Trying to make sense of multifamily cap rates in Long Beach? Between shifting interest rates, older building stock, and California’s AB 1482 rent rules, it can be tough to know what a “good” deal looks like or how to price your own building. You want clear math, local context, and a way to benchmark quickly so you can move with confidence. In this guide, you’ll learn how cap rates work, how price and NOI interact, what AB 1482 changes in underwriting, and how to benchmark deals in the Long Beach market. Let’s dive in.
What a cap rate measures
Cap rate is a simple snapshot of income yield: annual Net Operating Income divided by price. The formula is straightforward: Cap rate = NOI / Price. Rearranged, Price = NOI / Cap rate. It strips out your financing and looks only at the property’s income and operating costs.
NOI, explained
NOI is Effective Gross Income minus Operating Expenses. Effective Gross Income is rents and other income after vacancy and credit loss. Operating Expenses include things like repairs, management, insurance, utilities, property taxes, and reserves. NOI excludes mortgage payments and income taxes.
Stabilized vs. value-add
- Stabilized properties have rents near market, predictable occupancy, and limited near-term capital needs. Because risk is lower, stabilized assets usually trade at lower cap rates (higher prices).
- Value-add properties have below-market rents or deferred maintenance. Buyers underwrite higher future income after renovations and turnover, so they often pay a lower price relative to in-place NOI (higher cap rate) and focus on projected multi-year returns.
Why cap rates differ deal to deal
Cap rates move with risk and return expectations. Location and submarket, building condition, tenant mix, lease terms, expense load, and vacancy history all matter. Debt costs matter too. When interest rates and lender spreads rise, buyers typically demand higher cap rates to keep equity returns in line.
Long Beach market context
Long Beach benefits from steady demand drivers: the Port of Long Beach and the LA port complex, logistics and manufacturing, healthcare, education at California State University Long Beach, and tourism and services. Proximity to central LA employment and a coastal lifestyle supports durable renter demand for small multifamily.
On the supply side, most new apartments in the LA metro are delivered in specific corridors. Small buildings (roughly 2 to 20 units) in Long Beach are older and constrained in walkable, transit-adjacent neighborhoods, which helps support occupancy.
Property taxes in California are governed by Proposition 13. Base rates are roughly 1 percent plus local assessments, and reassessment generally occurs at sale. For guidance on how reassessment may affect your pro forma, review the LA County Assessor’s resources on property taxes and reassessment at the Los Angeles County Assessor.
Local regulation also shapes underwriting. AB 1482 (the California Tenant Protection Act of 2019) applies to many rental units statewide and sets limits on rent increases, just-cause standards, and exemptions. Long Beach may also have local tenant programs or registration requirements; you can confirm program details through the City’s Housing and Neighborhood Services page at the City of Long Beach.
Price and NOI: step-by-step math
Let’s walk through a simple fourplex example to show how changes in cap rate swing price.
Example: stabilized 4-unit
- Gross scheduled rent: $96,000 per year (4 units at $2,000 per month)
- Vacancy and credit loss: 5 percent, so Effective Gross Income = $91,200
- Operating expenses: 35 percent of EGI, so Expenses = $31,920
- NOI = $91,200 − $31,920 = $59,280
Now convert NOI to price at different cap rates:
- At a 5.0 percent cap: Price = $59,280 / 0.05 = $1,185,600
- At a 6.0 percent cap: Price = $59,280 / 0.06 = $988,000
A 100-basis-point shift in the market cap rate moves price by roughly 16 to 20 percent in this scenario. Small differences in perceived risk and income can change value significantly.
Example: value-add upside
Using the same property, assume current rents are 10 percent below market and you project NOI to grow to $75,000 by year 2 after turnover and renovations. If you underwrite an exit cap of 5.5 percent, terminal value is $75,000 / 0.055 ≈ $1,363,636. Because you expect higher future income, you may accept a higher initial cap rate (6.5 to 8 percent) at purchase. The key is to model time to renovate, turnover-related vacancy, and rent rules under AB 1482.
How AB 1482 shapes underwriting
AB 1482 sets statewide rent caps and just-cause standards for many units. Knowing what is covered and how increases work changes the way you value in-place leases and projected growth. You can read the statute at California Legislative Information for AB 1482.
Key points at a glance
- Rent caps: Annual rent increases for covered units are limited to 5 percent plus regional CPI, with a 10 percent maximum within any 12-month period.
- Just cause: After a tenant has occupied a unit for a set period (commonly 12 months), you must have just cause to terminate tenancy.
- Exemptions: Single-family homes and condos can be exempt if they meet specific conditions, units built in the last 15 years are exempt, and certain owner-occupied 1–2 unit properties have different rules. Applicability depends on the property.
- Vacancy reset: You can generally set rent to market for a new tenancy when a unit becomes vacant. This often drives the timing of value-add upside.
Practical impacts on pricing
- Upside compression: Limits on annual rent increases reduce the present value of rapid rent growth on long-term tenants. Properties with many long-time residents often trade at higher cap rates to reflect slower income growth.
- Turnover matters: Value-add plans that depend on raising in-place rents should be adjusted. Much of the upside comes from vacancy resets rather than annual increases.
- Exit assumptions: If you previously modeled 6 to 8 percent rent growth per year, revise growth assumptions to reflect the 5 percent plus CPI cap for covered units and consider a more conservative exit cap.
Due diligence checklist under AB 1482
- Obtain a current rent roll with lease start dates and rent increase history.
- Confirm which units are covered or exempt based on build date and property type.
- Verify notices and documentation for any recent rent changes or tenant actions.
- Model time to turnover and renovation scope for each unit in a value-add plan.
- Review local program requirements or registrations with the City of Long Beach.
Financing and interest rates
Cap rate measures property income yield, not the loan rate, but the two are connected. When mortgage rates and small-loan spreads rise, buyers often require higher cap rates to maintain returns after debt service. In small multifamily, local debt availability and terms can move pricing quickly, so align your cap-rate target with current lending quotes before you make an offer or set a list price.
Benchmarking cap rates in Long Beach
There is no single cap rate for the city. You need relevant comps by building size, condition, and neighborhood, then adjust for differences in tenant mix, rent position, expenses, and capital needs.
Where to find comps
- Public records: Verify closed prices through the LA County Recorder.
- MLS and broker packages: For small multifamily listings and sales (request rent rolls and expense statements through your broker).
- Market reports: Regional brokerages and data providers publish LA metro cap-rate trends. Use them as context, then tailor to small asset comps inside Long Beach.
- City and permitting: Check permit histories and any local programs through the City of Long Beach.
How to compare apples to apples
- Filter by unit count (for example, 2 to 10 units), vintage, and location within the city.
- Note whether the sale was stabilized or value-add and whether any units were vacant at close.
- If NOI was not published, estimate Effective Gross Income using current or recent rents and a realistic vacancy allowance, then apply a 30 to 40 percent expense ratio typical for small multifamily (confirm with local data).
- Calculate implied cap rate as NOI divided by price and track a range, not a single number.
Common adjustments to comps
- Renovations: Recently upgraded buildings trade at lower cap rates than pre-renovation peers.
- Tenant profile: Long-term, in-place tenants usually mean slower rent growth under AB 1482; many month-to-month or recently vacated units often command tighter pricing.
- Financing: Assumable loans or seller financing can distort price; note any included financing terms.
- Exemptions: Newer builds (within 15 years) or other exemptions can change rent-growth potential and pricing.
What sellers can do now
- Prepare investor-ready financials: 12 to 24 months of income and expenses, a current rent roll with lease dates, and a capital improvements summary.
- Highlight turnover opportunities: Note any recent or upcoming vacancies where rent can be set to market at a vacancy reset.
- Normalize NOI: Present current NOI and a separate pro forma with clear assumptions for any deferred maintenance or post-close renovations.
- Anticipate buyer diligence: Gather permits, service contracts, and utility details. Clarify which units may be covered or exempt under AB 1482.
- Price with comps: Use recent small-multifamily sales in Long Beach to set expectations and defend your list price.
What buyers should verify
Loan quotes: Align your target cap rate with current debt costs and available leverage.
Rent roll accuracy: Confirm start dates, rent history, and any pending increases. Check notices and compliance with AB 1482.
Expense reality: Validate insurance, taxes (post-sale reassessment), utilities, and management. Use the LA County Assessor to estimate taxes under a new basis.
Physical plan: Scope immediate repairs and a realistic renovation schedule tied to turnover.
Exit math: Underwrite a conservative exit cap and moderated rent growth for covered units.
Bottom line
Cap rates in Long Beach are the product of property income, risk, and today’s financing conditions. With older, supply-constrained small buildings and AB 1482 shaping rent growth, you win by underwriting precisely: audit the rent roll, model turnover, and price against real local comps. If you want a clean valuation for a sale or to align your next 1031 exchange, connect with a local specialist who can package your asset for investors and activate a buyer pool quickly.
Looking for a data-driven valuation or a 1031 strategy tailored to your timeline? Reach out to Jack McCann to schedule a 1031 strategy call or request a property valuation.
FAQs
What is a “good” cap rate in Long Beach?
- It depends on risk. Stabilized coastal product tends to trade tighter than inland assets, and small buildings usually price at higher caps than large institutional properties. Use recent local comps by unit count and condition to set your range.
How does AB 1482 affect my building’s value?
- It does not automatically lower value, but it caps annual rent increases for covered units, which slows growth on in-place leases. Properties relying on raising existing rents often see pricing adjust; assets with vacancy resets or exemptions may be less affected.
Should I market my property using cap rate or GRM?
- Use both. Cap rate shows NOI-based yield while GRM is a quick gross income multiple. For best results, provide a full rent roll, expense detail, and a clear pro forma so buyers can compute cap, GRM, and cash flow.
How do mortgage rates influence cap rates in Long Beach?
- When mortgage rates and small-loan spreads rise, buyers usually require higher cap rates to maintain returns after debt service, which puts downward pressure on prices.
How do LA County property taxes after a sale affect my NOI?
- California’s Proposition 13 sets a base rate near 1 percent plus local assessments, and reassessment typically occurs at sale. Model the new tax basis using guidance from the LA County Assessor and reflect it in your expense line.
