What Is My Apartment Building Worth?

Apartment buildings are valued based on income, not comparable sales. A single family home uses nearby sales. An apartment building uses Net Operating Income divided by the market cap rate. That is why Zillow estimates miss by 20% or more on multifamily properties.

The income approach starts with a simple premise: buyers are purchasing a stream of cash flow. The building is worth what someone will pay for that cash flow, adjusted for risk, location, and growth potential. This is fundamentally different from residential valuation, where emotion, school districts, and curb appeal play larger roles.

For a detailed breakdown of cap rates, NOI, GRM, and how these metrics work together, see our FAQ section on Property Valuation.

Value equals NOI divided by cap rate. Same building. Three different cap rates. Three very different values.

Same building. Same income. $600,000 swing based entirely on the cap rate. This is why getting the cap rate right matters. A half point difference is not rounding error. It is real money.

The cap rate applied to your building depends on location, condition, rent roll, and comparable sales. Don Favia at Favia Investment Group uses actual Westside transaction data to determine the appropriate cap rate for each specific property.

A rent roll lists actual rent collected per unit. Include concessions, vacancies, and below market leases. Eight units at $1,800 and four units at $1,200 tells a different story than twelve units at $1,800. Buyers pay for verified income, not hypothetical potential.

The rent roll is the first document any serious buyer requests. It shows:

• Current rent for each unit
• Lease start and end dates
• Tenant move in dates
• Any concessions or incentives
• Vacancy status and history
• Unit types and square footage

A clean, accurate rent roll speeds up due diligence and builds buyer confidence. Gaps, missing information, or discrepancies raise red flags and can delay or kill a deal. Keep your rent roll updated monthly.

Rent delta is the gap between current rents and market rents. It is often the single biggest driver of value. Buyers pay a premium for upside they can capture through natural turnover. The premium only applies if comparable market rents in your specific neighborhood support the increase.

Here is how it works in practice. You own a 10 unit building in Santa Monica. Your average rent is $2,000 per month. Market rent for similar units is $3,000 per month. Your rent delta is $1,000 per unit, or $120,000 per year in additional income potential.

At a 5% cap rate, that $120,000 in future income represents $2.4 million in additional value. Buyers will not pay full price for potential, but they will pay a premium for buildings where the upside is verifiable and achievable through normal tenant turnover.

This is why two identical buildings on the same block can trade at different prices. The building with below market rents trades at a lower cap rate on current income because buyers are pricing in the upside.

Cap rates vary by submarket. Premium Santa Monica assets trade at approximately 4.85% to 5.25% as of early 2026. Older buildings in secondary Westside locations trade at 5.5% or higher. Westchester, Palms, and Mar Vista fall between these ranges. Cap rates shift quarterly based on interest rates and buyer demand.

For a complete breakdown of cap rates, how they are calculated, and what they mean for your building, see our detailed FAQ on cap rates.

California Prop 13 locks assessed values at acquisition price plus minimal annual increases. Assessed values often represent a fraction of market value. Don Favia has seen buildings assessed at $1.2 million sell for $4 million. The tax bill has almost nothing to do with market reality.

The assessor's job is to collect property taxes, not to estimate market value. Their methodology is based on acquisition price plus the 2% annual increase allowed by Prop 13. If you bought your building in 1995 for $800,000, your assessed value today is roughly $1.4 million. That has no bearing on what a buyer would pay in 2026.

Do not use your tax bill to estimate value. Do not use your assessed value for estate planning. Use a Broker Opinion of Value based on current market conditions.

Every sale has a story. Was the building renovated? Were all units at market rent? Did the buyer have a 1031 deadline? Was it an off market deal with unique circumstances? Without knowing the full context, the comp misleads more than it helps. Surface level numbers ignore the details that determine actual value.

A building that sold for $5 million might have had $500,000 in recent capital improvements. It might have had all units at market rent while your building has four tenants paying 1990s rents. The buyer might have been a 1031 exchanger with a hard deadline who overpaid. Or it might have been a distress sale where the seller took the first offer.

Professional valuation involves digging into each comparable sale to understand what actually happened. Don Favia reviews the rent rolls, expense statements, and circumstances behind every comparable transaction to determine which sales actually apply to your property.

There is no perfect market timing. The right time depends on your situation, your goals, and your overall financial picture. Owners who do best make decisions based on their own circumstances, not on trying to time a cycle.

Here are situations where getting a valuation makes sense:

• You have owned the building for 10+ years and wonder what it is worth
• You are approaching retirement and thinking about estate planning
• You need to make capital improvements and want to understand the ROI
• You are considering a 1031 exchange into a different property type
• Your partnership is changing or you have inherited the property
• You want to understand your borrowing capacity for refinancing

A valuation is information. It does not commit you to selling. Many owners request valuations annually just to track their equity position.

Only work with a broker who specializes in your specific submarket. A residential agent who sells houses lacks multifamily expertise. A commercial broker who works downtown or in the Valley lacks Westside transaction data. Multifamily valuation on the Westside requires submarket specific experience and 12 months of recent comparable sales.

Ask potential brokers these questions:

• How many apartment buildings have you sold in this neighborhood in the last 24 months?
• Can you provide recent comparable sales data with verified cap rates?
• Do you understand Santa Monica rent control and LA RSO regulations?
• Can you walk me through the underwriting of my specific building?

The right broker should be able to give you a detailed, data driven Broker Opinion of Value on the spot, not a vague price range. They should understand how rent control, operating expenses, and submarket trends affect your specific property.

About half the owners who request valuations decide not to sell. They use the information to evaluate refinancing, estate planning, or reinvestment strategies. Some discover deferred maintenance dragging down value and make improvements that pay for themselves at sale.

Common uses for valuation information include:

• Refinancing to pull out equity for other investments
• Estate planning with attorneys and CPAs
• Partnership buyouts or restructuring
• Determining if capital improvements will generate ROI
• Evaluating a 1031 exchange into a different market
• Understanding inheritance and wealth transfer implications
• Deciding whether to hold or sell based on market conditions

A valuation is a tool. What you do with it depends on your goals. The key is having accurate information to make informed decisions.