Multifamily Investing

Multifamily property provides housing to multiple tenants within a single asset, ranging from small duplexes and fourplexes to large apartment communities with hundreds of units. Income is generated from many individual leases rather than one or a few large tenants, which spreads vacancy risk across the tenant base, since the loss of a single tenant has a much smaller impact on total income than a vacancy in a single tenant NNN property.

California multifamily owners operate under statewide rent regulation established by the Tenant Protection Act, commonly referenced as AB 1482, which caps annual rent increases for most multifamily properties at 5 percent plus the regional consumer price index, up to a maximum of 10 percent, with exemptions for certain newer construction and single family homes. Orange County investors evaluating multifamily property should confirm whether a specific property is subject to these statewide caps, as well as any additional local rent control ordinances that may apply in specific cities, since regulatory exposure affects both current income growth potential and exit value.

Multifamily property held for investment or business use is like-kind to other real property for Section 1031 exchange purposes, allowing Orange County investors to exchange into or out of apartment assets freely relative to other property types. Investors moving into multifamily from a single tenant property gain diversified tenant risk but take on more active management responsibility, including turnover, maintenance coordination, and compliance with California's regulatory framework, while investors exchanging out of multifamily into net lease or industrial property typically do so to reduce that management burden and regulatory exposure.