Multifamily vs. Mixed-Use: Which Investment Fits You Best?
PIVOT Research Team
Apartment buildings and mixed-use buildings are two of the most common investments in Los Angeles. Both can perform well, but they carry different risks and require different kinds of management. Here is how they compare.
Multifamily
Apartment buildings produce income from many residential tenants, so one vacancy rarely hurts much. Demand for housing in Los Angeles is steady, and financing for apartment buildings is widely available.
Things to check:
- Rent control. In the City of Los Angeles, the Rent Stabilization Ordinance (RSO) generally covers rental units in properties first built on or before October 1, 1978. Covered units have limits on rent increases.
- Utility metering. Buildings that are separately metered for gas and electric pass those costs to tenants, which helps expenses.
- Unit mix and upside. Compare current rents to market rents to see if there is room to grow income over time.
Recent PIVOT multifamily deals include a 24-unit building in Van Nuys, a 16-unit building and an 8-unit building in North Hollywood, and a 22-unit building in Boyle Heights.
Mixed-use
Mixed-use buildings combine ground-floor retail or office with apartments above. The commercial space can add income and diversify risk, and street-level retail can make a building more visible and valuable.
Things to check:
- The commercial tenants. Their lease terms, credit and remaining term matter a lot. A vacant storefront can take longer to fill than an apartment.
- Financing. Lenders may treat mixed-use differently from pure apartment buildings depending on how much of the income comes from commercial space.
- Rent control still applies. In the City of LA, the RSO can cover residential units attached to a commercial building.
Which fits you?
If you want simpler management and steady demand, multifamily is often the cleaner choice. If you are comfortable managing commercial leases and want more diversified income, mixed-use can work well. Many investors use a 1031 exchange to move between the two.
Talk to our team about your goals on our Multifamily & 1031 Exchanges page, or contact us.
This article is general information, not legal or tax advice.
