Every apartment building owner asks this question eventually. Some ask it too late. Others ask it at the right time but talk themselves out of acting. The reality is that there's no universally perfect time to sell. But there are specific, measurable signals that should trigger a serious evaluation of whether holding still makes sense for your portfolio.
I've worked with dozens of Westside apartment building owners through dispositions, and the ones who achieve the best outcomes share a common trait: they make the decision based on data and strategy, not emotion or market timing. Here are the five signals I tell my clients to watch for.
1. Your Debt Is Maturing and Refinancing Doesn't Pencil
This is the most urgent and least emotional of the five signals. If your loan matures in the next 12 to 24 months and current refinancing terms would significantly reduce your cash flow or require a capital call, selling may be your best option.
This isn't theoretical. There's a massive wall of multifamily debt maturing in mid 2026. Loans originated in 2021 and early 2022 at historically low rates on short term or floating rate structures are coming due. Many of these borrowers locked in 3 to 4 year bridge loans at rates in the low 3% range. Today, their refinancing options are in the mid 6% to 7% territory. On a $3 million loan balance, that's an additional $90,000 to $120,000 in annual debt service. For many buildings, that wipes out the cash flow entirely.
If you're in this position, start the analysis now. Don't wait until your maturity date is six months out. You need time to properly market the property, negotiate from a position of strength, and coordinate your 1031 exchange if applicable. Desperation selling at the last minute is how you leave money on the table.
The flip side of this is equally important: if you're a buyer, the mid 2026 maturity wall represents potentially the best acquisition window we've seen since 2010. Owners who can't refinance will need to sell, and the volume of forced dispositions could temporarily widen cap rates in certain submarkets.
2. Cap Rate Compression Has Peaked for Your Asset Class
Timing the absolute peak of a market cycle is impossible. But recognizing when you're in the late innings is both possible and practical.
Here's how to think about it. If your building has benefited from significant cap rate compression over your hold period and current cap rates are at or near historic lows for your submarket and asset class, you're sitting on unrealized gains that exist only on paper until you sell. Those gains can evaporate quickly if the market shifts.
Right now, Class B multifamily cap rates on the Westside are hovering around 4.9% according to CBRE. Class A is at 4.74%. These are tight numbers by historical standards. Could they compress further? Sure. But the asymmetry of risk has shifted. The downside from cap rate expansion (say, 50 to 75 basis points) would reduce your property value by 10% to 15%. The upside from further compression (maybe another 15 to 25 basis points) would add 3% to 5% in value. That's not a favorable risk reward profile for a hold decision.
This doesn't mean you have to sell. But it should prompt a rigorous analysis of your alternatives. Can you deploy the equity more productively elsewhere? Would a 1031 exchange into a higher yielding market or asset class improve your cash flow while maintaining your appreciation upside?
3. Deferred Maintenance Costs Exceed Your Value Add Upside
This one catches a lot of long term holders off guard. You've owned the building for 15 or 20 years. You've kept it in decent shape, but the major systems are aging. The roof needs replacement. The plumbing is original galvanized. The electrical panels are outdated. The windows are single pane.
Individually, each item is manageable. But add them up and you're looking at $30,000 to $50,000 per unit in capital expenditures for a comprehensive renovation. On a 12 unit building, that's $360,000 to $600,000. The question becomes: will that investment generate enough additional NOI through rent increases to justify the capital outlay?
In a rent controlled market like the Westside, the answer is often no. Under LA RSO, you can pass through a portion of capital improvement costs to tenants, but the allowable increases are capped and spread over time. If you're going to spend $500,000 on capital improvements and can only increase your NOI by $25,000 annually as a result, your return on that capital is 5%. You'd be better off selling the building as is, completing a 1031 exchange, and deploying your equity into an asset that doesn't need the work.
There's also a psychological component here. Deferred maintenance compounds. The longer you wait, the more expensive it gets, and the more it affects your building's marketability. If you know the work needs to be done and you don't want to do it, that's a sell signal.
4. Your 1031 Exchange Timing Creates a Strategic Window
The 1031 exchange is the single most powerful wealth building tool available to apartment building investors. But it requires planning, and the timing constraints are unforgiving. You have 45 days to identify replacement properties and 180 days to close. Those deadlines don't care about market conditions.
The strategic insight here is to work backwards from your ideal exchange scenario. If you've identified a replacement property or market that you want to move into, the optimal time to sell is when that target is available and priced attractively. Waiting for your current building to appreciate another 3% to 5% while your replacement property appreciates 8% to 10% is a losing trade.
I've seen this play out repeatedly. An owner in Santa Monica holds out for an extra $100,000 on their sale price while the 16 unit building they wanted to exchange into in a higher growth market sells to someone else. They end up scrambling to identify replacement properties under the 45 day deadline and settle for an inferior option.
If you're considering a 1031 exchange, start your replacement property search before you list your current building. Know what's out there. Know what it costs. Then make your sell decision with full information.
5. Rent Control Legislative Risk Is Increasing
This is the signal that most owners don't want to think about. But ignoring legislative risk doesn't make it go away.
California's rent control landscape has shifted dramatically in recent years. AB 1482 established statewide rent caps. Local municipalities continue to explore and implement additional restrictions. The political environment in Los Angeles and its Westside neighborhoods favors tenant protections, and the trend line points toward more regulation, not less.
For apartment building owners, increased rent regulation directly impacts NOI growth potential, which in turn affects property values. If you believe that future legislation will further constrain your ability to achieve market rents on turnover or pass through operating cost increases, that belief should factor into your hold versus sell analysis.
This isn't about politics. It's about probability weighted returns. If there's a 30% chance that new legislation reduces your NOI growth rate by 1% annually over the next five years, that has a calculable impact on your property's future value. Run the numbers. If the present value of selling today exceeds the probability weighted present value of holding, the math favors a sale.
The Decision Framework
None of these signals in isolation should trigger a sale. But if you're seeing two or three of them simultaneously, it's time for a serious conversation about your options.
The framework I use with clients is straightforward. First, determine your building's current market value with a proper broker opinion of value, not a Zillow estimate. Second, calculate your after tax proceeds from a sale, including depreciation recapture. Third, model your reinvestment options, whether that's a 1031 exchange, a different asset class, or simply redeploying capital. Fourth, compare the risk adjusted returns of holding versus selling and reinvesting.
The owners who do this analysis objectively almost always arrive at a clear answer. Sometimes it's to hold. Sometimes it's to sell. But the worst outcome is never doing the analysis at all and defaulting to inaction because selling feels like giving something up.
Your apartment building is an investment, not a family member. Treat the decision accordingly.
