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For Heirs, Trustees & Executors
Inherited an Apartment Building in San Diego? Your Options
You have three realistic paths: keep the building, sell it, or exchange it into something easier to own. Which one fits depends on whether the building passes through a trust or probate, how your property taxes and tax basis change, and whether every heir agrees. Start with a date-of-death valuation.
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Last updated October 2026. This guide is for heirs, successor trustees and executors who now control a San Diego apartment building. It covers what to do first, how trusts and probate affect a sale, what happens to property taxes under Prop 19, how the step-up in basis works, and how to compare keeping, selling or exchanging.
This is general information, not legal or tax advice. I am a licensed real estate professional, not an attorney or CPA, and I work alongside your estate attorney and tax advisor.
YOUR OPTIONS
What Are My Options After Inheriting an Apartment Building?
Most heirs choose one of four paths. The right one depends on how much management you want, cash flow after the reassessed tax bill, and whether every heir wants the same outcome.
Keep It as a Rental
Best when you want long-term rental income and the numbers still work at the new, reassessed property tax bill. Watch for deferred maintenance in long-held buildings, and for co-heirs who would rather have cash.
Sell It
Best when heirs want to divide the proceeds cleanly or no one wants to be a landlord. Because of the step-up in basis, a sale near the date-of-death value often triggers little capital gains tax. Probate rules control how the sale is approved.
Exchange It (1031)
Best when you want to stay invested in real estate but own something newer or easier to manage. Strict 45- and 180-day deadlines apply. A Delaware Statutory Trust (DST) is a passive option, but you give up control. See how 1031 exchanges work.
Buy Out the Other Heirs
Best when one heir wants to keep the building and the others want cash. A neutral, documented valuation gives everyone the same number to negotiate from, and is often what gets families to agreement.
FIRST STEPS
What Should I Do First After Inheriting an Apartment Building?
Protect the building and its income, collect the records, and get a valuation. Hold off on big decisions (evictions, major renovations, rent overhauls) until you have legal authority and advice.
Find out how the building is held.
If it is in a living trust, the successor trustee usually manages and sells it without going to court. If it was titled in the owner's name alone, expect probate.
Keep it insured, running and documented.
Notify the insurance carrier, keep rent flowing into the estate or trust account, and keep the property manager in place. Gather the rent roll, leases, security deposit records and two years of expenses. Buyers will ask for all of them.
File with the County Assessor within 150 days.
The Change in Ownership Statement for a deceased owner (form BOE-502-D) is due within 150 days of the date of death.
Get a date-of-death valuation.
It sets your tax basis, gives co-heirs a neutral number, and shows what each option is actually worth.
PROBATE VS. TRUST
Does an Inherited Apartment Building Go Through Probate?
If the building was held in a living trust, usually not. If it was titled in the owner's name alone, nearly every apartment building is worth more than California's small-estate limit ($208,850 for deaths on or after April 1, 2025), so probate is normally required. Here is how each kind of sale is approved:
Trust sale.
The successor trustee signs and sells without court approval, guided by a fiduciary duty to the beneficiaries. For buyers, it works like a normal sale.
Probate with full IAEA authority.
The executor gives heirs a Notice of Proposed Action at least 15 days before the sale, and heirs can object. If no one does, the sale proceeds much like a normal sale.
Probate with court confirmation.
A judge confirms the sale at a hearing. The offer must be at least 90% of the probate referee's appraisal, and other buyers can overbid in court. The first overbid must beat the accepted offer by 10% of the first $10,000 plus 5% of the rest.
What it means for pricing.
Court-confirmed sales favor buyers who can close without contingencies. Your probate attorney decides which path applies; my job is to price the building correctly and bring buyers who can close on those terms.
TAXES AT INHERITANCE
Will My Property Taxes Go Up When I Inherit a Rental Building?
Usually, yes. Since Proposition 19 took effect on February 16, 2021, the parent-to-child exclusion only covers a family home that becomes the child's own principal residence. An apartment building is not covered, so it is reassessed to market value as of the date of death. The key numbers:
2021
Prop 19 took effect (Feb 16)
150 days
To file BOE-502-D with the Assessor
$208,850
CA small-estate limit (2025)
§1014
Tax basis resets to date-of-death value
What most heirs don't realize: reassessment matters most if you keep the building, not if you sell. Every buyer's taxes reset to their purchase price anyway, so a higher assessment does not lower what a buyer will pay. It can sharply cut cash flow if you hold.
Step-up in basis: under IRC §1014, inherited property generally takes a new tax basis equal to its fair market value at the date of death. Selling near that value usually means little or no capital gain, and the prior owner's depreciation generally does not carry over. In California, community property can get a step-up on both halves when the first spouse dies. That is why a 1031 exchange is often less urgent right after an inheritance than people assume. Confirm with your CPA. How 1031 exchanges work →
WHEN HEIRS DISAGREE
What If the Heirs Don't Agree?
It is common: one sibling wants to keep the building and another wants cash. Usual solutions are a buyout at an agreed value, selling and splitting the proceeds, or keeping the building under a written co-ownership agreement.
If a co-owner goes to court, California's Partition of Real Property Act (for actions filed on or after January 1, 2023) gives the other co-owners a chance to buy out the co-owner who asked for partition. If the court orders a sale, it is generally an open-market sale through a licensed real estate broker, at no less than the value set by an independent appraiser.
Court is slow and expensive, so most families are better off agreeing on a value early.
✓ What helps families agree
A neutral, documented valuation that every heir sees at the same time, plus clear numbers for each option (keep, sell, exchange or buy out) using actual rents and the reassessed tax bill.
! Where caution applies
Avoid big moves before you have legal authority: no evictions, major renovations or rent overhauls. Have your attorney confirm title and authority before anyone signs a listing agreement.
5.15%
Avg cap rate, Q3 2026
$376,000
Avg price per unit
$388
Avg price per sq ft
12.2
Avg gross rent multiplier
What San Diego apartment buildings are trading at right now (Q3 2026, SCC analysis of CoStar data). A date-of-death valuation starts from these numbers, then adjusts for your building's rents, condition and location. See current San Diego apartment cap rates for the full breakdown.
SELL OR KEEP?
Should I Sell or Keep an Inherited Apartment Building?
There is no universal answer. These signs tend to point one way or the other.
Lean toward selling if:
-
Heirs want a clean split of the proceeds
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No one wants to manage tenants, repairs or the books
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Cash flow is thin after the reassessed tax bill
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The building needs work you don't want to fund
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Heirs disagree and a sale is the fairest outcome
Lean toward keeping if:
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An heir wants to own and run it, or will hire a manager
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Cash flow still works at the new property tax bill
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You want long-term income more than a lump sum
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All heirs agree, ideally in writing
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The building is in good condition with clean records
Can you sell with tenants in place? Yes. Most San Diego apartment buildings sell occupied, and leases and security deposits transfer to the buyer. In the City of San Diego, no-fault terminations require relocation assistance of two months' rent (three for seniors and tenants with disabilities), and statewide AB 1482 caps annual increases on most buildings over 15 years old at 5% plus inflation, up to 10%. Don't try to empty the building before selling. The best first step is a confidential valuation.
HOW I HELP
How I Help Heirs, Trustees and Executors
Long-held buildings usually come with below-market rents, deferred maintenance and thin records. Each cuts both ways: documented rent upside is something buyers pay for, and disclosed repairs cost less than surprises. I provide a confidential date-of-death market analysis your attorney and CPA can use alongside any formal appraisal, side-by-side numbers for keeping, selling or exchanging, and qualified apartment buyers who can close on trust or probate terms. Since 2014, I have closed $150M+ in San Diego apartment sales. See my case studies, recent sales and how I sell apartment buildings.
COMMON QUESTIONS
Inherited Apartment Buildings: Quick Answers
Do I have to sell an inherited apartment building right away?
No, there is no legal deadline to sell. The practical clocks are the reassessed property taxes, ongoing expenses, and, if the estate is in probate, the estate's own timeline. The County Assessor filing (BOE-502-D) is due within 150 days of the date of death either way.
Do I pay capital gains tax when I sell an inherited apartment building?
Generally, only on gain above your stepped-up basis, which is the building's fair market value at the date of death. Selling close to that value usually produces little or no taxable gain. Confirm your situation with a CPA.
Can the executor sell the building before probate closes?
Usually, yes. With full authority under California's Independent Administration of Estates Act, the executor gives heirs a Notice of Proposed Action at least 15 days before the sale. Otherwise, the court confirms the sale at a hearing, where the offer must be at least 90% of the probate referee's appraisal and other buyers can overbid.
Will my property taxes go up if I keep the building?
Usually, yes. Under Proposition 19, a rental property inherited from a parent is reassessed to its market value as of the date of death. Only a family home that becomes the heir's principal residence qualifies for the parent-child exclusion.
Do the tenants have to move out before the building is sold?
No. Leases and security deposits transfer with the building, and most San Diego apartment buildings sell occupied. In the City of San Diego, no-fault terminations require relocation assistance under the Tenant Protection Ordinance.
What does a valuation cost?
It is free and confidential. I review the rent roll, condition and recent comparable sales, and give you a realistic value range you can share with co-heirs, your attorney and your CPA.