You just inherited an apartment building in Los Angeles. Maybe it was your parents' investment property, maybe a family member's long-held asset. Either way, you're now responsible for a multifamily building in one of the most regulated rental markets in the country.
The good news? Inherited properties come with some serious tax advantages. The bad news? The process of actually selling one involves legal hurdles that most brokers never deal with.
I've walked multiple families through this exact situation. Here's what you need to know.
The single biggest factor in how your sale plays out is whether the property was held in a trust or needs to go through probate.
Trust-held properties are straightforward. The successor trustee has the authority to sell without court involvement. You can list, negotiate, and close on a normal timeline — typically 30 to 60 days. The trust document spells out who has decision-making power, and as long as the trustee follows the terms, the sale proceeds like any other transaction.
Probate properties are a different story. When someone passes without a trust (or without properly funding their trust), the property goes through the Los Angeles Superior Court probate process. This means court hearings, mandatory waiting periods, and a confirmation process that can add months to your timeline.
Here's the silver lining that makes inherited properties financially unique: the stepped-up tax basis.
When you inherit real estate, the IRS resets the cost basis to the property's fair market value at the date of death. This is massive for apartment buildings that have been held for decades.
Say your parents bought a 10-unit building in Silver Lake for $400,000 in 1985. At the time of inheritance, it's worth $4 million. Your new cost basis is $4 million — not $400,000. If you sell for $4.2 million, you're only paying capital gains on $200,000 instead of $3.8 million.
This changes the entire math on whether to sell or hold. For many families, the stepped-up basis creates a window where selling makes more financial sense than it ever would have for the original owner.
If you're going through probate, here's the timeline you're looking at:
Filing the petition kicks things off. You'll need to petition the court to be appointed as the personal representative (executor) of the estate. In LA County, expect 6 to 8 weeks just to get your first hearing date. The courts are backed up.
Getting authority to sell is your next step. California probate code offers two paths: Independent Administration of Estates Act (IAEA) authority, which lets you sell with limited court oversight, or full court confirmation, which requires a judge to approve the sale. Most attorneys push for IAEA authority because it speeds things up significantly.
Marketing the property happens once you have authority. With IAEA, you can market and accept offers much like a normal sale. Without it, you'll need to bring the highest offer to court for confirmation.
Court confirmation is where probate gets interesting. The court sets a hearing date, publishes the proposed sale, and opens the floor to overbidding. Any qualified buyer can show up and bid against your accepted offer. The minimum overbid is typically 5% above the original offer plus a small increment. I've seen court confirmation hearings push prices 10 to 15% above the initial accepted offer.
Closing happens after court approval, usually within 30 days. The full timeline from petition to close typically runs 6 to 12 months.
Things get complicated when multiple family members inherit the same building. Disagreements about whether to sell, what price to accept, and how to split proceeds can stall a transaction indefinitely.
The most common scenarios I see are one heir wants to sell while another wants to hold and collect rent, siblings who live in different states and can't agree on management, and blended families with competing interests in the estate.
My advice is to get everyone aligned before going to market. A family meeting — ideally with the estate attorney present — to discuss realistic values, timeline expectations, and each person's financial goals saves enormous headaches later. If alignment is truly impossible, a partition action through the courts can force a sale, but it's expensive and adversarial.
If the inherited property falls under LA's Rent Stabilization Ordinance — which covers most buildings with 2 or more units built before October 1978 — there are specific rules you need to know.
Tenants' rights don't change with ownership transfers, whether through inheritance, probate, or trust distribution. All existing leases, rent levels, and tenant protections remain in place. The RSO doesn't have an exception for inherited properties.
However, the stepped-up basis combined with vacancy decontrol creates an interesting dynamic. Under Costa-Hawkins, when tenants voluntarily vacate, you can reset rents to market rate. If you inherit a building with below-market rents, each turnover represents significant upside — and your stepped-up basis means the capital gains impact of holding and repositioning is much lower.
This is where having a broker who understands both the legal process and the multifamily market becomes critical. The decision to sell immediately versus holding and repositioning depends on the rent roll, the stepped-up basis, and the family's financial situation.
The stepped-up basis is the headline, but there are other tax considerations worth discussing with your CPA.
Measure ULA applies to inherited property sales just like any other transaction. If the building sells for over $5 million, you're looking at a 4% transfer tax. Over $10 million, it jumps to 5.5%. There's no estate or inheritance exemption.
Depreciation recapture is largely eliminated by the stepped-up basis. Since the basis resets to current fair market value, there's minimal accumulated depreciation to recapture — another significant tax advantage of selling shortly after inheriting.
State estate taxes aren't a factor in California, which has no state-level estate tax. But federal estate taxes apply to estates over the current exemption threshold, which is set to decrease significantly after 2025. Talk to your estate attorney about timing.
Selling an inherited apartment building in LA sits at the intersection of probate law, tax strategy, rent control regulation, and multifamily valuation. Most residential agents have never handled a probate sale. Most probate attorneys don't understand cap rates or RSO implications.
You need someone who speaks both languages. That's exactly what I do at The Group CRE — I've helped families navigate everything from straightforward trust sales to contested probate proceedings with multiple heirs and RSO-regulated tenants.
If you've inherited an apartment building in LA and want to understand your options, give me a call. No pressure, just a straightforward conversation about what the building is worth and the best path forward for your situation.
When you inherit a property, the IRS resets the cost basis to the fair market value at the date of death. This means if the original owner bought the building for $500K and it's worth $3M when you inherit it, your new basis is $3M. If you sell for $3.1M, you only pay capital gains tax on the $100K gain — not the $2.6M the original owner would have owed. This is one of the biggest tax advantages in real estate and a major reason many heirs choose to sell shortly after inheriting.
Probate sales in LA typically take 6-12 months from start to close. The process includes filing the petition (1-2 months for a hearing), marketing the property, accepting offers, and court confirmation (another 4-6 weeks). During the court confirmation hearing, the court may open bidding to other buyers, which can actually drive the price higher. Trust-held properties skip probate entirely and can sell on a normal 30-60 day timeline.
