As we reach the halfway mark of 2025, multi-family investors across Los Angeles, the San Gabriel Valley, and the Inland Empire are asking the same question: What’s next for property values, rents, and returns?
Despite concerns about the economy, interest rates, and rent control, the multi-family sector is holding strong—and in many cases, performing better than expected. Vacancy rates have dropped below 5% for the first time in over two decades. Rents are rising. CAP Rates are increasing. For serious investors, this is more than just a rebound—it’s a window of opportunity.
If you’re thinking of buying, selling, or refinancing, the time to act is now—before the next rate shift or policy change catches you off guard.
What Is the 2025 Mid-Year Trend in Multi-Family Real Estate?
From an investor’s lens, today’s market is about two things: tight supply and rising returns. Buildings are full, tenants are staying longer, and rental demand is surging as affordability challenges keep would-be homeowners in the rental market.
We’re seeing CAP Rates rise across nearly every corridor we serve—especially in East Los Angeles and cities with heavy rent control. And while prices have adjusted in some areas, that’s creating rare opportunities to buy at better yields.
Why This Matters to Southern California Investors
Vacancy Has Dropped Below 5%
Historically, 5% has been the standard underwriting assumption for vacancy. But today? Vacancy is at just 4.8%—the lowest it’s been in over 20 years. Translation: Units are renting faster, and buildings are staying full.
Rent Growth Outpacing Inflation
Current rent growth is averaging between 2.3% to 3.5%, often outpacing inflation. With limited housing supply and high mortgage rates, tenants are staying longer—driving steady cash-flow for landlords.
Affordability Crisis Keeps Tenants Renting
To afford rent comfortably, a household needs to earn:
- $120,000/year in Los Angeles County
- $103,000/year in Riverside County
That affordability gap makes homeownership unattainable for many, keeping demand for rentals high.
Why Multi-Family Investors Should Pay Attention
- CAP Rates Are Up: Investors can now purchase properties with 5–7% CAP Rates, a major shift from last year’s 4% averages.
- GRMs Are Down: In most areas, Gross Rent Multipliers have compressed—meaning investors are paying less per dollar of income.
- Inventory Is Sparse: Some cities saw just 2–5 total sales in the first half of the year. Low supply means well-positioned listings will get attention.
- Commercial Debt Pressure Is Building: With $384 billion in loans pushed into 2025, distressed sales may increase—especially if interest rates stay elevated.
“Don’t wait for 4% interest rates to return—they may not be coming back anytime soon.”
Key Takeaways for Investors
✔ Vacancy is down, rental demand is up
✔ Rental rates are rising in most corridors
✔ New investors make up 60% of buyers today
✔ Older owners are retreating due to tenant protections
✔ Areas without local rent control are outperforming
How to Capitalize on Current Market Conditions
- Evaluate Your Current Property
If you haven’t raised rents in the past 12 months, you may be leaving cashflow on the table.
→ [Watch our rent increase strategy video] - Explore Reinvestment Opportunities
Areas like the 605 Corridor and Inland Empire East offer strong CAP Rates without aggressive rent control. - Request a Property Valuation
If you’re sitting on a well-maintained building in a desirable location, now may be a good time to sell for a strong price—and trade up.
Ready to Make Your Move?
Rising CAP Rates, tight vacancy, and a flood of new investor interest all point to a market in transition. If you’re a seasoned owner looking to expand—or a new investor seeking your first acquisition—there are opportunities to gain an edge.
Contact us today for a custom strategy session tailored to your investment goals.
FAQs
What is a CAP Rate and why is it important in 2025?
A CAP Rate (Capitalization Rate) is your return if you bought a property all cash. With CAP Rates now ranging from 5% to 7.5%, investors can earn more on their money—even with elevated interest rates.
Are rents still rising in Southern California?
Yes. Average rent increases in 2025 are between 2.3% and 3.5%, and most landlords are seeing little to no vacancy.
What areas are performing best right now?
Corridors like the 605 (Downey, Montebello) and East San Gabriel Valley (Covina, West Covina) are seeing strong performance, thanks to high demand and less restrictive rent control policies.
Should I wait for interest rates to drop before buying?
Not necessarily. The Fed has paused cuts, and waiting could mean missing out on better CAP Rates available now.
How do I know if it’s time to sell or refinance?
Let us help. We offer complimentary property evaluations to help you decide if your building should be held, sold, or reinvested for better returns.