Most people find out about AB 1482 after they own the building. That is an expensive order of operations.
The law caps how much you can raise rent on most California residential property. If you underwrite a deal assuming you will move rents to market in year one, and the cap says otherwise, your returns were fiction before you closed.
What the cap actually is
Annual increases are limited to 5% plus local CPI, with a hard ceiling of 10% no matter what inflation does.
So in a year with 3% local CPI, your maximum increase is 8%. In a year with 7% CPI, you are capped at 10% rather than 12%.
You also cannot get around it by raising rent multiple times. The cap applies to the total increase over any twelve month period.
Which properties it covers
The main exemption is age. Property built within the last 15 years is generally exempt, and that window rolls forward, so a building constructed in 2012 became covered in 2027.
Single family homes and condos are often exempt too, but only if the owner is not a corporation or REIT and the tenant received proper written notice of the exemption. Miss the notice and you lose the exemption.
What this means in practice: most of the small multifamily stock people actually buy is covered. Long Beach has a great deal of pre-1940 housing. The Central Coast has decades-old duplexes and fourplexes in San Luis Obispo, Grover Beach and Paso Robles. Assume the cap applies until you have confirmed otherwise in writing.
Cities can also layer their own rules on top. Long Beach does. Never rely on the state rule alone.
Just cause eviction comes with it
AB 1482 also requires just cause to terminate a tenancy once a tenant has been in place twelve months.
At-fault reasons are what you would expect: nonpayment, lease violation, nuisance. No-fault reasons include the owner or a family member moving in, taking the unit off the rental market, or a substantial remodel, and most no-fault terminations require you to pay relocation assistance, typically one month of rent.
If your plan involves emptying a building to renovate and re-tenant, that plan has real costs and real timelines attached to it.
The number that actually matters at the offer stage
Not the market rent. The current rent, and the gap between them.
Say you are looking at a Long Beach fourplex. Market rent is $2,400 a unit. The sitting tenants pay $1,800 because they have been there eight years and the prior owner never pushed.
That is a $600 gap per unit, $2,400 a month across the building, roughly $28,800 a year of income you do not have.
At an 8% cap, closing that gap takes about four years of maximum increases. Not one lease cycle. Four years, during which every increase risks a tenant leaving and every vacancy is the only moment you can reset to market.
Underwrite the rent roll you are buying, not the one you hope to build.
Four things to ask for before you remove contingencies
That last one is also a financing question. Lenders want the rent roll and current leases to underwrite a DSCR file, and missing documentation is the single most common reason these deals stall in escrow.
Where the cap changes the strategy
Buy and hold works well under the cap. Steady increases, stable tenants, low turnover costs. Long Beach vacancy near 3.9% and San Luis Obispo County multifamily vacancy near 3.5% mean tenants stay and units refill quickly.
Aggressive value-add is harder than the spreadsheet suggests. If the model depends on repositioning rents fast, the cap and the relocation costs both apply, and the timeline stretches.
Vacancy is your reset button. When a unit turns over naturally, you can bring it to market. That makes natural turnover more valuable, and it is another argument for buying buildings where rents are not wildly below market to begin with.
Talk to me before you write the offer
Send me the address and the rent roll. I will run the DSCR on the rents you are actually buying rather than the rents in the listing, and tell you whether the deal finances.
That conversation costs nothing and it is a lot cheaper than finding out in month three.
About the numbers in this article
Any interest rates, monthly payments, down payment figures and repayment terms shown above are hypothetical examples for illustration only. They are not an offer to lend, not a rate quote, and not a commitment. No rate shown is locked or available on request.
The annual percentage rate will be higher than the note rate, because APR reflects financing costs in addition to interest. Both the rate and the APR you are offered depend on your credit score, loan amount, down payment, occupancy, property type, loan term and current market pricing, and will differ from any example here.
Payment examples show principal, interest, taxes and insurance. Your actual payment may be higher once mortgage insurance, HOA dues, flood insurance or other charges apply. Repayment terms shown are 30-year fixed unless stated otherwise.
All financing is subject to credit approval, income and asset verification, and a satisfactory appraisal. Programs, rates and terms are subject to change without notice, and not all products are available to all borrowers.
Ryan Van Til, NMLS #2732776. Pacific Trust Mortgage, NMLS #2573894. Licensed by the California Department of Real Estate. Equal Housing Opportunity. Your binding terms are those disclosed on your Loan Estimate and Closing Disclosure.