08/13/2026 - Multifamily Investing in a Distressed Market

This CG Legacy coaching call focuses on how multifamily investors can capitalize on current market distress through disciplined underwriting, aggressive offers, smart debt structures, and long-term ownership. The discussion covers current cap rates, renovation returns, workforce housing opportunities, low-rate debt assumptions, preferred returns, and strategies for buying assets at a low basis while many existing owners face financial pressure.

What This Call Covers

• Buying in a Distressed Multifamily Market
  • Rising interest rates, insurance costs, and operating expenses are putting pressure on existing owners
  • Thin NOI and higher cap rates are pushing property values lower
  • More sellers and brokers are actively looking for buyers, creating opportunities for well-capitalized investors
  • The current environment favors buyers who can be patient and disciplined
• Making Aggressive Offers
  • Submit a high volume of offers rather than waiting for the “perfect” deal
  • Don't be afraid to offer significantly below asking price when the numbers justify it
  • Support offers with actual income, expenses, cap rates, financing costs, and investor return requirements
  • Low offers can uncover motivated sellers who prioritize certainty and speed
• Underwriting With Today's Cap Rates
  • The call discusses using approximately an 8% cap rate for B-class multifamily in the current environment
  • Higher cap rates can create substantially lower valuations than sellers may expect
  • Underwrite based on today's economics rather than previous market valuations
• Finding Profitable Renovations
  • Measure renovations based on the additional annual rent generated
  • Example: a $10K renovation generating $300/month in additional rent produces a 36% annual return
  • Target renovations that generate at least a 20% return on renovation cost
• Targeting Workforce Housing
  • Focus on C+ through B+ multifamily rather than oversupplied luxury apartments
  • Look for properties around $50K–$70K per door when possible
  • Buying substantially below replacement cost can provide a strong long-term basis
  • Maintain occupancy by offering competitive rents rather than always pushing maximum rent
• Building a Long-Term Hold Strategy
  • Evaluate acquisitions using a 30-year ownership test
  • Prioritize properties you'd be comfortable owning through multiple market cycles
  • Buy at a low basis and focus on sustainable occupancy and cash flow
  • Re-syndication can provide another option for returning investor capital when refinancing doesn't generate enough proceeds
• Structuring Debt Carefully
  • Assuming existing low-rate debt can create substantial interest savings versus new financing
  • Compare those savings against the risk of an approaching balloon payment
  • Fixed-rate debt is generally preferred for predictability
  • If using variable-rate debt, make sure rate-cap protection covers the full loan term
• Structuring Investor Preferred Returns
  • Consider an 8–10% preferred return
  • Split the return between current distributions and accrued payments at exit
  • This can preserve property cash flow while maintaining an attractive investor return structure
• Key Takeaway
  • Current multifamily distress can create strong buying opportunities for investors willing to make aggressive offers, underwrite conservatively, buy below replacement cost, structure debt carefully, and hold quality workforce housing for the long term.