When Yield Isn’t Enough: Why LA Deals Aren’t Moving

We recently got a call from a broker trying to sell a 7% cap rate deal in West Adams. It had ADU potential, remaining upside, and in place cash flow, as you can borrow at 6% and be positively leveraged Day 1. In past years, this would have sold within weeks, but after multiple price cuts, it’s still sitting on the market — with no offers. Brokers and sellers are frustrated that their deals that ‘pencil’ aren’t selling as buyers are being super picky.

Today’s market isn’t just about cap rates or price per square foot — it’s about liability, headaches, hassle, and risk. Multifamily management now demands a level of involvement that many owners aren’t willing to take on. Even with strong on-paper returns, deals are sitting — often 40% below peak pricing — because ownership no longer feels it’s worth the effort. Owning multifamily in LA is no longer the passive, appreciation-driven investment it once was. It’s now complex, risky, and highly hands-on.

Landlord-tenant laws in Los Angeles have changed dramatically. In the past, if a tenant didn’t pay rent, a landlord could expect to spend $5,000 to $10,000 to regain possession of the unit within 60 days. Today, even with clear grounds, the law heavily favors tenants. Evictions can take 90+ days, cost $10,000 to $20,000, and are difficult to win. Habitability lawsuits are on the rise, often used as a tactic to extract payouts from landlords or insurance carriers.

This climate is pushing many landlords to reconsider whether owning rental property in LA is still worth it. For long term owners, many of whom endured the long COVID-era eviction moratorium, burnout is a real factor. They’re not thinking about 2022 sale comps or hypothetical appreciation. They’re thinking about getting out of what feels like a full-time job, where tenants dictate more of the terms than they used to. And for a growing number of investors, especially older owners or those who aren’t full-time real estate professionals, the math doesn’t justify the emotional and sometimes physical toll. They’d rather earn a lower return elsewhere than live with the anxiety or unpredictability of rising operating costs, difficult tenant situations, or ever increasing regulations. These investors are no longer chasing yield. They’re chasing peace of mind.

That’s why the market is seeing more listings. Combine this with a wave of loan maturities, and it’s no surprise the market feels crowded.

For buyers willing to take on the challenges, there is real opportunity. With so many deals on the market, buyers are able to be selective and wait for sellers to meet them on their terms.

At The Goldfinger Group, we’re using this time to maximize the performance of our current buildings. We’re doing what we can to keep expenses down, as well as renovate units as they become available, and add ADUs or additional units to our properties. We see this buyer’s market as a time to continue to buy where we see value and low risk; at the same time, we are placing a heavy emphasis on due diligence and risk-reward analysis as we grow and maximize our portfolio.