Small Landlords Sell Off Apartment Holdings

As Los Angeles regulatory policies and increasing operating costs drive out mom-and-pop landlords, the city’s rental landscape is undergoing an ownership shift with implications for pricing and housing stock quality.

“Demand to sell is really frothing over the top,” said Kian Maronde, associate director of investments for a local Marcus & Millichap team that focuses on multifamily buildings between five and 30 units.

Since the start of 2024, Maronde said his team has brokered 86 sales in the L.A. area, totaling $184.8 million. The vast majority of sellers are in their 50s, 60s and 70s and own a single property for passive income or to generate retirement savings, he said.

The number of deals is up 34 percent while the dollar volume is 31 percent higher than the comparable pre-pandemic period of early 2017 to May 2019.

The pandemic essentially pushed several years of data into outlier territory. It also caused hangover for landlords who saw eviction moratoriums and rent freezes remain long after vaccines were developed.

Nowadays, they face the city’s rent stabilization ordinance, hefty relocation fee requirements for renovations or redevelopments, and surging insurance and utility costs. It’s a “death by a thousand cuts scenario,” said Anthony Luna, CEO of Coastline Equity, an L.A.-based property management firm with more than 100 commercial buildings in its portfolio, including multifamily assets.

“Historically, our bread and butter was mom-and-pop property owners that owned medium to large size assets — and a lot of multi-generational families — and what we’re seeing now is less and less of those mom-and-pop operators, and certainly less of the multi-generational, and many more institutional clients coming into the folds,” Luna said.

Another hike in costs for landlords came in the wake of January 2025 wildfires, said Maronde. Many property owners’ insurance policies have doubled or even tripled. Then there have been increases in various bureaucratic costs — such as meeting code on new standards for seismic retrofitting and more frequent inspection requirements.

When it all shakes out, many landlords are no longer making enough money to keep their buildings up to standards with repairs and new code compliance.

“Any profit that (landlords) were getting is getting eaten up by their tripled insurance policy or their doubled water and trash bills,” Maronde said. “There’s no extra money to infuse into these buildings, and so they’re falling into disrepair.”

Maronde sees these buildings trading hands to those with more liquidity as a positive as new owners can invest in improvements and create better products for tenants.

As mom-and-pops are leaving the business, several buyer types have emerged. In Maronde’s practice, he estimates between 30 and 40 percent of buyers are doctors, lawyers and financiers scooping up properties for tax write-offs.

Another 30 percent or so are local operators looking for value-add opportunities such as increasing unit counts and converting garages into accessory dwelling units. These are the same industry players who have been in the game for years, Maronde said — “they’ve just changed their strategy.”

The long used cash-for-keys play — where new building owners would offer tenants payouts to voluntarily vacate to make way for renovations to take a property upscale — doesn’t always work out anymore, Maronde said. The regulatory atmosphere in Los Angeles has many tenants driving harder bargains these days.

In need of a new model, some investors are using ADU conversions to add value to existing properties. L.A. city permit data reviewed by The Real Deal sheds light on the trend, with numerous permits issued this month for ADU conversions in apartment complexes involving garages, recreation rooms and storage facilities.

The third prominent buyer profile Maronde highlighted is Gen Z and Millennial investors “who have the energy and patience to wait out the current anti-landlord cycle, which they acknowledge may last a decade or two.” This group — which typically has family seed money or has done well in sectors like tech — accounts for about 20 percent of sales, he said.

City leaders implementing the policies that have paved the way for the mom-and-pop exodus may not like the results, Luna notes.

“[Some City Council members] would like to see housing become a public good rather than a business in the city of L.A.,” Luna said. “… They don’t recognize that it is going to be far worse to deal with the Blackstones and the REITs of the world who have the deep pockets to sue them back than to work collaboratively with mom-and-pop owners.”

From where things stand now in Los Angeles, Maronde anticipates the mom-and-pop landlord segment will “continue to be phased out,” and the rental market will continue to evolve in its wake.