This report takes a comprehensive look at the performance of small multifamily in Los Angeles. Below are the key findings:
1. Los Angeles cap rates continue to inch up, averaging 4.8% in 2019
2. Rents have risen at a healthy pace, increasing every year since 2016 between 4.7% and 5.5%
3. Loan-to-value ratios remain conservative compared to the national average
Outlook: Local policy, demographic tailwinds, the U.S. business cycle and global capital markets are the competing ingredients that will shape LA’s small multifamily performance for the foreseeable future. Given the regulatory context, the directionality of asset pricing is undoubtedly the hot-button issue to watch over the next year. Liquidity and property-level income, however, are poised to remain in good health, and the balance of the above trends bodes favorably for cashflow investors. Amid a cloud of uncertainty given the number of market-shaping forces at play, heading into 2020, we can at least be sure that the Los Angeles small multifamily sector will be anything but boring.