What Is My Apartment Building Worth?
An apartment building in Los Angeles is worth what its income supports at the cap rate buyers are paying for similar buildings. This calculator runs that arithmetic with your own rents, expenses and cap rate, shows the gross rent multiplier value as a check, and builds in the property tax a buyer will pay after Proposition 13 reassessment.
Enter the monthly rent and a cap rate or gross rent multiplier to see an estimated value.
How an Apartment Building Is Valued
A house is valued by what similar houses sold for. An apartment building is valued mainly by its income, then checked against what similar buildings sold for. Buyers, lenders and appraisers use the same handful of measures:
- Net operating income and cap rate. Rent and other income, less vacancy and operating expenses, gives net operating income. Dividing it by the cap rate buyers are paying for comparable buildings gives the value. A lower cap rate means buyers accept less yield and pay more for each dollar of income.
- Gross rent multiplier. Annual gross scheduled rent times a multiplier taken from comparable sales. It ignores expenses, so it is a quick check rather than the final word.
- Price per unit and per square foot. Used to compare the result with closed sales and to spot a building that is out of line with its neighbors, in either direction.
- The reassessment adjustment. Proposition 13 resets the assessed value to the purchase price, so a buyer's property tax is usually far higher than a long-term owner's. Buyers underwrite their own tax, not yours. See how property taxes change when you sell.
Rent regulation sits underneath all of this. In the City of Los Angeles, buildings with a certificate of occupancy on or before October 1, 1978 generally fall under the Rent Stabilization Ordinance, and most other units are covered by the AB 1482 cap, so a buyer values the rents in place and prices below-market rents as upside rather than as income. See which rent rules apply to your building.
Worked Example
A hypothetical ten-unit building collecting $20,000 a month, with $4,000 a year in laundry and parking income, $80,000 in annual operating expenses before property tax, a 3% vacancy allowance, a 1.2% property tax rate after the sale, and a buyer applying a 5% cap rate. The 5% and 11× figures are inputs chosen for the example, not a statement about current Los Angeles cap rates.
| Line | How it is figured | Amount |
|---|---|---|
| Gross scheduled rent | $20,000 a month × 12 | $240,000 |
| Other income | Laundry and parking | $4,000 |
| Effective gross income | After a 3% vacancy allowance | $236,680 |
| Operating expenses | Before property tax | −$80,000 |
| Net operating income before tax | $156,680 | |
| Buyer's property tax | 1.2% of the value | −$30,325 |
| Net operating income to the buyer | $126,355 | |
| Value at a 5% cap rate | NOI ÷ 0.05 | $2,527,097 |
| Value at an 11× GRM | $240,000 × 11 | $2,640,000 |
That is about $252,710 per unit by the cap rate method. The two methods differ by $112,903 here because the multiplier ignores expenses and tax; with real comparable sales the two usually land closer together.
Where Each Input Comes From
- Monthly rent. Your rent roll. Use what tenants pay today, including any units under a rent reduction or free-rent period at the reduced amount.
- Other income. Laundry, parking, storage and utility reimbursements from the last twelve months of statements.
- Vacancy. Your own allowance. A fully leased building with long-term tenants and a building with three units turning over this year do not deserve the same figure.
- Operating expenses. Insurance, utilities you pay, repairs and maintenance, management, gardening, trash, city registration fees, and a reserve for replacements. Leave out loan payments, depreciation and your current property tax.
- Property tax rate. The percentage on a current tax bill in the same city. Proposition 13 sets the base at 1% of assessed value, and voter-approved debt is added on top; fixed direct assessments are not a percentage and are better added to expenses.
- Cap rate and GRM. Closed sales of comparable buildings. This is the input that moves the value most and the one a written valuation documents with addresses and dates.
Why Online Estimates Differ From What a Buyer Pays
- Automated home-value tools price houses. They use nearby residential sales and square footage, not rent rolls, so they are not built for a building with tenants in it.
- Regional cap rates are averages. A figure for “Los Angeles multifamily” blends 300-unit institutional sales with 6-unit buildings in different cities and rent regimes.
- Deferred maintenance and seismic retrofits are priced by buyers as deductions from value, and no formula sees them.
- Transfer taxes change the seller's math, not the buyer's. In the City of Los Angeles, Measure ULA can make a higher price net the seller less. Run the result through the net proceeds calculator before settling on a price.
Questions Owners Ask About Value
How do I find the right cap rate for my building?
From closed sales of similar buildings nearby: same size range, similar age and condition, same rent control status. Divide each sale’s net operating income by its price and look at where your building fits. Published “typical” cap rates describe a whole region and may be a year old. A written valuation supplies the cap rate from current comparable sales, with the addresses, and that is the part this calculator cannot do for you.
Should I use the rents tenants pay now or market rents?
Use current rents. Buyers pay for the income in place, because rent-controlled tenants cannot be moved to market rent on a schedule the buyer controls. Below-market rents are not ignored; they are priced as upside and show up as a lower cap rate or higher multiplier than a fully-rented building would get, not as if the higher rents were already being collected.
Why does the calculator ask for a property tax rate instead of my current tax bill?
Because the buyer’s tax bill will not be yours. Under Proposition 13 the county reassesses the building at the purchase price when it changes hands, so a long-held building’s property tax usually rises sharply at the sale. A buyer underwrites that higher figure, and the calculator does the same: it solves for the value with the new tax built in. Your current bill still matters for your own cash flow, just not for what a buyer will pay.
What is the difference between a cap rate value and a GRM value?
The cap rate method capitalizes net operating income, so expenses matter. The gross rent multiplier method multiplies gross rent, so two buildings with the same rents get the same value even if one has far higher expenses. GRM is quick and good for a first check; the cap rate method is closer to how buyers and lenders underwrite. When the two disagree widely, the expense figure is usually the reason.
How is this different from an appraisal or a broker’s valuation?
This calculator applies your figures. An appraisal is a licensed appraiser’s opinion prepared for a lender, with comparable sales, a cost approach and a site inspection. A broker’s valuation is a pricing recommendation for a sale: comparable closed sales, buildings currently competing for buyers, a review of the rent roll and expenses, local rules that affect the sale, and a pricing range with its assumptions written down. The last of these is what tells you whether a 5% or a 5.5% cap rate is the right one for your building.
How accurate is the number?
Exactly as accurate as the inputs. The sensitivity table shows what a quarter point on the cap rate does to the value; in the worked example on this page it is about $100,000. Treat the result as a range to bring to a conversation, not a price to put in a listing.
Want the Cap Rate Filled In?
A written valuation uses current comparable sales and your building's records to set a pricing range, with the assumptions spelled out.
Request a Property Valuation