Julian Bloch

Senior Director, Multifamily & Retail Investments · Kingside Investment Group

How Do I Cash Out of My LA Apartment Building?

Cash out of a Los Angeles apartment building by selling, refinancing, or selling a partial interest. A 1031 exchange can defer eligible tax while moving equity into replacement property; a seller carryback pays part of the price over time. Compare the cash, costs and ongoing obligations. Julian Bloch, Senior Director, Multifamily & Retail Investments at Kingside, handles apartment building sales for Los Angeles owners, (415) 250-7365.

By Julian Bloch, Senior Director, Multifamily & Retail Investments, DRE #02043055, (415) 250-7365 | Published November 10, 2026 at 10:00 a.m. Pacific Standard Time

Which cash-out route fits your goal?

Outright sale. Start with the cash you need and the obligations you want to leave behind. A sale can turn the building into cash at closing after the loan and closing obligations are paid. You give up ownership and future property income, and taxable gain must be estimated separately from the loan balance. The price is only the starting point: contract allocations, debt terms and your tax basis determine the amount available for your next purpose. A clean exit can suit an owner who no longer wants the building's responsibilities, provided the projected proceeds meet the owner's needs.

Cash-out refinance. A new loan can return some equity while you retain ownership, control and the building's future income and obligations. The new debt service and lender's approval limit what is practical. In its multifamily guide, checked November 1, 2026, Fannie Mae measures debt coverage using underwritten net cash flow divided by annual debt service, with a level amortizing payment at the greater of the note rate or underwriting floor. Agency standards are examples; your lender decides its own terms. The IRS explains in Publication 334, its small business tax guide, that borrowed money from a bona fide loan is not income. IRS Publication 544 explains that liabilities can count in the amount realized on a later sale. Both were checked November 1, 2026. Refinancing does not erase a built-in gain; a large loan can leave less cash to pay tax when you eventually sell. Compare the choices in selling versus refinancing an LA apartment building.

Sale with a 1031 exchange. An exchange can defer eligible gain by moving proceeds into qualifying replacement real estate, rather than putting all of the sale proceeds into your pocket. You remain exposed to real estate ownership and must coordinate the transaction before receiving proceeds. Cash or other non-like-kind property received can be taxable. The IRS Form 8824 instructions, checked November 1, 2026, describe the requirements; ask your CPA and exchange professional about timing and replacement-property rules before signing. See the LA apartment building 1031 exchange guide for the process. An exchange is not a listed Measure ULA exemption, according to the City of Los Angeles, checked November 1, 2026.

Seller carryback or installment sale. You sell the building but finance part of the price for the buyer, receiving a down payment and future payments under the note. That can spread receipts and, depending on the facts, some gain recognition, but you take on payment and collateral risk and do not have the full price available at closing. The 2026 FTB Form 593 instructions, checked November 1, 2026, state that installment sale withholding is generally 3 1/3% of the down payment in escrow, followed by buyer withholding on principal in later payments unless the FTB approves an election out. Check that the down payment covers the allocated transfer taxes, loan payoff and costs. The IRS installment sale guide, checked November 1, 2026, explains that depreciation recapture income, if any, is reported in the year of sale. Ask counsel to review security, default remedies and servicing. See the guide to seller carrybacks for LA apartment buildings.

Partial interest or partner buyout. A partner or new investor may buy an interest, giving the departing owner cash while others retain an ownership stake. The price and available cash depend on the interest and agreement; a remaining owner shares control and future risk under revised documents. Ask counsel to review consent, decision rights, future capital calls, exit terms, ULA and reassessment for the actual structure. Entity transfers can raise transfer-tax questions, as the California Supreme Court's North Ardmore decision, checked November 1, 2026, illustrates. In the hypothetical sale below, $2,826,400 remains after assumed tax; a partial sale must be evaluated against the cash and risk retained.

What does a sale leave after costs and tax?

Build a proceeds waterfall before comparing a sale with borrowing or a partner transaction. The following is a hypothetical example, not a quote, tax calculation or estimate for a particular property. It assumes a City of Los Angeles building, a sale with no lien remaining after payoff, no exemption, and the seller bearing the listed transfer taxes under the contract. Other costs and taxes are illustrative assumptions, not market rates.

• Sale price: $6,000,000.
• Less loan payoff: $2,000,000; assumed prepayment charge: $100,000.
• Less City base transfer tax: $27,000; County transfer tax: $6,600; Measure ULA: $240,000.
• Less assumed escrow, title and brokerage together: $200,000.
• Estimated cash before income tax and withholding: $3,426,400.
• Less assumed total income tax on gain, including any applicable depreciation-related tax: $600,000.
• Illustrative after-tax proceeds: $2,826,400.

The tax assumption is deliberately a placeholder. Give your CPA your adjusted basis, selling expenses and depreciation records to calculate the gain. See our guide to tax on selling a California apartment building. The IRS capital gains guidance, checked November 1, 2026, describes a maximum rate for unrecaptured section 1250 gain; it is not a flat rate on every sale. California FTB guidance, checked November 1, 2026, explains that California taxes capital gains as ordinary income. An owner with a small loan can still have a large taxable gain, and an owner with a large loan can have little cash left after payoff.

For closings after June 30, 2026, the City Office of Finance, checked November 1, 2026, lists ULA at 4% on the whole transaction value above $5,400,000 and below $10,900,000, and 5.5% at $10,900,000 or more. City base tax is $2.25 per $500 or part thereof; the County schedule, checked November 1, 2026, lists $0.55 per $500. See the Measure ULA guide for more detail. These City rules do not apply throughout the county. Check the property's jurisdiction and contract allocation. The example applies those City and County rates to a $6,000,000 sale with no lien remaining.

Separate closing cash from final tax. The 2026 FTB Form 593 instructions, checked November 1, 2026, describe withholding generally calculated at 3 1/3% of the price or under an elected alternative calculation, subject to exemptions. If the standard calculation applied in the example, $200,000 would be withheld at closing, leaving $3,226,400 before the remaining income tax is settled. Withholding is a credit against California tax, not another expense to subtract on top of the $600,000 assumed final tax. The final amount due or refunded depends on the return. See how Form 593 withholding affects an LA building sale.

How can the existing loan change the decision in Los Angeles?

Get a written payoff figure and review the note before relying on an offer. A prepayment charge, yield maintenance or defeasance requirement can change the net amount. The Fannie Mae guide, checked November 1, 2026, describes prepayment provisions for its loans; the actual documents and lender determine your obligation. Ask whether a lockout or other restriction affects the proposed closing and what it costs to satisfy the loan.

A buyer's loan assumption may be an alternative to paying off the debt, but approval and conditions matter. Freddie Mac's transfer guide, checked November 1, 2026, describes consent and review requirements for its loans. City guidance says an assumed loan remains in ULA's gross value even though the City base tax is calculated differently. Compare the net price, buyer qualification and timing under both structures. In the waterfall above, the assumed prepayment charge alone reduces proceeds by $100,000.

How should a Los Angeles owner choose?

Start with what you need the cash from your Los Angeles building to do and when you need it. If you need funds for a particular obligation, compare the amount available when it is needed, not just the nominal value of a note or replacement property. If your goal is to stop managing an investment, retaining a partial interest or refinancing may leave responsibilities you intended to end. If you want to retain exposure, weigh those responsibilities against the building's income and your capacity to carry new debt.

Next, examine what the property earns after operating expenses and debt service, using current records and realistic future obligations. In our hypothetical, a sale leaves $2,826,400 after tax. A refinance leaves you owning the building and its debt; compare the new payment with what the building earns after operating expenses, and compare what the $2,826,400 would earn elsewhere after tax. An outright sale gives up future income; a carryback substitutes a buyer's payment obligation for the building. Compare the risks, liquidity and control in each scenario, including what happens if income or payments fall short.

Finally, bring partners or family into the decision early. Review ownership documents, each person's need for liquidity, agreement on price and whether anyone wants to remain invested. Give your CPA the acquisition and improvement records, depreciation schedules and proposed terms. Start the comparison with the hypothetical $2,826,400, then update it with your actual figures.

Timing follows the route you choose:

1. Request a payoff and compare the written terms for a sale, refinance or partner transaction.
2. For a sale, set the escrow and contingency periods in the offer and ask for the lender's document request date in writing. Escrow length is a contract term.
3. For a 1031 exchange, identify replacement property within 45 days after transfer and receive it within 180 days or the return due date including extensions, whichever is earlier, under the IRS instructions checked November 1, 2026.

Frequently Asked Questions

About Julian Bloch

Julian Bloch is Senior Director, Multifamily & Retail Investments, and a California real estate salesperson, DRE #02043055. Call (415) 250-7365.

This article provides general information, not tax, legal or lending advice. Consult your CPA and attorney about your circumstances.

Sources

• City of Los Angeles Office of Finance, Measure ULA FAQ, checked November 1, 2026.
• Los Angeles County documentary transfer tax, checked November 1, 2026.
• FTB Form 593 instructions and capital gains guidance, checked November 1, 2026.
• IRS Publication 334, IRS Publication 544, Publication 537, Form 8824 instructions and Topic 409, checked November 1, 2026.
• California Supreme Court, North Ardmore, Fannie Mae prepayment guide, Freddie Mac transfer guide and Fannie Mae debt coverage guide, checked November 1, 2026.