If you own a rent-controlled apartment building in Los Angeles and you’re thinking about selling, there’s a conversation you need to have with yourself before you ever call a broker or check what buildings are trading for. That conversation isn’t about cap rates or interest rates or what the guy down the street got for his 12-unit. It’s about your rent roll, and whether you’ve been managing it in a way that puts your building in the best possible position when it hits the market..
I’ve spent close to two decades selling multifamily properties across the South Bay and greater Los Angeles, and I can tell you that rent control adds a layer of complexity to every sale. It’s not a dealbreaker. Investors buy rent-controlled buildings every single day. But the buildings that trade at the strongest numbers are the ones where the owner has been thoughtful about how they’ve managed rents, vacancies, and unit condition over time. The ones that struggle? They’re usually owned by someone who took a hands-off approach and is now sitting on a rent roll that’s 30-40% below market.
Know Where Your Rents Actually Stand
The first thing I tell any owner who’s considering a sale is to take an honest look at where their rents sit relative to what the market is actually bearing. Not what you think the market is – what it actually is. A lot of owners haven’t looked at comparable rents in years. They know what they’re charging, they know their tenants pay on time, and that feels like enough. Don’t count on your management company to stay on top of this. Often, they want it leased ASAP. But when a buyer underwrites your building, they’re going to compare every single unit to market rent, and that delta (commonly known as “loss-to-lease”) between what you’re collecting and what the units could lease for is going to drive a huge portion of the valuation.
Check sites like Apartments.com and Zillow Rentals to get a sense of where average rents are landing for your unit type and location. Rentometer is a good resource to more closely analyze rents and even look back at historical numbers. Sometimes owners are closer to market than they think. Other times, the gap is eye-opening.
Think About Turnover. It’s Not Always a Bad Thing.
In a non-rent-controlled world, turnover is just turnover. In a rent-controlled building, turnover is opportunity. Every time a tenant moves out, you get to reset that unit to market rent. That’s the mechanism. So when you’re thinking about selling, it’s worth considering what your turnover picture looks like.
Are any tenants likely to move in the near future? A study from 2024 (Equitable Rent: Rent Stabilization Standards in the City of LA) noted turnover for rents 40% under market is 5-10%. A buyer is going to factor in a longer hold period before they can realize the building’s full income potential—and that affects what they’re willing to pay today.
None of this means you should be pushing tenants out the door. But understanding the realistic turnover timeline for your building helps you and your broker price and position the property correctly.
Spend Some Money on Vacant Units
Here’s one that comes up constantly: an owner has a vacant unit and they’re in a rush to fill it, so they do the bare minimum and lease it up. That’s fine if you’re planning to hold the building for another ten years. But if you’re thinking about selling in the next year or two, a vacant unit is actually a gift – if handled correctly.
When a unit turns over, put some money into it. I’m not talking about a $40,000 gut renovation with quartz countertops and luxury vinyl plank. I’m talking about making it clean, fresh, and presentable. New paint, working fixtures, maybe updated hardware. The goal is a unit that a prospective buyer can walk into and feel good about. A unit that looks like it’s been cared for. That impression matters more than people realize during a property tour.
And here’s something worth discussing with your broker: depending on the timing, it might make sense to keep a vacant unit vacant rather than leasing it up at below-market rent right before a sale. A buyer will often pay more for a vacant unit they can lease at market than for an occupied unit locked in at a below-market rate for the foreseeable future. It’s counterintuitive, yes, but in a sale scenario, strategic vacancy can actually add value. Talk to your broker about this. Every situation is different, but it’s a conversation worth having.
Give Your Annual Increases
This is the big one, and it’s the mistake I see most often. Under L.A.’s Rent Stabilization Ordinance, landlords are allowed to raise rents by a certain percentage each year. The exact amount changes annually, but it’s there and your right as a property owner. It exists for a reason.
A lot of owners skip these increases. Maybe they have a good tenant and they don’t want to rock the boat. Maybe they forgot. Maybe they just didn’t think it mattered. But over five or ten years, those skipped increases compound into a serious gap between your in-place rents and where they could legally be. And when it’s time to sell, that gap is a problem. You can’t make up for ten years of skipped increases in one shot. The math doesn’t work.
So if you’re even remotely thinking about selling in the next few years, start giving your allowable increases now. It’s not about squeezing tenants. It’s about showing the building in its best light and demonstrating that it’s been professionally managed. Buyers pay more for buildings with healthy rent rolls, and a healthy rent roll in a rent-controlled market means an owner who has been consistently and fairly raising rents within the rules.
The Bottom Line
Selling a rent-controlled building in L.A. isn’t something you decide to do on a Tuesday and list on a Thursday. The owners who get the best outcomes are the ones who’ve been thinking about their rent roll, their unit condition, and their annual increases well before the for-sale sign goes up. The good news is that none of this is complicated. It just takes some attention and a willingness to manage the building like the investment it is.
Steffan Braunlich is a Managing Director of Investment Sales at Berkadia Real Estate Advisors, specializing in multifamily apartment buildings in Los Angeles and the South Bay market. For more information, please email [email protected] or call/text at 310.663.7145.