Navigating Rising Interest Rates as an LA Multifamily Investor
What Just Happened
For the last two years, multifamily investors have been waiting for one thing: lower interest rates. They may need to stop waiting.
In September, the Federal Reserve raised its benchmark rate by a quarter point to a range of 3.75% to 4% — its first increase since July 2023. More importantly, the 10-year Treasury breached 5% and the 30-year fixed mortgage averaged close to 7%, both levels not seen since well before the pandemic era. Markets entered 2026 expecting rate cuts. Persistent inflation changed that path, and the Fed has signaled another increase could come before year-end.
For Los Angeles apartment investors, this changes the math on every deal — but not necessarily the opportunity.
What Higher Rates Mean for Apartment Deals
Financing gets tighter Debt costs more, loan proceeds shrink, and debt-service coverage requirements get harder to satisfy. A property that penciled at 65% leverage may now only work at 55 or 60% — and that extra equity has to come from somewhere. Buyers either adjust their bids or bring more cash to closing.
Cap rates face pressure When investors require higher yields to compensate for expensive debt, the same net operating income supports a lower purchase price. Sellers who priced their buildings last spring may need to recalibrate to where buyers can actually transact today.
Refinancing pressure builds Nearly $983 billion in U.S. commercial real estate loans are estimated to mature in 2027. Owners who financed at materially lower rates a few years ago may not support the same loan balance today — which means cash-in refinancings, restructurings, or, for some owners, selling becomes the more rational move.
Why LA Multifamily Still Works
Rents keep holding up Los Angeles has a chronic undersupply of rental housing and deep, durable tenant demand. That fundamental hasn't changed with the rate cycle, and it's what separates multifamily from more cyclical property types.
Motivated sellers create openings Owners facing maturities are becoming more flexible on pricing, which helps narrow the bid-ask gap that's frozen so many deals. Well-capitalized buyers are finding opportunities below replacement cost — the kind of basis that's hard to replicate once rates eventually settle.
Local lenders are still in the game Banks and credit unions continue to compete for quality multifamily loans. For stabilized, income-producing apartment buildings in strong LA submarkets, debt is available — it's just underwritten more conservatively than it was two years ago.
What We're Telling Clients Right Now
If you're buying, underwrite to today's rates — not the cuts you hope are coming. Price the refinance risk into your offer and you'll never be caught off guard.
If you own a building with debt maturing in the next 18 months, run the math now: compare a cash-in refinance against a sale in today's market. For some owners, selling into a bid from a well-capitalized buyer beats feeding a loan.
If you're selling, know that the buyer pool is real and active — but pricing discipline matters more than ever. Buildings priced to today's financing are the ones moving.
The Bottom Line
Higher rates don't end the LA apartment market — they sort it. Leveraged owners face decisions, disciplined buyers find basis, and the gap between the two is where deals get done. The investors who act on today's math, rather than waiting for yesterday's rates to return, are the ones building the next cycle's portfolio.
Own an apartment building in Los Angeles? Get a free property valuation or call The Saghian Group at (310) 401-1559.