What It Actually Costs to Sell an Apartment Building in Los Angeles
Most owners think about their sale price. Far fewer think carefully about their net proceeds, and the gap between those two numbers is bigger than almost anyone expects.
On a $6 million apartment building in the City of Los Angeles, the difference between gross price and what lands in your account can exceed $1 million once you account for commission, transfer taxes, loan payoff, and the tax bill. Owners who plan for that figure make better decisions. Owners who don’t get an unpleasant surprise at closing.
This guide breaks down every cost, shows you the math on a real-world example, and explains which costs you can reduce or defer. If you’re still at the earlier stage of working out what your building is worth, start with our guide on how to value your apartment building before selling.
The Short Answer
Selling costs on an LA apartment building typically fall into two buckets:
Transaction costs (paid at closing, roughly 5% to 12% of sale price): – Broker commission – Transfer taxes including Measure ULA – Escrow, title, and administrative fees – Loan payoff penalties – Negotiated credits
Tax costs (paid later, potentially 20% to 37% of your gain): – Federal capital gains – California state income tax – Depreciation recapture
The single biggest variable is whether your sale exceeds the Measure ULA threshold, which can add hundreds of thousands of dollars in one line item.
Broker Commission
Commission is usually your largest transaction cost.
Typical range in LA multifamily: 4% to 6% of the sale price, most often split between the listing broker and the buyer’s broker.
What moves the number:
- Deal size. Smaller buildings (duplexes, fourplexes) sit at the higher end, often 5% to 6%. Larger institutional deals compress toward 3% to 4%.
- Complexity. Rent-controlled buildings, tenant issues, or difficult financials take more work and support higher rates.
- Whether a buyer’s broker is involved. An unrepresented buyer may mean a lower total commission.
What’s negotiable: the rate itself, the split, and the length of the listing agreement. What’s usually not worth negotiating away is the marketing budget. A broker who cuts commission by trimming exposure often costs you more in final price than they save you in fee.
Choosing well matters here. Our guide on how to find the best multifamily broker in LA covers what to look for. One important note: a commission difference of 1% on a $6 million building is $60,000. A pricing difference of 3% on that same building is $180,000. Choosing a broker on rate alone, rather than on submarket track record and buyer relationships, is usually the more expensive decision.
Transfer Taxes: The LA Layer Cake
Los Angeles stacks multiple transfer taxes, and sellers customarily pay them.
|
Tax |
Rate |
Applies To |
|---|---|---|
|
LA County documentary transfer tax |
0.11% |
All LA County sales |
|
City of Los Angeles transfer tax |
0.45% |
Sales within City of LA |
|
Measure ULA (4% bracket) |
4% |
City of LA sales $5.3M to $10.6M |
|
Measure ULA (5.5% bracket) |
5.5% |
City of LA sales above $10.6M |
The base transfer taxes are modest. Measure ULA is not.
Measure ULA in Brief
Measure ULA took effect April 1, 2023 and applies to real property transfers within the City of Los Angeles. The original thresholds were $5 million and $10 million, but they adjust annually with the Chained CPI. As of July 1, 2025 and continuing through 2026, the thresholds are $5.3 million and $10.6 million.
Three things make ULA especially painful:
- It applies to the gross sale price, not your profit. Sell a building at a loss and you still owe the tax if the price crosses the threshold.
- It’s a cliff, not a graduated bracket. Cross $5.3 million by a single dollar and the 4% applies to the entire consideration, not just the amount above the threshold.
- There is no 1031 exchange exemption. You can defer capital gains through an exchange, but the ULA transfer tax is owed on the sale itself.
Where ULA does not apply: properties outside City of Los Angeles boundaries. Buildings in Santa Monica, Beverly Hills, Culver City, Inglewood, Long Beach, or unincorporated LA County are not subject to ULA, though some of those cities have their own transfer taxes.
For the full picture on thresholds, exemptions, and planning strategy, see our dedicated guide to Measure ULA and multifamily sales over $5M. There are narrow exemptions, mostly for qualifying nonprofit sellers and purchasers, Community Land Trusts, Limited-Equity Housing Cooperatives, transfers between spouses in divorce, gifts, foreclosures and deeds in lieu, transfers into or out of trusts where beneficial ownership doesn’t change, and certain proportional-interest entity transfers. Most private apartment owners will not qualify.
Escrow, Title, and Administrative Fees
These are the smallest line items but they add up:
- Escrow fees: roughly $1,500 to $3,500+ depending on deal size, often split between buyer and seller by custom or negotiation
- Title insurance: seller typically pays for the owner’s policy; cost scales with price
- Recording fees: modest, a few hundred dollars
- Natural hazard disclosure report: $100 to $200
- County and city compliance certificates: LA requires certain reports and certificates before transfer, including a 9A Report (Report of Residential Property Records) for residential properties in the City of LA
- Estoppel certificate coordination: usually absorbed in broker or escrow work but occasionally a separate cost
Budget $3,000 to $8,000 total for this category on a typical mid-sized building.
Loan Payoff Costs
If you have debt on the property, paying it off early can trigger meaningful penalties. This is one of the most commonly overlooked costs.
Prepayment penalty structures you may encounter:
- Step-down prepay (common on bank and small-balance agency loans): a declining percentage, often 5-4-3-2-1, meaning 5% of the loan balance in year one down to 1% in year five. On a $3 million loan in year three, that’s $90,000.
- Yield maintenance: you compensate the lender for lost interest, calculated against Treasury yields. Cost varies widely with rate movement and remaining term.
- Defeasance (common on CMBS loans): you substitute government securities for the collateral. Expensive and administratively complex, often $50,000+ in transaction costs alone plus the securities purchase.
- Open prepayment window: many loans allow penalty-free payoff in the final months of the term.
Action item: pull your loan documents before you list and confirm your prepayment terms and any open window. Timing a sale to hit an open prepayment window can save six figures.
Repair Credits and Negotiated Items
After the buyer’s inspection, expect some negotiation. Typical outcomes:
- Deferred maintenance credits for roof, plumbing, electrical, or foundation issues
- Seismic retrofit credits if your building is a soft-story property with an outstanding order to comply, which can range from $20,000 to well over $100,000 depending on building size
- Code violation cure costs for outstanding LAHD or LADBS orders
- Tenant-related credits where rent discrepancies or deposit shortfalls surface
If your building is occupied, review our guide on selling a tenant-occupied building in Los Angeles for how tenant issues surface in due diligence.
Budget 0.5% to 2% of sale price for negotiated items on a typical building. Buildings with significant deferred maintenance can see far more.
The Tax Bill
Transaction costs come out at closing. Taxes come later, and they’re usually larger.
Capital Gains
Your gain is the difference between the net sale price and your adjusted cost basis (original purchase price plus capital improvements, minus accumulated depreciation).
- Federal long-term capital gains: 0%, 15%, or 20% depending on income
- Net Investment Income Tax: an additional 3.8% for higher earners
- California state income tax: up to 13.3%, and California does not offer a preferential capital gains rate
For a high-income California seller, the combined rate on capital gains can approach 37%.
Depreciation Recapture
Every year you owned the building, you claimed depreciation, which reduced your taxable income. When you sell, the IRS recaptures that benefit at a rate of up to 25% on the depreciation you took (technically “unrecaptured Section 1250 gain”).
This catches long-term owners hard. A building held 25 years may have accumulated several hundred thousand dollars of depreciation, all of it now taxable.
California Withholding
At closing, escrow typically withholds 3.33% of the gross sale price for California under Form 593, unless you qualify for an exemption or elect an alternative calculation. This isn’t an additional tax; it’s a prepayment against what you’ll owe. But it affects your cash at closing.
How a 1031 Exchange Changes the Math
A properly structured 1031 exchange defers federal and state capital gains and depreciation recapture entirely, as long as you reinvest into like-kind property of equal or greater value with equal or greater debt, identify replacement property within 45 days, and close within 180 days.
What a 1031 does not defer: Measure ULA, the base transfer taxes, commission, or escrow costs. Those are all still owed.
Exchange costs themselves are modest: a qualified intermediary typically charges $1,000 to $2,500 for a standard forward exchange.
Worked Example: A $6 Million Building in the City of LA
Assume a 12-unit building, purchased 20 years ago for $1.8 million, sold today for $6,000,000. Existing loan balance of $2,000,000 with a 2% step-down prepayment penalty remaining. Accumulated depreciation of $900,000. Seller is a high-income California resident.
Transaction costs:
|
Item |
Amount |
|---|---|
|
Broker commission (5%) |
$300,000 |
|
Measure ULA (4% on $6M) |
$240,000 |
|
City of LA transfer tax (0.45%) |
$27,000 |
|
County transfer tax (0.11%) |
$6,600 |
|
Escrow, title, reports |
$6,000 |
|
Prepayment penalty (2% of $2M) |
$40,000 |
|
Negotiated repair credits |
$35,000 |
|
Total transaction costs |
$654,600 |
Proceeds before tax: $6,000,000 minus $654,600 minus $2,000,000 loan payoff = $3,345,400
Tax exposure (if not exchanging):
- Adjusted basis: $1,800,000 minus $900,000 depreciation = $900,000
- Gain: roughly $6,000,000 minus $654,600 selling costs minus $900,000 basis = $4,445,400
- Depreciation recapture: $900,000 at 25% = $225,000
- Remaining capital gain: $3,545,400 at roughly 33% combined federal and California = about $1,170,000
- Approximate total tax: $1,395,000
Net after tax: roughly $1,950,000 from a $6 million sale.
If the seller does a 1031 exchange instead: the $1,395,000 tax bill is deferred, leaving roughly $3,345,400 to reinvest. The ULA, commission, and transfer taxes are still paid.
That gap, nearly $1.4 million, is why tax planning before a sale matters more than almost any other decision.
Which Costs You Can Actually Reduce
Reducible: – Commission rate, modestly, and mostly on larger deals – Prepayment penalty, by timing your sale to an open window – Repair credits, by addressing deferred maintenance before listing rather than negotiating under pressure – Escrow and title, marginally, by negotiating splits
Deferrable: – Capital gains and depreciation recapture, via a properly executed 1031 exchange. Review the common mistakes that void an exchange before you start. – Everything, if you hold until death, where heirs receive a stepped-up basis
Essentially fixed: – Measure ULA, unless your sale genuinely falls below the threshold or you qualify for a narrow exemption – Base city and county transfer taxes
On the ULA threshold specifically: pricing a building at $5.25 million instead of $5.35 million saves $214,000 in tax while giving up $100,000 in price. That math is real, and near the threshold it’s worth modeling carefully with your broker and CPA. Structuring a transaction to artificially avoid ULA, however, invites scrutiny. Legitimate pricing decisions are fine; contrived structures are not.
Common Mistakes That Cost Sellers Money
Not modeling net proceeds before listing. Many owners discover their real number at closing. Get a written net proceeds estimate before you sign a listing agreement.
Forgetting Measure ULA entirely. It’s the single largest surprise line item for City of LA sellers, and the assumption that a 1031 exchange covers it is widespread and wrong.
Ignoring the prepayment penalty. Owners routinely list without checking their loan documents, then discover a $90,000 penalty mid-escrow.
Underestimating depreciation recapture. Long-term owners often plan for capital gains and forget that two decades of depreciation is separately taxable at up to 25%.
Not knowing whether to sell at all. If you haven’t compared a sale against a refinance, read should I sell or refinance my apartment building first.
Deciding on a 1031 too late. The exchange must be set up before closing, with a qualified intermediary in place. You cannot take receipt of the proceeds and then decide to exchange.
Deferring maintenance until the inspection. Credits negotiated under time pressure in escrow almost always cost more than the same repairs done calmly beforehand.
Expert Tips
- Get a net proceeds estimate in writing at the same time you get your Broker Opinion of Value. Price without net proceeds is only half the picture.
- Pull your loan documents first. Prepayment terms can dictate your entire sale timing.
- Bring your CPA in before you list, not after you’re in escrow. The highest-value tax decisions happen early.
- If you’re near $5.3 million, model both sides of the threshold. Sometimes the right answer is to price below it.
- Consider whether your buyer pool changes at the threshold. Some buyers avoid ULA-triggering deals entirely, which affects demand as well as price.
Frequently Asked Questions
What does it cost to sell an apartment building in Los Angeles?
Transaction costs typically run 5% to 12% of the sale price, driven mostly by broker commission (4% to 6%) and, for City of LA sales above $5.3 million, Measure ULA at 4% or 5.5%. Capital gains and depreciation recapture apply separately unless deferred through a 1031 exchange.
What are typical multifamily broker commissions?
Generally 4% to 6% for smaller apartment buildings, often split between listing and buyer brokers. Larger institutional transactions compress toward 3% to 4%.
How much is transfer tax in Los Angeles?
The base is 0.11% county plus 0.45% city for properties within Los Angeles. Measure ULA adds 4% on sales from $5.3 million to $10.6 million and 5.5% above $10.6 million within City of LA boundaries.
What is Measure ULA and when does it apply?
Measure ULA is a transfer tax approved by LA voters in 2022 and effective April 2023. It applies to City of Los Angeles property transfers at 4% for sales between $5.3 million and $10.6 million and 5.5% above that. It’s assessed on the full sale price, not the profit, and it applies to apartment buildings, not just mansions.
Is there a 1031 exchange exemption from Measure ULA?
No. A 1031 exchange defers capital gains and depreciation recapture, but Measure ULA is owed on the sale regardless of whether you exchange.
What is depreciation recapture?
When you sell, the IRS taxes the depreciation you claimed during ownership at a rate up to 25%. Long-term owners are often surprised by how large this is, since it accumulates every year you own the building.
Can I avoid capital gains taxes when selling?
You can defer them through a 1031 exchange into like-kind property, or eliminate them for heirs by holding until death, when the basis steps up. Installment sales and Delaware Statutory Trusts offer other structures. Avoiding them outright while cashing out is generally not possible.
Who pays escrow and title fees in LA?
Custom varies and it’s negotiable. Commonly the seller pays for the owner’s title policy and escrow fees are split, but the purchase agreement governs.
What loan penalties apply when I sell?
It depends on your loan. Step-down prepayment penalties (often 5-4-3-2-1), yield maintenance, or defeasance on CMBS loans. Check your loan documents before listing, and look for an open prepayment window near the end of the term.
How do I calculate my net proceeds?
Start with sale price, subtract commission, transfer taxes including ULA, escrow and title, prepayment penalties, negotiated credits, and your loan payoff. That gives cash at closing. Then subtract estimated capital gains and recapture tax to get your true after-tax number, unless you’re exchanging.
Are selling costs tax deductible?
Selling costs like commission and transfer taxes generally reduce your amount realized, which lowers your taxable gain. They’re not deducted separately as expenses. Confirm treatment with your CPA.
Know Your Real Number Before You List
The owners who net the most from an LA apartment sale are the ones who model the full picture early: commission, ULA exposure, loan payoff terms, and the tax bill, all before the building goes to market.
For the complete process from valuation through closing, see our main guide on selling your apartment building in Los Angeles. A Broker Opinion of Value tells you what your building is worth. A net proceeds analysis tells you what you’ll actually keep. You want both before you make a decision, and both should be free.
