What Should You Inspect When Buying a Multi-Unit Property in Los Angeles or Santa Monica?

Buying a duplex, triplex, fourplex, or apartment building requires both physical and regulatory due diligence. In Los Angeles, compliance matters as much as condition.

1. Structure & Major Systems

Inspect the core components first:

• Roof and foundation
• Soft-story retrofit status (required under Los Angeles seismic retrofit program if applicable)
• Plumbing, sewer line, electrical panels, HVAC
• Separate gas and electric meters for each unit (major value driver)
• Balcony compliance under California Senate Bill 721 (Exterior Elevated Elements law)
• Signs of mold, pests, asbestos, deferred maintenance
• Unpermitted additions or alterations

Hire licensed specialists for roof, sewer, structural, and seismic inspections.

2. Financial Verification (Trust but Verify)

Do not rely on seller summaries alone.

Request and cross-reference:

• T-12 (Trailing 12-month income statement)
• Profit & Loss statements
• Current rent roll
• Estoppel certificates (must match rent roll exactly)
• Leases and security deposit records
• Property tax and insurance bills

Estoppel certificates confirm what tenants actually pay, deposit amounts, lease terms, and any side agreements. Discrepancies are red flags.

3. Regulatory & Compliance Review (Critical in LA)

Confirm status with the proper agencies before removing contingencies.

Verify:

• Rent Stabilization Ordinance (RSO) registration through the Los Angeles Housing Department (LAHD)
• Systematic Code Enforcement Program (SCEP) history
• Rent Escrow Account Program (REAP) status
• Los Angeles Department of Building and Safety (LADBS) permit history
• Certificate of Occupancy matches zoning
• Open violations, liens, or complaints

For Santa Monica properties, confirm:

• Rental Housing Habitability Program (RHHP) compliance
• Local rent control registration status

Check city portals directly — do not rely solely on seller disclosures.

4. Tenant Risk Review

Tenant profile affects value and cap rate.

Ask:

• Any ongoing disputes or habitability claims?
• Late or non-paying tenants?
• Pending eviction or buyout agreements?
• Long-term below-market tenants under rent control?

Tenant risk directly impacts pricing and investor appetite.

5. Environmental (5+ Units Recommended)

For larger buildings:

• Phase I Environmental Site Assessment

Budget

For a duplex or fourplex, budget approximately $1,000–$2,000 minimum for inspections. Larger properties require more extensive review.

Vacant units provide easier access and cleaner underwriting.

Bottom Line

Verify income.
Cross-check estoppels with rent roll.
Confirm Rent Stabilization Ordinance status.Check Los Angeles Housing Department and Los Angeles Department of Building and Safety records.
Confirm seismic retrofit compliance.
Review SCEP, REAP, and habitability history.

Due diligence protects your cap rate, reduces risk, and preserves exit value.

How Do I Verify a Rent Roll in Los Angeles?

When buying or selling a multifamily property in Los Angeles, verifying the rent roll is critical. Income drives value — and buyers will not rely on unverified numbers. Require tenant estoppel certificates in the purchase agreement Always cross-reference the rent roll with executed estoppel certificates, and make delivery of tenant estoppels a contractual requirement so you can independently confirm rents, deposits, lease dates, and tenant status.

Step-by-Step Rent Roll Verification

1. Match Rent Roll to Leases
Confirm unit-by-unit:
• Monthly rent
• Lease start and end dates
• Security deposits
• Tenant names

Everything must match exactly.

2. Compare to Bank Statements
Review 6–12 months (ideally 12–24 months) of bank deposits.
Scheduled rent should align with actual collected rent.

Deposits lower than scheduled income may indicate vacancy, concessions, or bad debt. Some sellers may not provide bank statements. Sellers are not legally required to provide bank statements.

3. Obtain Tenant Estoppel Certificates
Have tenants sign estoppel certificates confirming:
• Rent amount
• Deposit held
• Lease term
• No side agreements

Estoppels protect buyers and validate income.

4. Review T-12 (Trailing 12-Month Financials)
Ensure reported income on the T-12 matches:
• Rent roll totals
• Bank deposits
• Historical financial statements

Consistency is key.

Los Angeles-Specific Verification

If the property is subject to the Rent Stabilization Ordinance (RSO):

• Verify legal registered rents through the Los Angeles Housing Department (LAHD)
• Confirm no REAP (Rent Escrow Account Program) status
• Check for Systematic Code Enforcement Program (SCEP) issues

Under rent control, legal rent matters more than current rent.

Common Red Flags

• Month-to-month tenants exceeding normal turnover
• Concessions not disclosed
• Lease terms inconsistent with rent roll
• Below-market rents not registered properly
• Missing deposit records

These issues often lead to price renegotiation or escrow delays.

Bottom Line

In Los Angeles multifamily sales, rent roll verification requires:

• Lease review
• Bank statement analysis
• Tenant estoppels
• T-12 reconciliation
• RSO confirmation through LAHD

Accurate income verification protects your cap rate and ensures a clean transaction.

What are warning signs in older Los Angeles fourplexes?

Key concerns:

General red flags
• Unpermitted additions or garage conversions
• Soft-story buildings without required retrofit clearance
• Popcorn ceilings that may contain asbestos
• Knob-and-tube or outdated wiring
• Rent Stabilization Ordinance compliance issues

Structural concerns
• Foundation cracking or uneven floors
• Tuck-under parking with no retrofit approval from LADBS
• Roof near or past life expectancy
• Dry rot in balconies or framing, especially SB721 non-compliance

Mechanical and utility issues
• Galvanized plumbing (common pre-1986)
• Shared meters instead of separate gas, water, and electric
• Aging HVAC systems or water heaters
• Fire or code safety deficiencies

Legal and financial risks
• Open LAHD complaints or SCEP violations
• Unregistered RSO units
• Certificate of Occupancy that does not match actual unit count
• Recorded liens or problematic eviction history
• Rents below legal allowable levels

For pre-1978 properties, assume rent control and potential retrofit exposure. Budget for capital repairs. Always conduct a full inspection, zoning review, and title check before making an offer.

How do you assess plumbing and sewer in Los Angeles multi-unit properties?

Start with a professional inspection. Use a licensed plumber for pressure testing and sewer camera scoping, especially in older buildings.

Plumbing review
• Check for visible leaks, corrosion, or patchwork repairs
• Test water pressure (ideal range roughly 40–80 PSI)
• Identify galvanized supply lines (common pre-1986, near end of life)
• Confirm each unit has individual shut-off valves
• Inspect water heaters for age, rust, or improper strapping
• Look for water damage under sinks and around fixtures
• Verify backflow devices where required

Sewer review
• Run all drains simultaneously to test flow and backups
• Perform a sewer camera inspection on the main lateral
• Confirm accessible clean-outs
• Check for root intrusion, offsets, or cracked clay pipes
• Determine responsibility for the lateral to the curb (often owner responsibility in LA)

Common fourplex risks
• Shared drain lines that cause building-wide backups
• Improper tie-ins from added units
• No separate utility controls per unit

Budget for potential line replacement or major repairs if systems are original. Vacant units make access and testing easier. Always document findings and disclose material defects properly.

Are soft-story retrofits required for every building in Los Angeles?

No. Only certain older wood-frame multifamily buildings are subject to the mandate.

Who must comply
• Wood-frame buildings
• Two or more stories
• Built before 1978
• Open ground floor or tuck-under parking beneath living space

These properties were identified by the Los Angeles Department of Building and Safety. Most affected buildings are 4+ units, but some smaller multifamily properties also qualify.

Who is typically exempt
• Single-family homes
• Duplexes without open ground-floor parking
• Buildings constructed after 1978
• Structures without a “soft” first story condition

Deadlines and penalties
Owners had staged deadlines: engineering plans, permits, and completion within set timeframes after receiving an official order. Non-compliance can trigger substantial daily fines and restrict financing or refinancing.

For an LA or Santa Monica fourplex
If it is pre-1978 with tuck-under parking, assume it may fall under the ordinance. Verify by checking the LADBS property database by address.

Uncompleted retrofits can reduce value and complicate escrow. Always confirm compliance status and disclose it properly before listing or making an offer.

What happens if a building is in SCEP or the Rent Escrow Account Program (REAP) in Los Angeles?

If a property is in trouble with the city, income and value are immediately at risk.

SCEP (Systematic Code Enforcement Program)

• Applies to rental properties with 2+ units
• Inspections occur on a recurring cycle
• City checks habitability: plumbing, electrical, heat, ventilation, structural issues, unpermitted work
• Violations trigger a Notice to Comply
• Failure to correct leads to re-inspection, penalties, and escalation

SCEP itself is not catastrophic — but unresolved violations can trigger bigger consequences.

REAP (Rent Escrow Account Program)

This is serious.

• Tenants pay rent to the city — not the owner
• Rental income is withheld until violations are cleared
• The city can impose fees, liens, and legal action
• Clearance requires full repair + administrative approval

While in REAP, cash flow can drop to zero.

Impact on Value and Sale

• Buyers see REAP as high risk
• Expect price reductions or repair credits
• Financing can become difficult
• Cap rate can drop significantly due to suspended income

Before listing or purchasing, verify status directly through the Los Angeles Housing Department portal.

If a fourplex is in REAP, resolve it before marketing — or price aggressively to reflect the exposure.

Why Do Los Angeles Multifamily Escrows Collapse?

Most deals fail for three reasons: condition, income, or financing.

1. Inspection Surprises

When due diligence exposes major problems, buyers retrade or walk.

Common deal killers:
• Unpermitted units or additions
• Unfinished seismic (soft-story) retrofits
• Open code enforcement or rent escrow issues
• Sewer line failures or old galvanized plumbing
• Mold, asbestos, structural movement
• Major deferred maintenance

Unexpected capital costs quickly change the numbers.

2. Income Doesn’t Hold Up

If the rent story falls apart, the deal does too.

Typical problems:
• Rent roll doesn’t match deposits
• Missing tenant estoppels
• Inflated “pro forma” rents
• Hidden vacancies or concessions
• RSO rents not legally registered
• T-12 totals inconsistent with bank records

When income can’t be verified, buyers reduce price — sometimes 10–20% — or cancel.

3. Financing Breakdowns

• Appraisal comes in low
• Lender flags retrofit or habitability risk
• Insurance unavailable or too expensive
• Existing liens or unpaid city fines

If debt service coverage no longer works, escrow collapses.

Strategy for a Fourplex Seller

To prevent failure:

• Provide complete disclosure package upfront
• Include verified rent roll + executed estoppels
• Confirm city compliance and permit history
• Price based on realistic cap rates

Clean documentation and transparent income reduce renegotiation risk and protect value.

Is Insurance Still Available for Los Angeles Multifamily Properties?

Yes - but it’s harder, more expensive, and more selective than before.

Why Is There an Insurance Crunch?

Several factors are tightening the market:

• Wildfire exposure across Southern California
• Earthquake risk
• Rising reinsurance costs
• Aging multifamily stock (old wiring, older roofs, soft-story structures)
• Large loss payouts over the past few years

Many private carriers have reduced coverage or exited high-risk areas.

When traditional coverage is unavailable, owners often turn to the California FAIR Plan — a last-resort option with limited protection and higher deductibles.

Lenders still require full hazard coverage. No insurance = no loan.

Cost of Insurance for Multi-units

• Premiums have increased significantly in recent years
• Older buildings cost more to insure
• Knob-and-tube wiring or outdated panels can trigger denial
• Roof age heavily impacts underwriting
• Seismic upgrades, fire sprinklers, and monitored alarms can help reduce costs

Impact on a Duplex or Fourplex

Buyers now factor insurance volatility into underwriting.

Expect:
• Reduced projected NOI due to higher premiums
• Closer review of loss history
• Insurance quotes requested early in escrow

If a building is difficult to insure, financing can collapse.

Best practice:
• Obtain updated insurance quotes before listing or removing contingencies
• Disclose current carrier, premium, limits, and claims history
• Work with brokers who specialize in California multifamily risk

In today’s Los Angeles market, insurance is no longer a minor line item — it’s a critical underwriting factor.

Are Utilities Configured Properly in Los Angeles Multifamily?

Utility setup directly affects operating expenses and value. Poor configuration can reduce NOI by 5–15%.

Gas & Electric Meters

• Individual meters are ideal, tenants pay providers directly
• Master-metered systems are acceptable if legally submetered
• Newer construction typically requires separate tenant meters
• Improper setups can limit cost recovery

Direct billing = cleaner underwriting and stronger buyer appeal.

Water & Sewer

• Many older LA buildings are master-metered for water
• Owners may allocate costs through submetering or ratio billing (RUBS) if properly disclosed
• Allocation must be consistent and clearly stated in leases

Water expense leakage reduces cash flow if not structured properly.

Can You Use RUBS?

Yes — typically for water, sewer, and trash.

Requirements:
• Full disclosure in lease agreements
• No over-collection beyond actual utility cost
• Administrative fees must comply with local rules

Electric and gas are usually better separately metered when possible.

Red Flags

• Shared sewer lines serving multiple units
• No individual shut-off valves
• No clear separation of utility responsibility
• Unknown lateral connections

Backups in shared lines can cascade across units and create significant repair costs.

Fourplex Strategy

• Pull utility records early
• Confirm meter configuration
• Scope sewer lines
• Consider adding submeters where feasible

Clean utility separation improves income stability, buyer confidence, and resale value.

Are There Illegal Units in Los Angeles Multifamily?

Yes — if the legal unit count does not match what physically exists, the property may contain illegal units. This can trigger fines, forced removal, lost rent, and major value reduction.

How Do You Verify if Units are Permitted?

Start with the Certificate of Occupancy (CO) (the official city document stating how many units are legally permitted).

Check records through the
Los Angeles Department of Building and Safety ZIMAS portal (city zoning and permit database).

If the CO shows 4 units but 5 exist, the extra unit is illegal.

Compare:
• Official unit count
• Number of kitchens and bathrooms
• Permit history

Mismatch = exposure.

Common Illegal Scenarios

Garage conversions: Older buildings often converted parking into studios without permits. Warning signs:
• No proper egress windows
• Low ceilings
• No separate utility meters
• Lost required parking

Unpermitted additions: Basements, attic units, or added ADUs without approvals. Permit history will reveal this.

Regulatory Risk for Multi-units

The Los Angeles Housing Department oversees rental compliance.

If a tenant complains or an inspection occurs:
• Unit can be ordered vacated
• Rent may be frozen or escrowed
• Demolition or legalization may be required
• Lenders may deny financing

Legalization can cost tens of thousands per unit, sometimes more.

Impact on Value

Illegal units can reduce property value significantly because:
• Income may not be legally collectible
• Buyers discount risk
• Financing becomes difficult

Fourplex Due Diligence Strategy

Before making or accepting an offer:
• Confirm CO matches actual layout
• Review permit history
• Check LAHD compliance status
• Disclose any discrepancies

If legalization is possible, consider resolving it before listing. If not, price accordingly, buyers will adjust for the risk.

What If a Tenant Stops Paying Rent in Los Angeles?

You must follow the legal eviction process — no shortcuts.

Basic Process

1. Serve a 3-Day Notice to Pay Rent or Quit

2. If unpaid, file an Unlawful Detainer (eviction lawsuit)

3. Tenant has 5 days to respond

4. If no response → default judgment
   If contested → court trial

5. Obtain Writ of Possession

6. Sheriff posts 5-day notice → physical lockout

Typical timeline: 1–3 months uncontested. Contested cases can take much longer.

Common Delays in LA

• Habitability claims (repairs must be addressed)
• Rent Stabilization Ordinance (RSO) compliance requirements
• Just-cause eviction rules
• Procedural errors in notice or filing

Self-help evictions (changing locks, shutting utilities) are illegal and can trigger penalties.

Risk Management for Fourplex Owners

• Screen tenants carefully upfront
• Maintain repair records
• Keep reserve funds (several months of expenses)
• Document payment history

In Los Angeles, eviction risk affects property value. Buyers review tenant payment history closely and price accordingly.

What Hidden Repair Costs Should You Expect When Buying Multifamily in Los Angeles?

Older LA multifamily buildings often carry deferred maintenance that doesn’t show up in photos — but will show up in your budget.

Major Capital Items to Watch

• Full plumbing repipe (especially galvanized lines)
• New roof if near end of life
• Seismic (soft-story) retrofit if unfinished
• Electrical panel upgrades or rewiring
• Sewer lateral replacement
• HVAC systems past useful life

These are common in pre-1980 buildings and can quickly reach six figures.

Often Overlooked Costs

• Asbestos or mold remediation
• Balcony and deck structural repairs under California SB 721
• Legalizing unpermitted units or additions
• Fire-life safety upgrades
• Drainage corrections and water intrusion repairs

Balcony Law (SB 721) – Important

California Senate Bill 721 requires inspection of exterior elevated elements (balconies, decks, walkways) in multifamily buildings with 3+ units.

Requirements:
• Licensed structural inspection
• Documentation of findings
• Mandatory repairs if structural components are compromised

Non-compliance can lead to liability exposure, insurance issues, and buyer renegotiation.

Balcony repairs can range from minor reinforcement to full structural rebuilds depending on rot or framing damage.

Why Costs Escalate in LA

• Strict building enforcement
• Older building stock
• Shared systems that affect multiple units
• Tenant-protection laws delaying access

Investors typically reserve a percentage of property value annually for capital expenditures.

Fourplex Strategy

• Order full inspections (roof, sewer, structural)
• Review permit history
• Confirm retrofit and balcony compliance
• Budget for first-year capital improvements
• Adjust purchase price accordingly

In Los Angeles multifamily, hidden CapEx is not an exception — it’s expected. Proper underwriting protects your return and resale value.

How do I check soft-story retrofit status?

Los Angeles

To verify soft-story retrofit status in Los Angeles, search the property address on the Los Angeles Department of Building and Safety ZIMAS portal or LADBS online permit system. The record will show whether the building was subject to the Soft-Story Seismic Retrofit Program, if permits were pulled, and whether final sign-off was issued.

If the property is pre-1978 with tuck-under parking or an open ground floor, assume it may have been flagged. Print the compliance record for escrow. Unresolved retrofits can reduce value and complicate financing.

Santa Monica

Santa Monica has its own seismic retrofit ordinance. Check status through the City of Santa Monica Building & Safety permit portal or contact the city’s engineering division directly. The city will confirm whether the property was ordered to retrofit and whether compliance has been completed and signed off.

As in LA, older wood-frame multifamily buildings with parking beneath living space carry the highest risk. Always confirm completion status before listing or removing contingencies.

Final Takeaway

In Los Angeles multifamily investing, the risk is rarely visible at first glance.

Escrows most often fail when buyers discover:

• Income does not match documentation
• Rent control exposure was underestimated
• Insurance is unavailable or unaffordable
• Soft-story retrofits are incomplete
• Illegal units create financing barriers
• Capital expenditures were deferred

Multifamily due diligence in Los Angeles is not a formality — it is asset protection.

If you are buying or preparing to sell a duplex, triplex, fourplex, or apartment building in Los Angeles or Santa Monica, structured verification protects your cap rate and preserves exit value.

Before committing:

Verify income.
Confirm compliance.
Underwrite insurance.
Forecast capital expenditures.
Price for risk.

For a confidential multifamily valuation or compliance review, contact Philippe Properties directly.

Serious investors verify first - and negotiate second.