Multifamily Real Estate Q&A Los Angeles

Buying a Duplex, Triplex, 1-4 units in Los Angeles

What first-time buyers need to know about buying multifamily property, duplexes, triplexes, and fourplexes, compared to a single-family home. Buying a multifamily property in Los Angeles, whether a duplex, triplex, or fourplex, can be one of the smartest ways to build long-term wealth.

Is Buying a Multifamily Property Harder Than a Single-Family Home?

The steps are similar, but you’re also buying an investment. Expect more due diligence, more ongoing management, and more rules, leases, tenants, and city compliance. You’re running a small business, not just buying a home.

Should I Buy a Vacant Property or One With Tenants?

Vacant or month-to-month tenants are easiest. If you inherit long-term tenants, you can’t screen them, rents may be below market, and rent control laws limit increases.

If the tenants will remain in place, review each lease carefully including the rent amount, security deposit, and notice requirements before removing contingencies.

Maintenance Differences

More plumbing, electrical, roofing, sewer, shared walls, and common areas mean more calls and potential conflicts. You’ll likely handle landscaping, trash, and common area upkeep. Budget time and money for maintenance and professional help.

What to Check Before Making an Offer

• Verify rent roll and compare to market rents.

• Review utility bills, insurance, taxes, and vendor contracts.

• Confirm whether utilities are separately metered.

• Check for deferred maintenance on roof, plumbing, and foundation.

• Ask your agent about fire and life-safety compliance (required in triplexes and fourplexes).

California Safety Retrofits and Seller Responsibilities

In California, many cities require safety retrofits before closing escrow. These retrofits protect new owners and bring older buildings up to basic safety standards. They typically include:

• Water heater strapping and bracing to prevent tipping during earthquakes

• Seismic gas shut-off valves to automatically stop gas flow after strong shaking

• Smoke and carbon monoxide detector installation in all required areas

• Fire alarm or safety checks for multifamily buildings

These items are often seller’s responsibility under local transfer ordinances. Always confirm with your agent or escrow officer which retrofits apply in your city, since requirements can vary between Los Angeles, Santa Monica, and surrounding areas. Having retrofit work completed and certified helps prevent delays in closing and ensures your property meets California life-safety standards.

Financing for 2–4 Units

If you plan to live in one of the units, you may qualify for FHA financing with as little as 3.5 percent down or VA financing with no down payment. Lenders classify properties with two to four units as residential, though appraisals and inspections are typically more expensive. Properties with five or more units require commercial financing, which involves stricter terms and larger down payments.

Tax and Insurance Differences

Always consult with your CPA before purchasing. Insurance costs are typically higher due to the added liability of multiple units, but you can deduct expenses such as mortgage interest, repairs, management fees, and depreciation using a 27.5-year schedule. Confirm zoning and legal use before closing, as some properties marketed as residential may actually be classified as commercial.

Legal and Safety Requirements

Cities like Los Angeles require:

• Annual fire alarm inspections

• Smoke and CO detector compliance

• Rent control registration for eligible buildings

Verify these before closing to avoid future violations.

Tenant Management

More tenants mean more requests and more potential disputes. Use clear leases and written house rules for parking, pets, quiet hours, smoking, and trash. Consider professional property management if you prefer a hands-off investment.

Resale Value

1–4 units: priced based on comparable sales.
5+ units: valued by income (NOI) and cap rate.
Multifamily buyers care about numbers, not finishes.

First-Time Buyer Strategy: House Hacking

Live in one unit, rent the rest. Your tenants’ rent can offset the mortgage, helping you build equity faster while learning management on a smaller scale.

Hidden Costs

• Shared water or gas meters

• Landscaping and trash service

• Vacancy periods between tenants

• Higher insurance premiums

• City inspection or compliance fees

Common Mistake When Buying Multi-Units

Before removing contingencies, always request:

• Inspection reports to identify structural or system issues.

• City compliance certificates to confirm all units meet code.

• Tenant Estoppel Certificates to verify rent, deposits, and lease terms.

• Work with an experienced agent who understands the ins and outs of multifamily transactions.

• There are many moving parts and details that require professional guidance.

• Review all seller disclosures carefully.

• Check city records to verify the property’s history and permit activity.

• Compare the original certificate of occupancy with the current use to ensure it matches.

• Confirm that all plumbing, electrical, and structural work was completed with proper permits.

• Conduct a thorough independent investigation.

• Do not rely solely on seller-provided information.

Order detailed inspections, including:

• General inspection

• Sewer line inspection

• Termite inspection

• Foundation inspection

• Electrical and plumbing evaluations

• Mold inspection

• Roof

Coordinate inspections in a professional manner to avoid alarming tenants.

Make sure you fully understand the property before removing contingencies or closing. Review its condition, compliance, and tenant situation carefully.

Common Mistakes in Multifamily Investing

Poor team building: Trying to do everything alone leads to costly mistakes. Work with an experienced attorney, broker, CPA, and property manager to protect your investment.

Weak investment criteria: Know your goals, risk tolerance, and target returns. Avoid chasing deals that don’t align with your strategy.

Inadequate due diligence: Verify rent rolls, inspect every unit, and review all expenses. Never rely solely on the seller’s information.

Ignoring market fundamentals: Research job growth, rental demand, and local housing regulations. Location and market trends drive performance.

Overestimating returns: Be realistic about income potential. Budget for vacancies, maintenance, and slower rent growth. Keep reserves for unexpected costs.

Misjudging timelines: Renovations and stabilization take time. Plan enough cash flow to support the property until it’s fully performing.

Relying on promised returns: Be cautious of “guaranteed” returns. Base decisions on verified numbers and market data.

No management plan: Decide early whether to self-manage or hire professional management. Clear systems improve efficiency and tenant satisfaction.

What Do the Current Leases Say?

• Month-to-month or fixed term?

• Rent amounts, deposits, and late fees

• Pet policies, parking, and utilities

• Compliance with California and Los Angeles rent control laws

Are Tenants Paying on Time?

Match leases with bank statements or rent ledgers to verify rent collection. This prevents buying based on inflated rent rolls.

Are There Maintenance or System Issues?

• Roof, plumbing, electrical, HVAC, and foundation

• Shared meters or utility lines

• Appliances and gas lines

Even one failing system can impact all units.

How Should Title and Deposits Transfer?

At closing:

• Escrow must credit all deposits and prorated rents to you

• Get receipts and addenda showing parking, pet, or storage fees

Landlord Obligations

Know:

• Rent increase limits

• Required notice periods

• Security deposit rules

• Habitability standards

In Los Angeles County, confirm rent registration and legal rent history.

Tenant Estoppel Certificates (What Every Buyer Should Require)

A Tenant Estoppel Certificate is a short form signed by each tenant confirming their lease details. It ensures the buyer and lender rely on accurate facts.

When Used:

• When a property is being sold

• When an owner refinances

It Confirms:

• Lease dates, rent, deposits, expiration

• Whether the tenant has subleased

• That the lease is valid and current

• That the landlord is not in default

• Parking, storage, and who pays utilities

• That no side agreements exist

Why Tenant Estoppel Matters: Once signed, the tenant is legally bound by the information. If a tenant later claims a different rent or rights, the buyer can rely on the estoppel certificate. It protects you from inaccurate information and can even help prove cause for eviction if lease terms were violated.

The 1% Rule

The 1% rule is a quick way investors estimate rental property performance. It means the monthly rent should equal at least 1% of the property’s purchase price. For example, a property bought for $500,000 should rent for at least $5,000 per month to meet the rule.

A stricter version of the 1% rule is difficult to meet in high-cost areas where home prices are higher and rent growth is limited. Instead of relying on this shortcut, investors should analyze full financials, including income, expenses, financing costs, and projected returns, to get a true picture of profitability. In Los Angeles, most properties fall below this due to high prices. Use cap rate and actual net income for accurate analysis.

The 2% Rule

The 2% rule is a more aggressive version of the 1% rule. It suggests that a property’s monthly rent should be at least 2% of the purchase price. For example, if you buy a property for $300,000, it should generate about $6,000 per month in rent to meet the 2% rule.

This rule is typically only achievable in lower-cost markets where property values are low relative to rent potential. In high-demand or expensive areas, such as major coastal cities, the 2% rule is rarely realistic.

While it can help investors quickly screen for high cash flow opportunities, it’s still just a guideline. Always verify a property’s actual performance through detailed financial analysis, including operating expenses, taxes, financing terms, and vacancy assumptions.

The 50% Rule

A quick budgeting rule: assume about half of the gross rent will go toward expenses like taxes, insurance, maintenance, utilities, and vacancies. This doesn’t include the mortgage payment but helps estimate your net operating income (NOI).

Is Owning a Multifamily Property Worth It in Los Angeles?

Yes, if the numbers make sense. Having multiple tenants helps steady income and build equity. In Los Angeles, cash flow can sometimes be negative, but land value often grows significantly over time, making long-term appreciation a key benefit. Pros include equity growth, tax advantages, and diversification, while cons are higher prices, more management, and lower short-term returns. Always run the real numbers before buying.

Can I Buy Multifamily with FHA?

Yes, for up to 4 units if you live in one.

• 3.5% down with 580+ credit

• Lenders can count ~75% of other units’ rents toward qualifying

• 5+ units require commercial loans

How to Buy a Multi-Unit Property

• Get pre-approved for a loan.

• Search for properties in high-demand rental areas like Santa Monica, West LA, and Mid-City.

• Analyze income, expenses, and cap rate to be sure the deal makes sense.

• Verify rent control registration and city compliance.

• Order inspections including general, pest, sewer, and roof.

• Review permits and property history with the city.

• Negotiate repairs or seller credits based on inspection results.

• Review tenant leases, rents, and deposits if the property is occupied.

• Decide whether to self-manage or hire a property manager.

• Keep adequate reserves for maintenance, vacancies, and emergencies.

• Work with an experienced agent who understands multifamily properties and local rent laws.

Can a Buyer Evict a Tenant After Purchasing a Multifamily Property in Los Angeles?

Yes, but only under specific conditions. In Los Angeles, a buyer who becomes the new owner can evict a tenant for owner move-in purposes, meaning the owner plans to live in one of the units. However, the process is tightly regulated under Los Angeles Rent Stabilization Ordinance (RSO) and must follow strict city procedures.

Here’s what’s required for an owner move-in eviction:

• File a Declaration of Intent to Evict and Owner Occupancy Application with the Los Angeles Housing Department (LAHD).

• Pay relocation assistance to the displaced tenant. The amount depends on the tenant’s income, age, and length of tenancy.

• The property must remain owner-occupied for at least three years after the eviction.

Every city in Los Angeles County (such as Santa Monica, West Hollywood, or Beverly Hills) has its own variation of these rules, so always verify requirements with the local housing department before taking any action.

For full details, visit the Los Angeles Housing Department – Owner Move-In Evictions page.

What should you know about buying vacant vs. occupied multifamily properties?

Buying vacant gives you full control to renovate, set market rents, and choose tenants. When properties are occupied, you must honor existing leases and may face below-market rents or difficult tenants.

Are inspections and appraisals more expensive?

Yes. Each unit needs a full inspection, and appraisals take longer because they analyze income and expenses in addition to property condition.

What legal or compliance items should you check before closing?

Confirm rent control registration, city compliance, separate utility meters, and fire safety systems. Some triplexes and larger buildings must maintain active fire suppression systems and inspection certificates.

Is it harder to sell a multifamily property?

Yes. The buyer pool is smaller than for single-family homes, which can make resale slower. However, strong income and good condition can keep values competitive.

How do returns compare to single-family homes?

Multifamily investments usually provide steady income and long-term appreciation but may have lower short-term cash flow, especially in expensive markets like Los Angeles.

What other factors should you consider before buying?

Check whether utilities are separately metered.
Budget for exterior maintenance like lawn care and pest control.
Review rent control and habitability laws.
Inspect each unit individually.
Plan your exit strategy early, decide whether you’ll hold, refinance, or sell.

Hire Us

Thinking about buying a multifamily property in Los Angeles? Whether you’re considering a duplex, triplex, or fourplex, I can help you evaluate the numbers, understand rent control and retrofit rules, and find the best properties in areas like Santa Monica, West LA, Beverly Hills, Venice, Mar Vista, and Mid-City.
Contact me today to start your search or get a free multifamily investment analysis.