Sell if three conditions hold: your equity is trapped and a refinance can't release meaningful capital, the building's trajectory is flat or negative given its rent control regime, and you have a better use for the proceeds than continuing to own the building. Hold if the opposite is true.
That's the math answer. The full answer factors in the non-math variables — management capacity, estate planning, tax position — that decide sale questions more often than the market does.
Variable one: your current cap rate on market value. NOI divided by today's market value. If that number is above the refinance rate you'd get on commercial multifamily debt, leverage works. If it's below, leverage is eroding returns. Refinance math favors holding. Sale math favors selling.
Variable two: the loan-to-value a refinance actually supports. 2026 commercial multifamily underwriting is more conservative than 2021. For pre-1978 RSO buildings, it's meaningfully more conservative. If a refinance at current rates and DSCR only releases 20% of your equity, the trapped portion is under-performing relative to what it could do elsewhere.
Variable three: your tax basis and depreciation schedule. A sale triggers federal capital gains, California state tax, and depreciation recapture. Combined, roughly 35-40% of gain on a significant appreciation. A refinance triggers none of this. A 1031 defers all of it. Held-until-death eliminates it at stepped-up basis.
Variable four: your active management capacity. This is the qualitative variable that decides most sale decisions. Holding a building means continuing to manage it — tenant calls, LAHD compliance, capital work, rent control mechanics. If that capacity is declining, refinancing only delays the eventual decision.
Three profiles where selling is usually the better move:
Pre-1978 LA City owner with significant equity and tight cash flow. The July 2026 RSO formula caps future NOI growth at 4%. Refinance at current rates on capped NOI often doesn't pencil. Sale locks in current value and redeploys the equity.
Owner with declining management capacity. If the operational burden is pushing toward "I need to offload this," hold decisions are extending the problem, not solving it.
Owner with a clear next-use for the capital. 1031 into a DST for passive income. Diversified acquisitions. A specific personal liquidity need. When the capital has a better job to do, the building is holding it back.
Three profiles where holding is usually the better move:
Post-1995 Costa-Hawkins exempt owner with stable cash flow. The trajectory is intact. AB 1482 rent upside available. Refinance preserves optionality without triggering tax.
Owner over 65 with estate planning goals. A building held until death receives a stepped-up basis, permanently eliminating deferred capital gains tax. Selling triggers the full tax burden. For estate-planning owners, holding is often decisively better math.
Owner with positive cash flow and active management capacity. If the building is producing meaningful cash flow after debt service, management is working, and there's no pressing need for the capital elsewhere — continuing to hold is the default for a reason.
Most LA multifamily owners don't fit cleanly into either category. Some equity is trapped but some is deployable. Cash flow is positive but narrow. Management capacity is intact but not growing. Next-use for capital is possible but not urgent.
For the middle case, the answer is often: don't sell yet, but do one of the following:
Pre-1978 LA City owners face a specific timing pressure. The December 2025 RSO rewrite takes effect July 1, 2026. Buyers have been repricing for it since January. By Q4 2026, the full buyer pool will have absorbed the new underwriting. If you sell before that absorption completes — roughly Q2-Q3 2026 — you close at pricing that reflects partial-rewrite underwriting. If you wait into 2027, you close at fully-repriced buyer models.
For this cohort, "should I sell or hold" has a timing dimension that other owner profiles don't face. The sell case is time-sensitive through 2026.
Most sellers who regret their decision regret holding too long, not selling too soon. The LA multifamily owners I've worked with who wish they'd done something different almost always wish they'd sold two to five years earlier than they did. That's a pattern across fourteen years.
It doesn't mean everyone should sell immediately. It means the default bias in this decision tends to err toward inaction, and the sellers who transact proactively on their own situation tend to outperform sellers who wait for the market to make the decision obvious.
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Related reading:
- Selling vs. Refinancing Your LA Apartment Building — Full Comparison
- Try the Hold vs Sell Analyzer
- How to Sell a Multifamily Property in Los Angeles
Michael Sterman is Senior Managing Director Investments at Marcus & Millichap. $1.41 billion across 254 closed transactions.
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