Multifamily Memo: Where Are the Best Multifamily Opportunities in Los Angeles?

Where are the Good Deals?

Los Angeles County currently has a massive amount of inventory across nearly every submarket. As of today, there are 1,279 multifamily buildings on the market. The first quarter of 2025 was quiet, with only 320 transactions—a significant drop from 477 deals in Q4 2024.

The wildfires earlier this year contributed to a “pencils down” environment among many buyers. However, select listings are gaining strong momentum—especially well-located value-add properties. We are currently completing a best-and-final round for a value-add listing with 8 offers, including one non-contingent offer from a buyer who has not even seen the units.

Of today’s listings, 266 buildings (22%) are priced at a 6-cap or better. It is likely that much of the remaining 78% will struggle to trade—unless they are in top-tier locations. With high inventory and cautious buyers, it is more important than ever for us as brokers to be selective about the deals we take on.

Who’s Buying LA Multifamily?

Nationwide, deal velocity is concentrated in the sub-$10 million segment. Private investors are moving faster than institutions, especially in our team’s listings. We have seen 5+ offers on deals under $3 million, while larger deals are facing a much thinner buyer pool. A big driver is the ULA tax—buyers are factoring it into their future exit assumptions.

Through May 30, 2025, only 26 multifamily properties in the City of LA traded above the $5.15 million ULA threshold. Per Marcus & Millichap’s latest report, significant capital remains on the sidelines and is expected to re-enter the market in the second half of 2025.

Are We Going to See More Units Built in LA?

So far in 2025, 5,119 units have been permitted—many of which are 100% affordable ED1 projects. This means the number of market-rate units in the pipeline is considerably lower than what is being delivered now.

Some areas like South LA, the Westside, and Downtown have seen a surge in permits. By contrast, San Fernando Valley submarkets have seen a sharp drop. Between July 2024 and May 2025, 76 new ED1 applications were filed. However, given Section 8 funding challenges and uncertainties around ED1 menu options, a good number of these may never get built.

Figure 1 is from RealPage that shows LA is ranked #8 nationwide in multifamily permits. Permitting in Los Angeles is down 31% year-over-year, which is a positive sign for existing owners in terms of future rent growth.

Operating Expenses Continue to Rise

The primary source of distress in multifamily is not declining revenue—it is rising operating expenses. Over the past year:

• Insurance is up 100%

• Utilities are up 21%

• Many fixed-rate loans are coming due in 2025 and 2026

According to Trepp, over 5,100 properties nationwide now have debt service coverage ratios below 1.0, meaning they cannot support their current debt.

While distress is growing, true-banked owned sales in LA remain rare. That said, we are starting to see forced sales. One current listing of ours involves a seller who renovated for three years and is now listing just above the loan balance—simply to preserve their credit after failing to raise capital for a refinance.

Where are Interest Rates Headed?

Wall Street currently anticipates 2-3 quarter-point cuts over the next 12 months. However, trade-related tariffs and inflation still above the Fed’s 2% target are complicating the Fed’s timeline. The Fed is cautious—aware of past mistakes where rate cuts were followed by renewed hikes. Multifamily loans are typically priced relative to the 10-Year Treasury, currently in the mid-4% range. Most analysts expect it to remain between 4.25%-4.5% in the coming year.

Chase reports that just under 30% of its multifamily loan portfolio is variable-rate, underscoring refinance risk for some investors. With spreads relatively tight today, many owners are facing tough refinancing math in comparison to their original debt in the 3% range. And while rate cuts may offer some relief, waiting for significantly better rates could be wishful thinking.