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Should I Invest in Multifamily Real Estate in Los Angeles County?

By Justin Borges, DRE #01940318 | Updated March 2026

Yes, if you have $400K+ capital and can hold 7-10+ years. Multifamily offers superior risk-adjusted returns through diversified income streams (4 tenants vs 1 eliminates binary vacancy risk), operational efficiency (one roof covers 4 units vs 4 separate roofs), and better leverage (24% ROI vs 10% stocks). Best for long-term wealth building in LA County.

75% vs 0%

Occupancy Resilience
(Fourplex vs Single-Family)

24% vs 10%

ROI with Leverage
(Multifamily vs Stocks)

$0 vs $30K

Tax on $100K Gain
(1031 vs Stock Sale)

4X Efficiency

One Property = Four Units
(vs Scattered Single-Family)

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Table of Contents

• vs Single-Family
• vs Stocks & Bonds
• vs Commercial RE
• Unique Advantages
• Risks & Challenges
• Who It's Right For
• Getting Started
• FAQ

Multifamily vs Single-Family Rentals

The Core Comparison

Choosing between multifamily and single-family investment comes down to efficiency, risk management, and scaling potential. Let's compare identical $2 million investments:

Factor	4 Single-Family Homes	1 Fourplex
Properties	4 @ $500K each	1 property, 4 units
Down Payments	4 separate (25% each)	1 down payment (25%)
Mortgages	4 loans to manage	1 loan
Property Tax Bills	4 bills	1 bill
Insurance Policies	4 policies	1 policy
Locations	4 different addresses	1 location
Roofs to Replace	4 roofs ($120K total)	1 roof ($30K)
Management	4 locations to oversee	1 location

Same investment, dramatically different complexity.

Vacancy Risk Comparison

Single-Family Scenario

You own 1 rental home. Tenant moves out.

0% Occupied

Income: $0

Mortgage still due: $3,000/month

⚠️ Bleeding Cash

Multifamily Scenario

You own a fourplex. 1 unit vacant.

75% Occupied

Income: $6,000/month (3 units @ $2,000)

Mortgage + expenses: $11,000/month

✓ Still Managing, Not in Crisis

Risk Diversification: Built-In

The single biggest advantage of multifamily is eliminating binary vacancy risk. With 4 units, one vacancy means 75% occupancy. With one unit, one vacancy means 0% occupancy and complete income loss.

Price Per Unit Advantage

In LA County, buying units together costs significantly less than buying them separately:

• Single-Family: $700K-$900K per property
• Fourplex: $1.6M-$2M total = $400K-$500K per unit
• Savings: $200K-$400K per unit when bought together

Multifamily vs Stocks & Bonds

The Leverage Advantage

This is where multifamily really shines compared to stocks:

Return Comparison: $500K Investment

Stocks (No Leverage)

10% Return = $50K/year

Multifamily (4X Leverage)

24% Return = $120K/year

How it works: $500K down payment controls $2M property. 5% appreciation ($100K) + $20K principal paydown + $0 cash flow = $120K annual gain on $500K invested = 24% return.

Control & Value Creation

❌ Stocks

• No control over company
• Cannot force appreciation
• Subject to market volatility
• CEO scandals tank value

✓ Multifamily

• You control the property
• Can force appreciation through improvements
• Control tenant selection
• Control operating expenses
• Mitigate risks through management

Tax Advantages

Example: $100K Capital Gain

Stock Investor: Pay $30K in taxes (30% federal + state)

Multifamily Investor: $0 in taxes via 1031 exchange

Difference: $30,000 saved, fully reinvested in next property

Over multiple cycles, this creates massive wealth compounding.

The Liquidity Trade-Off

Stocks Win on Liquidity

This is multifamily's biggest disadvantage: Takes 30-90 days to sell, 6-8% transaction costs, can't partially liquidate. Stocks sell instantly with minimal fees.

Solution: Keep stocks for liquidity needs, multifamily for wealth building.

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Multifamily vs Commercial Real Estate

Financing Comparison

✓ Multifamily (2-4 units)

• Residential financing (20-25% down)
• 30-year fixed rates
• Easier approval process
• FHA/VA options (3.5% or 0% down)

❌ Commercial

• 25-30% down minimum
• Shorter terms (5-10 year balloons)
• Harder approval (NOI-focused)
• No government loan programs

Recession Resistance

Multifamily: Everyone needs housing. During recessions, demand actually shifts from ownership to rental, often helping multifamily occupancy.

Retail: Discretionary spending drops, stores close, bankruptcies common.

Office: Companies downsize, remote work trend continues, high vacancy risk.

Result: Multifamily is the most recession-resistant real estate asset class.

The Unique Advantages of Multifamily

1. Economies of Scale

One property, multiple income streams: 4 tenants paying rent, shared systems (one roof, one foundation), single management point, bulk purchasing power.

2. Risk Diversification

Built-in diversification: 1 vacancy = 75% occupied (not 0%), different tenant types reduce risk, income averaging smooths cash flow.

3. Easier Scaling

Single-Family Route: Buy 4 houses = 4 separate transactions, 4 locations, 4 property managers

Multifamily Route: Buy 1 fourplex = 1 transaction, 4 units, 1 manager. Then sell via 1031 into 8-unit = 2 transactions total for 8 units.

4. Professional Management Makes Sense

Single-family: 8-10% of $3,000 rent = $300/month for ONE property (often not worth it)

Fourplex: 8-10% of $8,000 rent = $800/month managing FOUR units (economies make it worthwhile)

5. Value-Add Potential

More opportunities: Renovate units as they vacant, improve property appearance, separate utilities, add laundry income, improve management systems. Forced appreciation is easier to achieve.

Risks & Challenges

Be Realistic About Challenges

Capital Requirements

Down payment: $400K-$500K (25% of $1.6M-$2M)
Reserves needed: $30K-$100K
Renovation budget: $50K-$100K
Total: $500K-$700K

Multifamily is not for everyone. Substantial capital required.

Other Key Risks

• Management Complexity: Multiple tenants, more calls, more issues, learning curve
• Liquidity: Can't sell quickly, 6-8% transaction costs, must commit long-term
• Market Risk: Values can decline, rents can stagnate, cap rates can compress
• Tenant Issues: Non-payment, damage, turnover costs, evictions
• Maintenance Costs: Unexpected repairs, deferred maintenance, systems failures

Mitigation: Thorough screening, adequate reserves, long-term hold perspective (7-10+ years), professional management, proper insurance.

Who Multifamily Is Right For

Decision Matrix

✅ Choose Multifamily If:

• Have $400K+ liquid capital
• Can handle negative cash flow initially
• Plan to hold 7-10+ years minimum
• Want to build serious wealth
• Comfortable with tenant management
• Strong credit (680+)
• Stable income or reserves
• Risk-tolerant but prudent

Best for wealth building

🤔 Choose Single-Family If:

• Lower capital ($100K-$150K)
• Want simplest possible start
• Plan to house hack
• Building to multifamily later

Good stepping stone

📈 Choose Stocks If:

• Need liquidity
• Want passive investing
• No management time/desire
• Lower capital available
• Prefer diversification

Best for liquidity

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Getting Started in Multifamily

Step-by-Step Path

1. Education (3-6 months): Read books, blogs, guides. Listen to podcasts. Attend seminars. Network with investors.
2. Financial Preparation (6-12 months): Build credit (680+ target). Save down payment + reserves. Reduce debt-to-income ratio. Get pre-approved.
3. Market Research (2-3 months): Choose target area. Analyze neighborhoods. Study comparables. Understand local rent control.
4. Team Building (1-2 months): Find multifamily agent. Connect with lenders. Identify inspectors. Line up contractors.
5. Property Search (3-6 months): View properties. Run analyses. Make offers. Negotiate.
6. Purchase & Close (30-60 days): Due diligence. Inspections. Financing. Close escrow.
7. Operate & Optimize (Ongoing): Manage tenants. Maintain property. Increase rents. Build equity.

Timeline: 12-24 months from decision to first property

Frequently Asked Questions

Q Should I invest in multifamily instead of single-family rental properties?

Yes, if you want better risk management and operational efficiency. Multifamily beats single-family through: Risk diversification (fourplex with 1 vacancy = 75% occupied vs single-family 0% occupied), economies of scale (one roof covers 4 units vs 4 roofs), better cash flow per dollar invested (4 units generating income vs 1), easier management (one property to oversee vs managing 4 scattered properties), and lower price per unit ($400K/unit in fourplex vs $500K+ single-family). Example: $1.6M buys fourplex ($400K/unit) generating $96K/year or 2 single-families ($800K each) generating $72K/year. Same investment, $24K more annual income with multifamily.

Q Is multifamily real estate better than stocks for building wealth?

Multifamily offers unique advantages vs stocks: Leverage (buy $2M property with $500K down vs stocks require full cash), consistent cash flow (monthly rent checks vs sporadic dividends), tangible asset you control (can force appreciation through improvements vs stock prices you cannot control), tax advantages (depreciation, 1031 exchanges, mortgage interest deduction vs limited stock benefits), and inflation hedge (rents and values rise with inflation vs stocks volatile). Historical returns similar (7-10% annually) but multifamily provides more control and predictability. Diversification strategy: Own both. Multifamily for wealth building and income, stocks for liquidity.

Q What are the main risks of multifamily investing?

Key multifamily risks: Tenant issues (vacancies, non-payment, damage, evictions), maintenance costs (unexpected repairs $5K-$50K annually), market downturns (values decline 15-30% in recessions), interest rate risk (refinancing challenges when rates rise), rent control restrictions (RSO properties with capped increases), capital requirements (need reserves $30K-$100K for emergencies), and time/management burden (tenant calls, repairs, bookkeeping). Mitigation strategies: Thorough tenant screening, adequate reserves, buy AB 1482 markets (not RSO), long-term hold perspective, professional management, and proper insurance. Unlike stocks (can drop 50% overnight), real estate offers more predictability and control.

Q How much cash flow can I expect from multifamily property?

Realistic LA County cash flow expectations depend on strategy. Value-add properties: Often negative to break-even initially, become cash flow positive after rent stabilization in 3-5 years. Turnkey properties: 2-6% cash-on-cash return typical ($50K down payment = $1,000-$3,000 annual cash flow). Premium areas (Pasadena, Arcadia): Lower cash flow (0-3%), focus on appreciation. Value areas (El Monte, Gardena): Higher cash flow (4-8%). Example fourplex: $1.6M purchase, 25% down ($400K), rents $8,000/month, expenses $5,000/month, debt service $8,000/month, cash flow: Negative $5,000/month initially, positive $2,000/month after stabilization.

Q Should I start with multifamily or single-family as first investment?

Start with multifamily if possible. Advantages for beginners: House hacking (live in one unit, rent others, tenants pay mortgage), faster wealth building (more units = more income), better learning (manage multiple tenants builds skills quickly), and economies of scale from day one. Start with single-family only if: Cannot afford multifamily down payment (20-25% of $1.5M-$2M), want simplest possible start (one tenant, less management), or plan to live in it then convert to rental (owner-occupied financing). Best first multifamily: Duplex or fourplex with VA loan (0% down for veterans) or FHA (3.5% down), live in one unit, build equity.

Q Why is commercial real estate more complex than multifamily?

Commercial real estate (office, retail, industrial) adds complexity vs residential multifamily: Commercial financing is harder (25-30% down, shorter terms, balloon payments, qualification based heavily on property not personal income), tenant buildouts required (offices need custom layouts $50-$150/sq ft), lease negotiations complex (multi-year terms, CAM charges, tenant improvement allowances), economic sensitivity higher (retail suffers in recessions, office faces remote work challenges), and management more specialized (commercial property managers expensive). Multifamily advantages: Easier residential financing (20-25% down, 30-year fixed, personal income qualification), no buildouts needed (apartments ready to rent), simple leases (standard forms), recession resistant (everyone needs housing), and straightforward management.

Q What are the tax advantages of multifamily investing?

Major multifamily tax benefits: Depreciation deduction (deduct 1/27.5 of building value annually for 27.5 years = $50K+ annual deduction on $1.5M property), mortgage interest deduction (deduct all interest paid), operating expense deductions (property taxes, insurance, repairs, management, travel to property), 1031 exchanges (defer all capital gains by exchanging into new property), cost segregation (accelerate depreciation on certain components), and passive loss rules (offset other passive income). Example: $1.6M fourplex generates $96K rent. After depreciation ($58K), mortgage interest ($84K), and expenses ($38K), taxable income: Negative $84K despite positive cash flow. This 'paper loss' can offset other income. Consult CPA for personal situation.

Q Can I invest in multifamily with limited experience?

Yes, multifamily is accessible to beginners with proper preparation. Steps for success: Educate yourself thoroughly (read, courses, podcasts), start with small multifamily (duplex/fourplex easier than 20-unit), use experienced professionals (real estate agent specialized in multifamily, property inspector, CPA, attorney), get proper financing (strong pre-approval), analyze conservatively (use realistic expense ratios 35-40%, budget reserves), and plan to hold long-term (7-10+ years to ride out learning curve). Many successful investors started with zero experience but strong commitment to learning. Partner with experienced investor for first deal if possible. Avoid: Jumping into large complex properties, using inexperienced team, or undercapitalization.

Ready to Start Your Multifamily Journey?

Schedule a consultation to discuss your investment strategy and goals

Call (213) 444-2225 Email Justin

Contact Justin Borges

With 13+ years of LA County real estate experience, I help investors navigate the multifamily market with confidence.

📞 Phone

(213) 444-2225

📧 Email

[email protected]

🏢 Office

680 E Colorado Blvd Suite 180
Pasadena, CA 91101

Related Resources

📍 Where to Buy Multifamily

Find best LA County neighborhoods for multifamily investing

🔍 How to Analyze Properties

7-step framework for evaluating multifamily deals

💰 Financing Options

Understand multifamily financing strategies

📚 Complete Guide

Comprehensive multifamily investing resource

Legal Disclaimer

This article provides general information comparing investment alternatives. This content does not constitute investment, financial, or legal advice. All investments carry risks. Returns are not guaranteed and past performance does not indicate future results. Real estate requires substantial capital, expertise, and risk tolerance. Consult with qualified financial advisors, CPAs, and attorneys before making investment decisions.

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