{"id":181867,"date":"2025-03-31T00:29:00","date_gmt":"2025-03-31T06:29:00","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=181867"},"modified":"2025-04-01T07:32:06","modified_gmt":"2025-04-01T13:32:06","slug":"multifamily-real-estate-looks-like-2012","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/multifamily-real-estate-looks-like-2012","title":{"rendered":"Wish You Bought Real Estate in 2012? A Similar Opportunity Just Arrived in Multifamily"},"content":{"rendered":"\n

After reaching an all-time high in 2007, single-family home prices collapsed 27.4% until <\/span>hitting<\/span> a low in 2012. Since then, the <\/span>Case-Shiller U.S. National Home Price Index<\/span><\/a> has exploded by 141.23%. <\/span><\/p>\n\n\n\n

Don\u2019t you wish you had a time machine and could buy a home at 2012 prices? <\/span><\/p>\n\n\n\n

You don\u2019t, and you can\u2019t, of course. But you can invest in another type of real estate that\u2019s coming off a similar <\/span>collapse in prices<\/span>. <\/span><\/p>\n\n\n\n

Multifamily<\/span><\/a> apartment building prices have fallen by 23.5% since reaching a peak in July 2022, <\/span>according to CoStar<\/span><\/a>. The Freddie Mac <\/span>Multifamily Apartment Investment Market Index<\/span><\/a> (AIMI) fell 28.1% before bottoming out and starting to rise again. <\/span><\/p>\n\n\n\n

And you don\u2019t need millions of dollars to invest in multifamily properties. You can invest fractionally with $5,000 and enjoy all the cash flow, appreciation, and tax benefits of ownership. <\/span><\/p>\n\n\n\n

Why Multifamily Looks Like It’s Bottomed Out<\/span><\/h2>\n\n\n\n

First, take a moment to remember the narrative around real estate in 2011-2012. The mood was bleak\u2014all you read were doom-and-gloom headlines, and the narrative was <\/span>all<\/span> negative. In other words, there was \u201cblood in the streets.\u201d <\/span><\/p>\n\n\n\n

Today, you are in the same mood in multifamily real estate. Investors are running scared after three years of capital calls and distressed sales. <\/span><\/p>\n\n\n\n

Every investor knows <\/span>the famous Warren Buffett’s<\/span> advice to \u201cbe fearful when others are greedy, and greedy when others are fearful.\u201d <\/span>But<\/span> the mood among investors is far from the only reason to consider multifamily right now.<\/span> <\/span><\/p>\n\n\n\n

Dropping construction starts<\/span><\/h3>\n\n\n\n

What drives market prices? Supply and demand\u2014and multifamily housing supply rose sharply between 2021-2025. <\/span><\/p>\n\n\n\n

But after peaking at 614,000 in late 2022, <\/span>multifamily unit housing starts<\/span><\/a> have dropped to 370,000 as of February. You can thank the \u201cblood in the streets\u201d for that. <\/span><\/p>\n\n\n\n

In 2024 alone, <\/span>new multifamily construction starts fell by 25%<\/span><\/a>. <\/span><\/p>\n\n\n\n

So yes, the U.S. saw a lot of housing construction post-pandemic. <\/span>But<\/span> that surge in new construction has passed and crashed, while the country remains in a housing shortage.<\/span> <\/span><\/p>\n\n\n\n

Continued housing shortage<\/span><\/h3>\n\n\n\n

A 2024 <\/span>report by Zillow<\/span><\/a> estimated that the U.S. is still short 4.5 million housing units. Most markets don\u2019t have to worry about an oversupply of housing<\/span>. Quite<\/span> the opposite. <\/span><\/p>\n\n\n\n

Rising rents<\/span><\/h3>\n\n\n\n

Multifamily prices are calculated based on rental income. And rents keep rising faster than inflation. <\/span>In fact,<\/span> rents are one of the primary drivers of inflation. As of February, rents nationwide are <\/span>up 4.2% year over year<\/span><\/a>. <\/span><\/p>\n\n\n\n

Rising prices<\/span><\/h3>\n\n\n\n

After hitting a low in 2024, multifamily prices have started rising again. <\/span><\/p>\n\n\n\n

The Commercial Property Price Index (CPPI) index, calculated by MSCI Real Capital Analytics, shows multifamily properties hitting a <\/span>low in February 2024<\/span><\/a>, leveling out over the next few months, and rising since. <\/span><\/p>\n\n\n\n

The CPPI also shows multifamily prices far below their long-term trend line:<\/span><\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

That means they have some serious catching up <\/span>to do<\/span>, marking now as the perfect time to buy into the market.<\/span><\/p>\n\n\n\n

Multifamily cap rates are starting to compress <\/span>again<\/span><\/h3>\n\n\n\n

After seeing how low they could go in 2021, multifamily cap rates expanded sharply from 2022-2023. <\/span>But<\/span> in 2024, they stabilized, and in the second half of the year started shrinking again, according to the <\/span>CBRE\u2019s 2024 Cap Rate Survey<\/span><\/a>.<\/span><\/p>\n\n\n\n

As a refresher, cap rates are the other part of the price equation for commercial real estate. You divide a property\u2019s <\/span>net operating income<\/span><\/a> (NOI) by the <\/span>cap rate<\/span><\/a> to <\/span>come up with<\/span> the value. <\/span><\/p>\n\n\n\n

Lower cap rates mean higher prices. So, one of the drivers of rising multifamily prices is cap rates turning around and compressing again. <\/span><\/p>\n\n\n\n

How to Invest in Multifamily Without Betting the Farm<\/span><\/h2>\n\n\n\n

I get it: There\u2019s a lot of uncertainty in all financial markets <\/span>right now<\/span>, real estate included. <\/span>The <\/span>Trump tariffs <\/span>and trade wars<\/span><\/a>, as well as<\/span> recession uncertainty<\/span>, <\/span>all make for fearful investors.<\/span> So, how can you invest in multifamily while keeping your risk in check? <\/span><\/p>\n\n\n\n

Invest small amounts<\/span><\/h3>\n\n\n\n

If you invest in a multifamily syndication yourself, it typically requires a minimum investment of $50,000 to $100,000. I don\u2019t like that. So, I go into these investments with other people through a co-investing club. <\/span><\/p>\n\n\n\n

It\u2019s how I practice <\/span>dollar-cost averaging<\/span><\/a> with my real estate investments, steadily investing $5,000 each month. <\/span><\/p>\n\n\n\n

Protect against recession <\/span>risk<\/span><\/h3>\n\n\n\n

Some investments are recession-resilient, continuing to thrive even during downturns. <\/span><\/p>\n\n\n\n

For example, I\u2019ve invested in mobile home parks with tenant-owned homes. <\/span>If a renter has to choose between paying a $500 lot rent and <\/span>paying<\/span> $6,500 to move their mobile home, <\/span>which do you think they\u2019ll<\/span> pay?<\/span> <\/span><\/p>\n\n\n\n

Likewise, I\u2019ve invested in multifamily properties that get a property tax abatement for setting aside 50% of their units for affordable housing. Those units have a waiting list\u2014imagine how much more the demand would rise in a recession.<\/span><\/p>\n\n\n\n

Here are other <\/span>recession-resilient real estate investments<\/span><\/a> for more examples.<\/span><\/p>\n\n\n\n

Don\u2019t count on compressing cap <\/span>rates<\/span><\/h3>\n\n\n\n

The trend line looks positive for cap rates compressing again. But I\u2019m still not counting on that for the success of my investments. <\/span><\/p>\n\n\n\n

In my<\/span> club<\/span>, we generally like<\/span> to see strong cash flow in the multifamily investments we vet.<\/span> We <\/span>like<\/span> collecting distributions, like properties that don\u2019t rely on price improvements for returns. <\/span><\/p>\n\n\n\n

With strong cash flow, the operator (and you) can sit back and hold the property long term, waiting out rough patches\u2014all while collecting plenty of rental income. <\/span><\/p>\n\n\n\n

Diversify with other property <\/span>types<\/span><\/h3>\n\n\n\n

Yes, it <\/span>looks like<\/span> a great time to buy multifamily properties.<\/span> But you should look to diversify your portfolio. That includes <\/span>taking a look<\/span> at industrial properties, mobile home parks, raw land, hotels, and vacation rentals. <\/span><\/p>\n\n\n\n

I don\u2019t have a crystal ball, so I can\u2019t predict the next hot asset class. <\/span>And I don\u2019t have to because I invest in <\/span>so many different types of<\/span> properties.<\/span> <\/span><\/p>\n\n\n\n

Diversify across states<\/span><\/h3>\n\n\n\n

I have cash tied up in over 30 properties across 13 states and counting. <\/span><\/p>\n\n\n\n

Again, no one knows where the next \u201chot\u201d market will be. Who cares? Spread your money across many geographical markets, and you\u2019ll catch some <\/span>of the<\/span> hot ones. <\/span><\/p>\n\n\n\n

Diversify across other passive <\/span>investments<\/span><\/h3>\n\n\n\n

Syndications are just one <\/span>type of<\/span> passive real estate investment but aren\u2019t the only option.<\/span> You can also invest in <\/span>private partnerships<\/span><\/a>, private notes, secured debt funds, and real estate equity funds. That also helps you invest for different timelines, including some investments as short as nine months. <\/span><\/p>\n\n\n\n

Final Thoughts<\/span><\/h2>\n\n\n\n

Multifamily properties experienced a bear market from 2022-2024, along with the losses and fear that come with them.<\/span><\/p>\n\n\n\n

The bottom of a bear market doesn\u2019t look and feel optimistic yet. The press and mood remain <\/span>mostly<\/span> negative at the bottom before it becomes <\/span>obvious<\/span> to everyone a new bull market is starting. That\u2019s precisely the time to buy in. <\/span><\/p>\n\n\n\n

As someone who invests steadily every month, I don\u2019t advocate trying to time the market. But as far as I can tell, most market metrics <\/span>are signaling<\/span> the bottom of the bear market and the beginning of a new bull market in multifamily. <\/span><\/p>\n\n\n\n

It doesn\u2019t feel like the giant party that it was in 2021. And that\u2019s precisely what makes it a better time to buy.<\/span><\/p>\n\n\n\n

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