5+ Unit Commercial Investment and NNN Investments

5+ Unit Commercial Investment and NNN Investments

The Southern California small and mid-sized apartment sector is showing renewed momentum in 2025—even as the market adjusts to higher borrowing costs and shifting renter demand. Investors evaluating 5–30 unit properties are seeing improved negotiating leverage, clearer pricing, and stronger cash flow opportunities than in prior years.

Below is a breakdown of current market conditions, rent performance, pricing, and investor profiles for Los Angeles County and Orange County.

Los Angeles County

Los Angeles County’s 5–30 unit apartment market remains resilient, offering a blend of value-add and stabilized investments across both urban cores and emerging neighborhoods.

As of mid-2025, average asking rents are near $2,275 per unit, helping offset higher vacancies of 4.7%–5.5% and elevated cap rates averaging 5.5%–6%.

Median pricing has softened slightly, with properties trading between $218,000–$270,000 per unit. This has reopened opportunities for buyers focused on cash flow, repositioning, and ADU or renovation strategies.

Strong rental demand persists in Koreatown, the Westside, and the San Fernando Valley, while value-add potential remains in Eastside and South Los Angeles submarkets.

Orange County

Orange County continues to attract investors prioritizing long-term stability, premium tenants, and lower operational risk.

Vacancy rates remain low at 3%–4%, with average rents ranging from $2,800–$3,200 per unit. Cap rates trend slightly lower at 4.2%–5%, reflecting the region’s stability and strong tenant base.

Typical pricing for 5–30 unit assets falls between $290,000–$340,000+ per unit, with coastal and prime submarkets commanding premiums.

Santa Ana, Anaheim, and Costa Mesa currently offer the best blend of price accessibility and rent growth, while cities like Huntington Beach and Irvine remain prized for fundamentals despite lower yields.

What Is a NNN Investment?

A NNN (Triple Net) lease structure requires the tenant to pay:

• Property taxes on the premises
• Property insurance premiums
• Common area maintenance and operating expenses (CAM/OPEX), including repairs, landscaping, parking, trash, and shared utilities

In addition, the tenant pays base rent under a long-term commercial lease, typically 7–25 years, often with options and scheduled rent increases. In practice, the owner receives a single rent payment that conceptually includes both base rent and NNN reimbursements.

Key Benefits to the Owner

• Predictable, cleaner cash flow: Expense volatility is largely passed through to the tenant, protecting NOI.
• Lower management burden: Day-to-day operations and CAM responsibilities are typically handled by the tenant.
• Long-term, bond-like income: Extended lease terms with built-in rent bumps provide income visibility and inflation protection.
• Strong resale appeal: NNN assets—especially with credit tenants—trade efficiently and often command tighter cap rates.

Practical Example

A common profile is a single-tenant retail property leased to a national tenant on a 15-year NNN lease with annual 1–2% rent increases. The tenant covers taxes, insurance, and maintenance, leaving the owner with near-passive net income aside from limited structural responsibilities.

Recent Commercial / Multifamily Transactions

What Investors Should Know

• Los Angeles County: Higher cap rates and softening prices create better entry points for repositioning strategies.
• Orange County: Lower risk, long-term stability, and premium tenant profiles justify tighter pricing.
• Across Southern California: Cap rate expansion has improved leverage for disciplined buyers.