San Francisco Real Estate Investing: Rent Control Traps Every Investor Must Understand

Dzintars Grinfelds (00:00)
If I was to do another purchase, I mean, probably not in the cards because I’m gonna have actually remodels coming up, probably within the next 10, 20 years, ⁓ I would much prefer something vacant. I did just make a purchase for my own new house. It will be my personal property and… ⁓

Vacant because like I said before I really do prefer keeping with our family tradition of giving it class ⁓ Giving it the extra bit of elegance here and there ⁓ I Can understand that people would want to purchase with a tenant because that’s instant income, but it depends on who that tenant is too.

Dylan Silver (02:09)
Hey folks, welcome back to the show. Today’s guest, Dzintars Grinfelds is an entrepreneur, active professional bowler and real estate investor with a portfolio of single family rentals as well as triplexes in the San Francisco area. His background spans digital marketing, sports, content strategy and audience growth with experience working alongside major brands including the Golden State Warriors, San Francisco Giants, NBA 2K and others.

Dzintars is welcome to the show.

Dzintars Grinfelds (02:38)
Thanks for having me. Thanks for your invite.

Dylan Silver (02:40)
Now you’ve competed in multiple different arenas, active professional bowler, worked around major brands and have a rental portfolio in a very hot and competitive market. What mindset carries across all three worlds?

Dzintars Grinfelds (02:54)
I have to say one is dedication and competing for success. I’m always gonna be a competitor. I am always gonna be one to try to be better day by day. So yes, that applies to bowling because obviously I’m competing for money and titles every single time I’m out there. But as you said, in the kind of market that we have here in San Francisco, to be able to essentially argue for the rents that we are getting from our…

and our tenants, we have to give very hands-on services. We have to give exceptional service to everybody. So they do go hand-in-hand, the competitive aspect and then what I apply to people because no matter what, I have to be among the best.

Dylan Silver (03:36)
Do you see any advantages to being able to be active in these three worlds where you might actually reap a lesson from the social media world that’s helpful in bowling or vice versa?

Dzintars Grinfelds (03:50)
⁓ Certainly for myself, it’s using the social media background to promote my own brand as I’m now sponsored by three great companies. I have to promote them, promote myself because that all works together, of course. But having the experiences I did working in sports where I was in digital marketing and social media, but really what that also meant was I got to play with a lot of the new marketing tools that came out.

So I got to adapt ⁓ a lot of things for our business in like just creating digital receipts, how I can use ⁓ task management programs to keep ourselves ⁓ in check, make sure we’re on time, get projects lined up and done ⁓ in good order.

Dylan Silver (04:32)
Now, San Francisco and the greater San Francisco area, for folks who may not be investing in San Fran, do you have any specific neighborhoods that you like to look at deals or evaluate deals in in San Francisco?

Dzintars Grinfelds (04:46)
I appreciate the pause, we definitely don’t call it San Fran. ⁓ So, yeah, within San Francisco, there are pockets that are consistent hotbeds, and I am very lucky that our investments are in one of them. That’s Noe Valley.

Dylan Silver (04:50)
you

Dzintars Grinfelds (05:49)
It’s essentially the heart of San Francisco. Many people don’t know, but downtown is actually off to one side, northeast side. ⁓ Noe Valley, Castro, everything around

These neighborhoods are consistent for families, beautiful weather. In the late 1990s and 2000s with the tech boom, we also got incredibly lucky as investors where the ⁓ tech buses decided to set up shop around our properties. We had stops in front of at least three quarters of our properties. And that meant all of sudden we had

tech VPs, senior management coming in. So of course that affects the rent too, where there’s high demand. And as I said earlier, we’ve always had a family philosophy of having a certain level of class in what we do and what we provide. That just meant that we were bringing in people that expected more too. So rents went up for us, which was ⁓ truly beneficial, but at same time we had to up our game to match that.

Dylan Silver (06:53)
Walk me through what some of that value add looks like.

Dzintars Grinfelds (06:56)
⁓ Even showing ⁓ behind me, detail. ⁓ We really do care about adding more than just cream walls, ⁓ a white trim, know, the whole standard ⁓ unit look, right? ⁓ Of course we keep things pretty clean and basic, but we add a lot of touches like custom tile work in the bathrooms, backsplashes.

⁓ We try to make sure that we have ⁓ views of the city and things are kept tidy so that way when someone walks into a unit they can see like, wow, this is well maintained. ⁓ Nice ornaments, nice lighting. Even, we go shop at other places, not just Lowe’s. And Home Depot, not that they’re wrong. I love buying from Lowe’s as much as anybody.

As we mentioned earlier, I use apps where I get discounts off of Lowe’s and extra cash back. But what matters most is finding things that are true to the periods because a lot of our homes are Victorian.

Dylan Silver (08:01)
Now, ⁓ when you’re looking at deals, are you looking on market, off market? Do you have ⁓ broker relationships that have been fruitful for you? How do you find deals?

Dzintars Grinfelds (08:14)
We’re very lucky to have one broker we’ve worked with for 25 years and he is among those that is constantly on Craigslist and Redfin and all the sites. He’s probably one of the most prolific as well and he has been for all that time. So that just means he is truly among the best. And the best part about that relationship isn’t just that he is essentially a family friend and part of our family.

You can tell from his experience that he has that keen ability to sniff out BS from people. He can really tell who will be a good tenant. He will tell you not just if that individual tenant is good, but if they work well with the rest of the duplexes or triplexes. Because there are people that just are happy to bring in the young techie who is willing to pay a lot in rent.

but they won’t mesh well with the senior tenant down below. Now, we’ve had those kind of circumstances before, ⁓ but now having someone with his experience is just invaluable.

Dylan Silver (09:15)
So he’s not only finding and sourcing these properties, he’s also property manager.

Dzintars Grinfelds (09:18)
Thankfully, that’s where we take over. He will not be hands-on. But ⁓ I have three generations worth of experience doing all the hands-on work. I know that I consider myself an investor and property manager. I live in this space where people see it as a weird overlap. But I see it as property managers nowadays have it too easy. They just take phone calls and distribute the workload. Whereas if I take a call from somebody, I’m on site.

Dylan Silver (09:30)
Mm-hmm.

Yeah.

Dzintars Grinfelds (09:44)
and I’m analyzing what’s going on, let’s say it’s a ⁓ washer, clothes washer, that they say has sprung a leak, they don’t know, the tenant typically doesn’t know what it is that’s going on. And if I can get on site and say, well, clearly it’s coming from the appliance, I see it’s rusted out, therefore I need a new

It’s coming from the appliance, it’s coming from this one area within a washer, you know what, that’s workable. If it’s coming from the hose, I could replace the hose myself.

Having the layers of knowledge that I do is really a benefit that I think a lot of people are missing when they’re in my space.

Dylan Silver (10:53)
Now, do you prefer to be purchasing properties that are tenant occupied or vacant?

Dzintars Grinfelds (10:59)
If I was to do another purchase, I mean, probably not in the cards because I’m gonna have actually remodels coming up, probably within the next 10, 20 years, ⁓ I would much prefer something vacant. I did just make a purchase for my own new house. It will be my personal property and… ⁓

Vacant because like I said before I really do prefer keeping with our family tradition of giving it class ⁓ Giving it the extra bit of elegance here and there ⁓ I Can understand that people would want to purchase with a tenant because that’s instant income, but it depends on who that tenant is too

And in San Francisco, there are a lot of laws you have to navigate around that if for example if they were in the property before 1996 Even though it’s single-family home this rent control

After if anyone moved in after 1996 a single-family home doesn’t have rent control But there are investors who jump into it and don’t know that date so they may be investing in a building that has someone rent controlled which I’m in favor of but It may backfire on their investment

Dylan Silver (12:03)
for sure, for sure. You mentioned earlier some remodels. Are you currently active doing value add in that capacity remodeling?

Dzintars Grinfelds (12:11)
Absolutely, like I said, my own property, of course, ⁓ get to have fun with that project because it was one that was last repainted in the 1970s. Quite literally, they did all one shade of white throughout the entire house, except for the hand railing, which it is an eight inch round hand railing. It was all black and I scraped a little paint away and we found beautiful, original old redwood, like original to the house.

from the 19, I believe it was built 1908. do those little bits of work and it just brings out so much more. But like you said, it’s value added because we’re finding these kinds of details. I absolutely do think that these, especially here in San Francisco where people are willing to spend a little bit more for a comfortable life, they look for those things.

Dylan Silver (12:59)
Now, it sounds like the management of these properties in a long-term hold capacity is really where you’re building your wealth. And so when we talk about successful property management, what are the things that come to mind?

Dzintars Grinfelds (13:16)
⁓ Client care, for sure. ⁓ And that’s always going to be the most difficult one because I’ve told other podcasts, other friends that are interested or just ⁓ other students.

Not everyone’s easy handle, but you have to have that client and customer background to be able to manage that. ⁓ Knowledge and a very general knowledge of everything. I’m never going to say I’m an electrician or a plumber, but I certainly know the science behind it. I know how things work. And to be frank, there are plenty of people that are hopping onto apps such as Thumbtack.

I think one’s called Houzz, there’s Yelp. Everyone can create a new business now and I know that the metrics and data says, excuse me, the data says that there’s a lot of people now taking on blue collar jobs like plumbing and electrician, being electricians, because they can own their own business, which is fantastic. But they don’t carry some of knowledge that some of the people that have been in the trade 30 years do. So I have to watch over them a lot.

Dylan Silver (14:18)
Sure.

And I think that there are a lot of people who, like you mentioned, don’t know where to turn to. And a reliable electrician, a reliable HVAC person, a reliable contractor, handyman, what have you, these can be some of the most valuable people, not just in a long-term hold, but in a short-term rental, right? And anytime you’re managing tenants or turnover, this is huge. What’s your thought on…

rent increases? Is that something that you try to shoot for periodically or every couple of years? What goes into that arithmetic?

Dzintars Grinfelds (14:53)
⁓ So I’ll kind of separate that in two different ways here within San Francisco. ⁓ We are a rent controlled city

and the rent control only applies to duplexes plus. So two unit, three unit. The exception being single family homes before 1996. So that means that with everything that’s rent controlled in San Francisco, it’s incredibly easy. They tell us this is the number this year. That’s your maximum for the last

Three years now, it’s been 1.5%. Done. There are additions I can make if I make a capital improvement to the property, which means something that truly adds to the ⁓ value of people living there. New roofs, new patios, ⁓ paint jobs, but even then it needs to be something within reason and something that truly adds to the property. It’s not just lipstick on a pig. ⁓

So there are other ways to up the rent, but everything is, like I said, controlled and watched within the city. Now, single family homes, I can increase as much as I’d like up to the California rate, which I believe I did. ⁓ It was 10 % last year, and I did that for two properties. But that’s because we had not increased their rent for, frankly, since they had moved in, which was fine.

I’m always watching the numbers. I always do ⁓ annual charts to make sure that our budget’s on par. Plenty of the properties are ⁓ working well within their range, and I’m not worried about having to crunch, ⁓ add rent to get more out of them. But because this year our insurances went up 25 % across the board, I had to send a letter to these tenants at single family homes and say, you know what, it’s just time.

And thankfully, because we have this rapport with our tenants, they said, not a problem.

Dylan Silver (17:23)
We are coming up on time here, Dzintars. Any ⁓ new projects that you’re working on.

Dzintars Grinfelds (17:28)
Well, all I can plug is myself, you know, being the bowler, being the brand ambassador that I am for a lot of bowling products. Please feel free to search me up. I’m happy to talk bowling. I’m happy to talk real estate, stock investments or real estate investments. I know I’m easy to find because I have a unique name. So just search DZINTARS underscore G (@dzintars_g and I’m sure I’m going to pop up first.

Dylan Silver (17:51)
Thank you so much for joining us today. Thanks for your time.

Dzintars Grinfelds (17:54)
Again, thanks for the invite.