identifying which properties fall outside of the rent control laws. If you’ve got a building that’s been newly constructed (in some areas, buildings built after a certain year), you may be able to charge market rent. Get those details locked down before you buy anything.

Another hack? Vacancy decontrol. In some places, when a tenant leaves, you get the green light to raise rent to market rate. That means if you’ve got a tenant that’s been in the property forever at a cheap rent, don’t just sit there—start preparing for that tenant to vacate so you can bump up the rent once the place is vacant. Time it right, and you’ll score big.

Upgrade, Renovate, and Pass on the Costs

If you want to make money, you’ve got to play the long game. Rent control might put a cap on what you can charge in rent, but that doesn’t mean you can’t increase the value of the property. If rent hikes are limited, it’s time to look at your property’s overall income potential. Here’s how to do it:

• •  Certain improvements, like adding new appliances, updating kitchens and bathrooms, or even making the building more energy efficient, can justify rent increases under the law.
    
    
  • Pass on costs. In regulated markets, you’re often allowed to pass certain costs on to tenants, like utilities or even capital improvements (e.g., major upgrades). You can charge for these changes or upgrades on top of your rent.
    
    
  • Convert unused spaces. Take that basement or attic and turn it into a usable rental unit. Create additional income streams without having to raise your rent beyond what’s allowed.

You are ready to join our Inner Circle!

Short-Term Rentals: The Wildcard

Want to make some serious cash in rent-controlled areas? Short-term rentals (like Airbnb or VRBO) might just be your secret weapon. These types of rentals often have higher rates than long-term leases.

Before you dive in, check the local rules about short-term rentals. In some cities, you’re allowed to rent units out for short periods of time at market rates, regardless of rent control. The key is finding a balance between long-term tenants and short-term guests. Use those short-term rentals to squeeze out more profit while your long-term tenants are locked into their rent control rates.

It’s all about diversification. You can keep your property stabilized with long-term tenants while maximizing income from short-term bookings.

Get Creative with Lease Terms and Add-Ons

You don’t have to raise rent directly to increase your property’s value. There are other ways to generate extra income without stepping on the toes of rent control laws. Look at what services or add-ons you can offer to tenants. Here are some ideas:

• • Parking spaces. If you’ve got extra parking, charge for it.
    
    
  • Storage units. Tenants will pay for space to store their stuff.
    
    
  • Premium amenities. Charge a small fee for access to new amenities like an upgraded laundry room, or even rent out space for private events or gatherings.

These extra charges may not seem like much, but over time, they can add up to a lot of extra income without running afoul of rent control laws. And let’s be honest—small streams of revenue make the river of cash flow.

Work with Property Managers Who Know the Rules

Rent control laws are complex. They’re nuanced, and they change all the time. So don’t go it alone. Hire property managers who specialize in regulated markets. They’ll know the ins and outs of local laws, understand how to maximize your profits legally, and save you a ton of headache down the road. They can help you navigate everything from legal rent increases to managing renovations and ensuring that your property stays compliant while still profitable.

Play Smarter, Not Harder

You want to make money in real estate? It’s not about finding the easiest deal. It’s about finding the right deal. Rent control markets have the potential to be some of the most lucrative if you know how to play by the rules while maximizing your profits.

Don’t get discouraged by rent caps. Get creative. Find the loopholes, work the system, and most importantly—maximize your property’s revenue potential. You don’t need to raise rents to make a fortune. You just need to use strategy, patience, and smarts to turn those rent-controlled units into high-yield investments.

Now get out there and take control of your investment game. It’s time to hustle.

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Resources:

Mendenhall, Dutch. “Money Shackles: The Breakout Guide to Alternative Investments.” Michaels Press, 2023.

This work includes content generated with the assistance of artificial intelligence (AI).

Dutch Mendenhall’s opinions and expressed views are his own. These are not promised outcomes and do not indicate future results. The content provided is for informational purposes only and should not be considered professional advice. For more information, visit https://dutchmendenhall.com/disclosures/.