Twenty-eight of our closed transactions involved sellers who had owned their properties for decades, often 25 to 40 years or more. These are not distressed sellers or flippers. They are people who built wealth through LA real estate over a generation and are now making one of the biggest financial decisions of their lives: when and how to exit.
Here is what we have learned about working with longtime owners, and what makes their transactions fundamentally different from every other deal type.
Why Longtime Owners Sell
After two or three decades of ownership, the decision to sell is rarely about the property. It is about the owner's life.
The Regulatory Tipping Point
California's expanding regulatory environment has changed the calculus for many longtime owners. An owner who bought in the 1990s operated under a very different set of rules than what exists today. RSO rent caps, AB 1482 statewide protections, soft-story retrofit mandates, and Measure ULA have all added cost and complexity that did not exist when these owners acquired their buildings.
For owners who have been managing their own buildings for decades, the regulatory burden often reaches a tipping point where the hassle exceeds the reward. Our Ocean View deal illustrates this perfectly: a 30-year owner decided to sell after rent control expansion changed the long-term economics of holding the property.
The Transition to Passive Income
Many longtime owners are in their 60s, 70s, or 80s when they decide to sell. They are tired of tenant calls, maintenance emergencies, and property management. They want the income without the work. A 1031 exchange into DSTs or NNN properties gives them exactly that, which is why the majority of our longtime owner deals also involve a 1031 exchange. Six of our 28 longtime owner stories are also tagged as 1031 exchanges, and the actual overlap is likely higher, as many older deals pre-date our category tagging system.
Estate and Family Considerations
Some longtime owners sell because they are planning their estate and want to simplify their holdings. A single apartment building is harder to divide among multiple heirs than a portfolio of DST interests or NNN properties. Others sell because the next generation has no interest in managing rental property. The sale is as much about succession planning as it is about returns.
What Makes Longtime Owner Deals Different
The Emotional Component
A seller who bought a building 35 years ago has a relationship with that property that goes beyond economics. They may have personally managed it for decades. They know every tenant by name. The building may have been their primary wealth-building vehicle. Selling it is not a transaction. It is the end of an era.
This emotional attachment affects every aspect of the deal: pricing expectations (owners often believe their building is worth more than the market says), timeline preferences (they need time to process the decision), and deal structure (they care about who buys it and what happens to the tenants).
Massive Tax Exposure
After 25 to 40 years of appreciation plus fully depreciated cost basis, the capital gains tax exposure on a longtime hold is enormous. A building purchased for $500,000 in 1990 and sold for $3 million today creates $2.5 million in gain, plus depreciation recapture. At combined federal and California rates, the tax bill can exceed 35% of the gain.
This is why virtually every longtime owner sale we handle involves a 1031 exchange. The tax savings are too significant to ignore. In our Ocean View deal, the seller deferred $600,010 in capital gains taxes through a 1031 exchange into four DSTs.
Below-Market Rents Create Embedded Upside
Longtime owners who have been conservative with rent increases often have significant loss-to-lease, meaning the gap between current rents and market rents is substantial. This embedded upside is extremely attractive to value-add buyers. It also means the building's cap rate on current income does not reflect its true value.
Pricing a longtime owner's building requires showing both the current income picture and the achievable income picture. The buyer is paying for the upside, and the seller needs to understand that their below-market rents are actually an asset, not a liability.
The Longtime Owner Playbook
- Start the exchange conversation before listing. Identifying replacement properties, selecting a qualified intermediary, and understanding tax implications takes time. Do not wait until the building is in escrow.
- Get a current rent survey. If you have been raising rents at 3% annually for 30 years while the market moved 5 to 8% annually, your rents may be 30 to 50% below market. That gap is value. Quantify it before pricing.
- Budget for the emotional timeline. Longtime owners often need more time between receiving a BOV, deciding to list, and accepting an offer. Build that into the listing strategy.
- Consider the buyer's perspective. Your below-market rents, deferred maintenance, and tenant mix are all factors that buyers will underwrite. Present them proactively rather than letting the buyer discover them during due diligence.
- Explore DST and NNN options early. Our DST guide and NNN guide provide frameworks for evaluating passive replacement options. Start here before listing so you know what your exit looks like.
Browse all 28 longtime owner deal stories to see the full range of generational transitions we have facilitated.
Frequently Asked Questions
When is the right time for a longtime owner to sell?
Common triggers include depreciation exhaustion (after 27.5 years), expanding regulatory burden, desire to transition from active to passive income, estate planning needs, and personal fatigue with property management.
How much are capital gains taxes on a property held for 30+ years?
Combined federal and California capital gains taxes plus depreciation recapture can exceed 35% of the total gain. On a building purchased for $500,000 and sold for $3 million, that translates to roughly $875,000 in taxes without a 1031 exchange.
What is a DST and why do longtime owners choose them?
A Delaware Statutory Trust is a passive real estate investment that qualifies as a 1031 exchange replacement property. Longtime owners choose DSTs because they provide rental income without management responsibilities and defer all capital gains taxes.
Should I raise rents before selling my apartment building?
Not necessarily. Below-market rents create embedded upside that value-add buyers pay a premium for. Document the gap between current and market rents clearly so buyers can see the opportunity.