What Is My Los Angeles Apartment Building Worth?
Your building is worth what a buyer will pay for it - which is based on the income it supports, adjusted for condition, regulation and what a buyer has to spend after closing. There are three common ways to arrive at the value and each one is wrong in a specific, predictable way. Understanding which way it is wrong can be more useful than the number itself.
I am not going to publish cap rates or price-per-unit figures here. Those move as other market interest rates move (especially the 10 year treasury), they vary by submarket, and I do not have a current sourced dataset to cite. Anyone quoting you a submarket cap rate should tell you where it came from and when.
Capitalized income
The cap rate formula is: take net operating income and divide by a capitalization rate.
Where it misleads: the inputs. Sellers often compute NOI using their own property tax bill, their own insurance premium, and a management figure that assumes they keep doing the work themselves. A buyer recomputes all three. Under Proposition 13 the assessment typically resets on sale, so the buyer's tax line is theirs, not yours. Insurance gets requoted at today's California market rather than your renewal from three years ago. And management gets priced at a real rate even if you have never paid one.
Those three adjustments alone routinely move NOI by more than owners expect, and NOI drives the whole calculation.
Price per unit
Total price divided by unit count. Fast, and useful for sanity-checking, but a pretty crass instrument.
Where it misleads: it treats units as interchangeable. A building of studios and a building of two-bedrooms are not comparable on this basis. Neither are a regulated building and a free-market one, or a retrofitted building and one that is not. Price per unit is a cross-check, not a valuation.
Price per square foot
Price per square foot is surprisingly useful, but not perfect.
Where it misleads: on income property, square footage does not collect rent. A building with more square feet in fewer, larger regulated units can produce less income than a smaller building with more units. Price per square foot is most useful when the buyer's plan involves redevelopment rather than operation, and misleading otherwise. Regardless, it does function to mark the highest and lowest possible price.
What a buyer deducts that you did not
This is the gap between a broker's opinion of value and an actual offer, and it is not mysterious.
Deferred capital. Roof, plumbing stack, electrical service, foundation. A buyer like us prices what they will spend in the first two years, and they price it with a contingency because they cannot see inside the walls.
Retrofit status. An unretrofitted building carries a known future cost, and it comes off the price.
Anything open with the city. Open permits, code enforcement items, work done without a permit. These are worse than their dollar cost, because they can prevent a financed buyer from closing at all.
The gap between in-place and permitted income. On regulated stock, current income is what governs, and growth is capped. Pro forma rents assume turnover a buyer cannot schedule.
Tax reassessment. Yours will unfortunately not transfer.
Insurance. In the current California market, a buyer's insurance cost can be double or more of the seller's. The current market and loss runs are what determine it.
What to do before you ask anyone for a number
Assemble the file with all the documents needed: rent roll, trailing twelve months of collections, utility bills, two to three years of operating statements, current tax bill, insurance declarations with loss runs, leases, permit and code history, retrofit status, and your loan payoff.
Then ask two or three parties and compare the reasoning rather than the numbers. A party who can explain their deductions is generally the more useful conversation.
Frequently asked questions
Why is a buyer's offer lower than my broker's opinion of value?
They answer different questions. A broker's price is the price the property will be advertised at, not a guarantee of closing price. An offer is a commitment of the buyer's own capital based on assumptions they verified themselves.
Does square footage determine what my building is worth?
Partially, but not entirely. On income property the rent determines value. Price per square foot matters most when a buyer's plan is redevelopment rather than operation.
Will my property taxes transfer to the buyer?
Generally no. Under Proposition 13 the assessed value typically resets on sale, so a buyer underwrites their own future tax bill rather than your current one.
What deductions do buyers apply most often?
Deferred capital, retrofit status, open items with the city, the gap between in-place and market income on regulated units, tax reassessment, and current-market insurance.
How do I get an accurate number?
Assemble the complete document file first, then ask two or three parties and compare their reasoning rather than their headline numbers. If you would like a no-obligation offer from The Beverly Group, call us at (310) 620-2290 or submit your address.
Want a buyer's number on your building?
We buy apartment buildings in Los Angeles County, generally 4 to 100+ units, in a range of conditions. Send the address and we will come back with a real number.
General information about buying and selling apartment buildings in Los Angeles. Not legal, tax, accounting or investment advice, and not an offer to buy or sell any property. Rules and figures change; verify anything you intend to rely on with the issuing agency and with your own attorney and CPA. The Beverly Group is a principal buyer, not a brokerage, and does not represent sellers as an agent. Nothing here creates any obligation on the part of any party, and no outcome, price, timeline or result is promised.
Source note: No cap rates, price per unit, price per square foot, or submarket valuation figures are published. No current sourced dataset was available for those and none are estimated. Proposition 13 is referenced only for the general principle that assessed value typically resets on sale; verify your own exposure with the LA County Assessor.