Updated September 28, 2026
Two buildings, same address block, same rents on paper. One rent roll is entirely month-to-month. The other has half its units locked into three-year leases signed two years ago at the bottom of the market. A buyer will not price those two buildings the same way, even though today's collected rent is identical. What decides the difference is not the rent — it is how fast, and how certainly, that rent can move.
Most LA multifamily tenancies become month-to-month once the initial fixed term expires, and RSO's just-cause protections keep applying regardless. A rent roll that shows "month-to-month" across most units is not a red flag — it is the normal state of a mature LA apartment building. What a buyer actually looks at is not whether a unit is month-to-month, but what that status means for how the income behaves after closing.
A month-to-month unit carries two things at once: it is subject to the same rent-increase caps as everything else on the building's rulebook, and it turns over on the building's natural vacancy timeline rather than a fixed lease-expiration date. Under LA City RSO, AB 1482, or LA County RSTPO — whichever applies to your building — the annual increase ceiling is the same whether the unit is on a lease or month-to-month. The difference month-to-month buys the owner is optionality: when a unit does turn over, the new tenancy resets closer to the increase schedule's starting point, rather than waiting out a multi-year term first.
This is the one sellers underestimate. A signed multi-year lease at a below-market rent does not protect the seller's asking price — it locks in the discount for the buyer, in writing, for years. A month-to-month unit at the same below-market rent at least has a chance of moving toward the increase ceiling on the normal annual cycle. A unit locked into a three-year lease at that rent guarantees the buyer collects the below-market number for the full remaining term, with no early exit. Buyers underwrite that difference explicitly: the same in-place rent gets discounted harder when it is contractually locked than when it sits on a month-to-month tenancy subject to the ordinary increase schedule.
Long-term leases signed recently, at or near current market rent, read the opposite way — as locked-in, dependable income a buyer can finance against with confidence, the same certainty an institutional lender rewards on a stabilized property. What buyers are looking for in LA multifamily right now starts with rent rolls that match reality; a mix of fresh, market-rate leases and month-to-month units on the same schedule is one of the cleaner rent rolls a buyer can underwrite.
Present the rent roll with a lease-expiration column, not just current rent. A buyer's underwriting model wants to see, unit by unit: current rent, lease type, expiration date if any, and time since last increase. That schedule tells the story the raw rent number cannot — how much of the building's income is contractually frozen, how much is free to move on the normal cycle, and how fast the blended number can realistically change after closing.
The mistake mirrors the most common pricing error in this market: pricing the rent roll you wish you had instead of the one you actually have. A seller who signed several tenants to long leases at low rents to "lock in occupancy" before listing has, without meaning to, locked in a discount a buyer will find in the first pass of diligence. If you are weighing whether to sign renewals before you list or wait, ask whether raising rents before a sale actually helps — the honest answer depends on the same lease-mix mechanics.
A mixed rent roll is not a problem to smooth over before you list — it is information a buyer needs and will find regardless. Present the lease-expiration schedule plainly, and understand that a below-market rent locked into a fresh long-term lease is worth less to a buyer than the same rent sitting month-to-month. The rent number tells half the story. The lease terms tell the other half, and buyers read both.
Is a month-to-month rent roll bad for my sale?
No. It is the normal state of a mature LA multifamily rent roll and gives a buyer more flexibility to capture allowed increases on the ordinary schedule than a locked lease at the same rent does.
Should I sign tenants to longer leases before I list?
Only at rents close to market. Locking a below-market rent into a multi-year lease before you sell hands the buyer a guaranteed discount for the length of that term.
Do rent caps apply differently to leased vs. month-to-month units?
No. The applicable increase ceiling — RSO, AB 1482, or RSTPO — applies the same way regardless of lease status. What differs is how quickly the unit's rent can actually move toward that ceiling.
Michael Sterman is Senior Managing Director Investments at Marcus & Millichap.
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