You inherited an apartment building. You are not in the real estate business. Your parent or relative was — they understood the rent roll, the tenants, the capital schedule, the Rent Stabilization Ordinance. You don't. You know the building exists, you have the keys or know someone who does, and you are trying to figure out what happens next.
This guide is for you. It's not a guide for a sophisticated multifamily investor — it's for a person who now owns something that generates money they've never managed and faces decisions they've never made. The sequence below works.
When you inherit real estate, the IRS gives you a gift called stepped-up basis. Your cost basis in the building resets to its fair market value on the date of the previous owner's death — not what they originally paid for it.
This is substantial. If your parent bought the building for $800,000 in 1985 and it was worth $4.5 million when they died, your basis is $4.5 million. If you sell for $4.6 million, your taxable gain is $100,000 — not $3.8 million.
For LA multifamily inherited by heirs in 2025-2026, stepped-up basis often reduces capital gains tax from hundreds of thousands of dollars to nearly zero. This is the single most important fact to understand before making any other decision.
What to do: Get a formal appraisal of the property as of the date of death. This establishes your basis for tax purposes. Your CPA or estate attorney should handle or coordinate this.
California Proposition 19 (effective February 2021) changed the rules for inherited real estate property tax. Before Prop 19, children inheriting a parent's real estate generally kept the parent's Prop 13 assessed value (low property tax). After Prop 19:
If the deceased's apartment building was not your primary residence (which it almost certainly isn't for an apartment building), the building's property tax has likely been reassessed. Your property tax bill going forward is based on current market value, not your parent's 1985 basis.
What this means practically: If the building was worth $4.5 million when your parent died and you inherited it, you're now paying property tax on $4.5 million of assessed value — approximately $45,000/year in property tax plus local assessments. That's often 2-4x what your parent was paying before death.
What to do: Request your current property tax bill from LA County Assessor. Understand the new annual cost. Factor it into any hold-vs-sell decision.
In the weeks and months after inheriting an apartment building, walk through these questions in order.
If in probate: The building is frozen until the probate process completes. Probate in California takes 9-24 months typically. You cannot sell the building until probate authorizes a sale (or completes and distributes the property).
If in a living trust: The successor trustee (often you or a family member) has immediate authority to manage the property, including the right to sell without court approval. This is dramatically faster and simpler than probate.
If inherited via direct transfer (small estate or other exception): Consult an estate attorney to understand your specific ownership rights.
What to do: Find out which applies. An estate attorney can clarify quickly. This determines your timeline for every other decision.
Gather these documents:
- Current rent roll (all units, current rents, tenancy start dates)
- Most recent operating statements (3 years if available)
- Most recent property tax bill
- Current insurance policy
- Any outstanding mortgage documents
- LAHD RSO registration (if in LA City)
- Recent capital improvement records
If the building has a property manager, they should have most of this. If there's no property manager and no organized records, you may need to reconstruct from tax returns, bank statements, and physical inspection.
What to do: Don't make any decisions until you have these documents. Most inherited multifamily sellers who regret their timing wish they'd spent an additional 30 days understanding the building before listing.
The math favors one answer for most non-real-estate heirs. Here's why.
Sell case (strong for most heirs):
Hold case (applies to some heirs):
For most non-real-estate heirs, selling is the right answer. The tax-efficient timing (stepped-up basis fully intact) is optimal immediately after inheritance. Every year of holding is a year of operational burden, Prop 19 property tax, and exposure to market risk you don't have the tools to manage.
Sell within 6-12 months of death: Stepped-up basis is unambiguous. Market appraisal matches sale price closely. Minimal capital gains tax. Operational management period is short.
Sell within 12-24 months of death: Still efficient. Some potential for gain or loss relative to date-of-death basis, but often small.
Sell 2-5 years after death: Requires more careful tax planning. The original stepped-up basis is fixed; appreciation since death is taxable gain. For long-held inherited properties, the tax advantage diminishes.
Hold until you die: Your heirs get another stepped-up basis on your death. If you can manage the building during your lifetime without stress, this can be a powerful multi-generational tax strategy.
For most non-real-estate heirs: sell within 12 months of death.
Inherited LA multifamily sellers face three LA-specific considerations:
If the building is LA City pre-1978, it's under RSO. The December 2025 RSO rewrite (effective July 1, 2026) caps future rent growth at 4%. For inherited sellers considering hold-vs-sell, the regulatory trajectory matters.
If the building is LA County unincorporated pre-1995, it's under the LA County RSTPO (3% ceiling). Even tighter than LA City.
If the building is post-1995 Costa-Hawkins exempt, it's not under local rent control. More flexibility.
What to do: Confirm the building's regulatory regime before deciding. This affects both the hold case (trajectory) and the sale case (buyer pool, cap rate).
Older LA multifamily often has long-tenured tenants paying deeply below-market rent. If you sell the building as-is, buyers factor this into their offer. If you want to maximize sale price, you may consider pre-listing tenant buyouts — a compliance-heavy process covered in its own guide.
For most non-real-estate heirs, selling as-is with tenants in place is the cleaner path. Don't take on tenant buyout complexity without an experienced broker guiding you.
If the building is in probate, any sale typically requires court approval. The probate court confirms the sale price is reasonable through a "confirmation hearing" and allows "overbidding" — other buyers can submit higher offers at the hearing. This can be good (maximum price discovery) or bad (uncertainty until the hearing), depending on your preference.
Probate sales typically close slower than non-probate sales (adding 30-60 days for court process). Some buyers prefer to wait for non-probate sales. Some buyers (particularly investors) seek out probate sales for potential pricing advantages.
What to do: Work with a broker experienced in probate sales if your building is in probate. The process is specific.
If you just inherited an apartment building and you're not sure where to start:
Find the estate attorney. If your loved one had one, contact them first. If not, find one now. They'll confirm whether the building is in probate or trust and advise on basic next steps.
Get a current market-value appraisal dated as of the date of death. This establishes your stepped-up basis. Costs $500-$2,000. Essential.
Gather the building's financial documents. Rent roll, operating statements, tax bills, loan documents. Use what you have; reconstruct what you don't.
Get a free valuation from an experienced LA multifamily broker. Not to commit to selling — just to understand what the building is worth today and what selling it would actually look like. Interview 2-3 brokers.
Make the hold-vs-sell decision deliberately. Don't drift into either outcome. Given your own circumstances (tax position, operational capacity, life goals), which path is right?
Three common mistakes:
Mistake one: selling too fast or too slow. Selling within 30 days of death can mean accepting the first offer that arrives. Selling 3-5 years later can mean paying capital gains on post-death appreciation. The sweet spot is usually 6-12 months — enough time to understand the asset, but not so long that tax efficiency degrades.
Mistake two: treating the building as a lightning rod for family emotions. Apartment buildings in families can become vehicles for unresolved grief, sibling dynamics, and inheritance tensions. Keeping the decision anchored in practical considerations (tax, management, your own life) protects against this.
Mistake three: not getting the appraisal dated to date of death. This is the single most important document for establishing your tax basis. Skipping it, or getting a casual valuation that isn't formal, can cost tens of thousands in unnecessary capital gains tax at eventual sale.
Inheriting an apartment building is rarely a gift. It's an asset you didn't ask for, with management complexity you didn't sign up for, during a period of life (usually grief) when you have less capacity than normal to make complicated decisions.
The good news: LA multifamily has a deep, efficient resale market. You can sell. Stepped-up basis typically eliminates most tax burden. The decision isn't whether to sell — for most heirs, it's when, and how to do it cleanly.
You don't need to become a real estate investor to inherit a real estate asset. You need 30-60 days of honest preparation, a good team (estate attorney, CPA, experienced broker), and a clear-eyed decision about what to do next.
Request a free evaluation of your inherited building — with an honest read on the hold-vs-sell decision for your specific situation →
Do I pay capital gains tax on an inherited apartment building?
Only on gain above your stepped-up basis. Your basis resets to fair market value at the date of death. If you sell soon after inheritance at roughly that value, capital gains tax is typically minimal.
Does California Prop 19 reassess my inherited apartment building?
Yes. Unless you inherit it as your primary residence and use it as such (unlikely for apartment buildings), the building's property tax is reassessed to current market value at the date of death.
Should I hire a property manager or sell?
Depends on your capacity and goals. For most non-real-estate heirs, selling is cleaner. Hiring a property manager adds cost (typically 6-10% of gross rents) and still requires your oversight.
What if my loved one's building has a mortgage?
The mortgage transfers to the estate. Depending on the loan type, it may remain with the property or require payoff at sale. Review the loan documents; most residential mortgages have "due on sale" clauses that apply when ownership transfers by death.
How long does it take to sell an inherited apartment building?
In a trust: 90-150 days from listing to close (standard LA multifamily timeline). In probate: add 30-60 days for court confirmation, so 120-210 days total. Getting the building ready pre-listing adds 30 days regardless.
What if multiple heirs disagree about selling?
All heirs typically need to agree to a sale. If they don't, the property can remain in shared ownership (which often creates its own problems) or one heir can buy out the others. An estate attorney can facilitate. Most multi-heir situations resolve toward a sale because shared ownership of an operating building creates management complexity.
Related reading:
- How to Sell a Multifamily Property in Los Angeles (The Complete Guide)
- How much tax will I pay when I sell my apartment building in California?
- The Complete Tenant Buyout Compliance Guide for LA Multifamily Sellers
Michael Sterman is Senior Managing Director Investments at Marcus & Millichap. $1.41 billion across 254 closed transactions — many of them inheritances handled with sensitivity for heirs who didn't ask to become landlords.
This guide is informational, not legal or tax advice. Consult an estate attorney and CPA for advice on your specific situation.
Thinking about selling? Get a no-obligation evaluation from a broker with $1.41 billion across 254 closed LA multifamily transactions.
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