Guides
The 45 Day Identification Period
Plain language explainer on how the forty five day identification window works under Section 1031.
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Multifamily Investing
Multifamily property generally refers to residential buildings with five or more units, which is generally the threshold where lenders and underwriters shift from residential mortgage products to commercial financing, appraisal methods based on income rather than comparable sales, and reporting requirements more typical of other commercial asset classes. Multifamily underwriting generally centers on net operating income, meaning gross rental income less vacancy and operating expenses such as property taxes, insurance, utilities, payroll, and maintenance, capitalized at a market rate to arrive at value, alongside a close look at the trailing rent roll to understand current lease rates, expirations, and any gap between current rents and achievable market rents. California multifamily owners generally operate under the statewide Tenant Protection Act, commonly known as AB 1482, which generally caps annual rent increases at five percent plus the local rate of inflation, up to a maximum of ten percent in any twelve month period, and generally requires a valid just cause reason before ending a tenancy, for most multifamily buildings that are more than fifteen years old, with certain exemptions for newer construction and some smaller owner-occupied properties. San Diego, CA also has local tenant protection measures that can layer on top of the statewide rules, so multifamily owners generally need to confirm both state and any applicable local requirements before setting rent increases or pursuing an eviction. Because of this regulatory layering, some San Diego, CA multifamily owners exchanging out of a local property choose to diversify into multifamily assets in other states with different regulatory environments, seeking more operational flexibility on rent setting and lease enforcement, while others prefer to stay local given their existing market knowledge and property management relationships. Multifamily value-add strategies, meaning acquiring an underperforming property and improving unit finishes, amenities, or operational efficiency to raise achievable rents over time, generally require more active hands on management or a strong third party property manager, compared to a core, stabilized multifamily asset that is already operating near market rents with limited near term upside. Multifamily is also generally one of the property types most commonly available through DST and syndication offerings, though as covered elsewhere, only properly structured DST or TIC interests generally preserve 1031 eligibility, while typical syndication membership interests generally do not, since a DST or TIC interest may be a security and we do not sell securities, only provide introductions to licensed providers. Educational content only. This is not tax, legal, or investment advice.
How multifamily underwriting relies on NOI and the rent roll, how California's AB 1482 rent cap and just cause rules generally apply to most buildings over fifteen years old, and why some San Diego, CA owners diversify multifamily exposure nationally through a 1031 exchange.
Our Process
1
Trailing rent roll and net operating income underwriting
2
AB 1482 statewide rent cap and just cause eviction compliance review
3
In-state versus out-of-state diversification comparison for multifamily replacement property
Why This Matters
Our multifamily investing service helps San Diego investors navigate the complexities of 1031 exchanges with expert guidance and personalized support. We coordinate with qualified intermediaries, lenders, and tax advisors to ensure your exchange stays on track and meets every deadline.
Service Focus
MultifamilyAB 14821031 Exchange
Key Benefits
- Expert coordination with QIs and lenders
- Nationwide property identification
- Deadline management and timeline tracking
- San Diego market expertise
Frequently Asked Questions
Common questions about multifamily investing in San Diego
At what size does a residential property generally become multifamily for financing purposes?+
Generally five or more units, which is the threshold where lenders typically shift from residential mortgage underwriting to commercial income-based underwriting and appraisal methods.
How does AB 1482 generally limit rent increases in California?+
For most multifamily buildings more than fifteen years old, AB 1482 generally caps annual rent increases at five percent plus the local rate of inflation, up to a maximum of ten percent in any twelve month period, along with just cause eviction requirements.
Why would a San Diego owner exchange into out-of-state multifamily?+
Some owners generally seek different regulatory environments with more flexibility on rent setting and lease enforcement than California's statewide and local tenant protection rules allow, while others prioritize yield or price point differences available in other metro areas.
Is a value-add multifamily strategy generally more work than a stabilized property?+
Generally yes, value-add multifamily generally requires more active management or a strong third party property manager to execute unit renovations and operational improvements, compared to a core, already stabilized property with limited near term upside.
Does AB 1482 apply to every multifamily property in San Diego?+
Generally not every property. AB 1482 generally includes exemptions for certain newer construction, typically buildings less than fifteen years old, and some other specific property types, so owners should generally confirm their property's exemption status rather than assuming the cap applies universally.
How do local San Diego rent control ordinances interact with the statewide AB 1482 cap?+
Generally the stricter of the applicable state and local rules governs a given property, so owners should generally confirm both the statewide AB 1482 cap and any applicable local ordinance in their specific San Diego, CA jurisdiction before setting a rent increase.
Do multifamily buyers in San Diego generally need to assume existing leases at purchase?+
Generally yes, existing tenant leases generally transfer with the property at sale, and California's rent cap and just cause protections generally continue to apply to those tenancies under the new ownership, so buyers should generally review the full rent roll and lease terms carefully before closing.
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Guides
The 180 Day Exchange Deadline
Plain language explainer on the one hundred eighty day exchange completion deadline and how it interacts with the identification period.
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What Is Boot in a 1031 Exchange
Plain language explainer on cash boot, mortgage boot, and how unlike kind value becomes taxable.
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The Qualified Intermediary Role
Plain language explainer on why a qualified intermediary is required and how safe harbor and constructive receipt work.
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Discuss Multifamily Investing
We focus on matching multifamily investing opportunities across all 50 states while coordinating with Qualified Intermediaries and lenders. We are not a Qualified Intermediary.