Your LA apartment building's value equals its net operating income divided by the current cap rate for your specific submarket and building profile. On a 20-unit Koreatown building generating $280,000 in NOI at a Q1 2026 market cap rate of 4.5%, that math produces roughly $6.2 million. Your building's number will differ based on submarket, age, condition, and regulatory regime.
But the formula is the easy part. Getting each input right is where most sellers over- or under-estimate their building's value by 10 to 20%.
Input one: annual NOI. Start with gross scheduled rent (sum of all monthly rents × 12). Subtract vacancy at the current submarket rate (roughly 5-7% for most LA multifamily). Subtract operating expenses at 32-38% of effective gross income. The result is NOI.
Input two: your submarket's current cap rate. As of Q1 2026:
- Santa Monica, West LA, Century City: 3.5% – 4.5%
- West Hollywood: 3.75% – 4.5%
- Koreatown, Hollywood, Palms: 4.0% – 5.0%
- Mar Vista: 3.8% – 4.8%
- Sherman Oaks, Toluca Lake, Glendale: 4.5% – 5.5%
- North Hollywood: 4.75% – 5.75%
- Van Nuys, Panorama City: 5.0% – 6.0%
- Reseda: 5.25% – 6.25%
Input three: adjustments for your building's specific profile. Pre-1978 LA City RSO buildings trade 20-40 basis points wider than the submarket's blended cap rate as of 2026 (because of the July 2026 RSO rewrite). Post-1995 Costa-Hawkins exempt buildings trade 20-30 basis points tighter. Buildings with significant deferred capital trade wider still. Buildings with clean rent rolls and documented compliance trade tighter.
Mistake one: using pro forma rents. The value formula uses in-place NOI, not what NOI would be if rents were at market. Buyers underwrite in-place income plus a realistic capture assumption on a realistic timeline. Your building's value today is what an informed buyer will pay based on what the building actually produces, not what it could produce.
Mistake two: using an LA-blended cap rate. The Q1 2026 LA metro blended cap rate is 5.6%. That number describes almost no specific building accurately. Koreatown, Westside, and Valley buildings trade at dramatically different cap rates. Using the blended number will under-price Westside and over-price Valley.
Mistake three: ignoring the regulatory regime. Two buildings on the same block, one pre-1978 LA City RSO and one post-1995 Costa-Hawkins exempt, trade at cap rates 50-75 basis points apart. If you apply the wrong regime's cap rate, your valuation is off by 10% or more.
You own a 15-unit Sherman Oaks building. Average rent: $2,100 per unit. 6% vacancy. Built in 1968 (pre-1978 LA City RSO).
Or roughly $293,000 per unit, which is in the middle of the Sherman Oaks range of $300-425K per unit on stabilized inventory. The slight shade below the middle reflects the RSO adjustment.
Three situations where building-specific factors override the general formula:
Value-add with clear upside thesis. A pre-1978 building with 30% below-market rents, clean capital condition, and a path to turnover-based rent capture may trade at a tighter cap rate because the buyer is pricing the upside, not just the current NOI.
Significant deferred capital. A building with $200K+ of obvious deferred maintenance trades wider. The NOI-to-cap-rate math is the starting point; buyer discounts for capital exposure adjust downward.
Tenant documentation problems. Below-market long-tenured tenants, undocumented arrangements, or ambiguous occupancy produces buyer uncertainty that translates directly to price concessions.
The formula is NOI divided by cap rate. Your building's real value is the formula's output, adjusted honestly for condition, regime, and rent roll quality. Most LA sellers over-estimate their value by applying wishful assumptions to each input. The sellers who price accurately close cleanly. The sellers who don't either sit on the market or concede in escrow.
For a sharper number than a self-calculation, a broker's opinion of value based on recent closed comparables is the next level of precision. The difference is material — often $500K or more on a mid-size LA multifamily building.
Request a free evaluation with actual comparable sales in your specific submarket →
Related reading:
- How to Sell a Multifamily Property in Los Angeles (The Complete Guide)
- What is a good cap rate for an apartment building in Los Angeles?
- Try the LA Multifamily Value Estimator
Michael Sterman is Senior Managing Director Investments at Marcus & Millichap. $1.41 billion across 254 closed LA multifamily transactions.
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