{"id":185949,"date":"2025-12-05T11:54:46","date_gmt":"2025-12-05T18:54:46","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=185949"},"modified":"2025-12-05T11:54:48","modified_gmt":"2025-12-05T18:54:48","slug":"rent-spikes-are-a-thing-of-the-past-but-investors-can-look-forward-to-a-stable-multifamily-market-instead","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/rent-spikes-are-a-thing-of-the-past-but-investors-can-look-forward-to-a-stable-multifamily-market-instead","title":{"rendered":"Rent Spikes are a Thing of the Past\u2014But Investors Can Look Forward to a Stable Multifamily Market Instead"},"content":{"rendered":"\n<p><em><span data-preserver-spaces=\"true\">This article is presented by <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.connectinvest.com\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Connect Invest<\/span><\/a><span data-preserver-spaces=\"true\">.<\/span><\/em><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">\u201cPredictable\u201d isn\u2019t exactly the most exciting qualifier for a real estate market, but it\u2019s the exact word that investors in the <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/finding-multifamily-properties\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">multifamily<\/span><\/a><span data-preserver-spaces=\"true\"> sector have been longing to hear for years. <\/span><span data-preserver-spaces=\"true\">The era of <\/span><span data-preserver-spaces=\"true\">huge<\/span><span data-preserver-spaces=\"true\"> market <\/span><span data-preserver-spaces=\"true\">upheavals<\/span><span data-preserver-spaces=\"true\"> brought by the pandemic seems to be finally, truly over, with rent growth and supply-and-demand balance returning to pre-pandemic <\/span><span data-preserver-spaces=\"true\">patterns<\/span><span data-preserver-spaces=\"true\">.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">It can be <\/span><span data-preserver-spaces=\"true\">difficult<\/span><span data-preserver-spaces=\"true\"> to accept, but the fact is that the 2% rent growth rate by 2027\u2014a <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.credaily.com\/briefs\/multifamily-forecast-signals-market-stabilization-by-2027\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">prediction<\/span><\/a><span data-preserver-spaces=\"true\"> from Yardi Matrix executives Jeff Adler and Paul Fiorilla\u2014is in line with <\/span><span data-preserver-spaces=\"true\">normal<\/span><span data-preserver-spaces=\"true\">, pre-pandemic rates. In fact, this is what the real estate market <\/span><em><span data-preserver-spaces=\"true\">should <\/span><\/em><span data-preserver-spaces=\"true\">look like. Here\u2019s why.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Why \u201cSlow But Stable\u201d Isn\u2019t a Bad Thing<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">The double-digit growth rates of 2021 will not return <\/span><span data-preserver-spaces=\"true\">again<\/span><span data-preserver-spaces=\"true\">; these were a historical anomaly brought about by a singular convergence of factors, namely:&nbsp;<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Pent-up demand from people who could not buy a home during lockdowns.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">An unprecedented housing shortage caused by people not selling, and a lack of building supplies <\/span><span data-preserver-spaces=\"true\">disrupting<\/span><span data-preserver-spaces=\"true\"> new construction.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Brand-new migration patterns <\/span><span data-preserver-spaces=\"true\">creating<\/span><span data-preserver-spaces=\"true\"> housing hot spots.<\/span><\/li>\n<\/ul>\n\n\n\n<p><span data-preserver-spaces=\"true\">None of these conditions were ever meant<\/span><span data-preserver-spaces=\"true\"> to last, but many investors understandably were building their business <\/span><span data-preserver-spaces=\"true\">strategy<\/span><span data-preserver-spaces=\"true\"> around these anomalous market spikes.<\/span><span data-preserver-spaces=\"true\"> For a few years, an investment plan along the lines of \u201cThis metro area has the highest rental growth right now\u201d could deliver impressive short-term results.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">What was wrong with this picture? Nothing, on the surface of it, in terms of aligning your strategy with market conditions. <\/span><span data-preserver-spaces=\"true\">But <\/span><span data-preserver-spaces=\"true\">there was<\/span><span data-preserver-spaces=\"true\"> another variable aside from rental growth fluctuations <\/span><span data-preserver-spaces=\"true\">that<\/span><span data-preserver-spaces=\"true\"> began creating an imbalance: construction.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Construction booms inevitably cooled red-hot markets, most notably Austin\u2019s, which \u201cwent from red-hot to best avoided in the blink of an eye,\u201d according to <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.bloomberg.com\/opinion\/articles\/2025-10-27\/austin-s-housing-bust-is-just-what-america-needs\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Bloomberg<\/span><\/a><span data-preserver-spaces=\"true\">, as a direct result of its post-pandemic-era construction surge.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">It seems like there\u2019s nothing positive here, but there is.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">We know that <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.upjohn.org\/research-highlights\/new-construction-makes-homes-more-affordable-even-those-who-cant-afford-new-units\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">new construction lowers the overall cost of housing<\/span><\/a><span data-preserver-spaces=\"true\"> across a metro area, including <\/span><span data-preserver-spaces=\"true\">old<\/span><span data-preserver-spaces=\"true\"> inventory. <\/span><span data-preserver-spaces=\"true\">This<\/span><span data-preserver-spaces=\"true\"> kick-starts a game of musical chairs of sorts: <\/span><span data-preserver-spaces=\"true\">An<\/span><span data-preserver-spaces=\"true\"> overall <\/span><span data-preserver-spaces=\"true\">fall<\/span><span data-preserver-spaces=\"true\"> in home prices means <\/span><span data-preserver-spaces=\"true\">that<\/span><span data-preserver-spaces=\"true\"> some existing tenants will move out and become homeowners.<\/span> <span data-preserver-spaces=\"true\">Landlords sitting on empty units <\/span><span data-preserver-spaces=\"true\">then<\/span><span data-preserver-spaces=\"true\"> often have to lower rents <\/span><span data-preserver-spaces=\"true\">in order<\/span><span data-preserver-spaces=\"true\"> to fill vacancies, <\/span><span data-preserver-spaces=\"true\">meaning that<\/span><span data-preserver-spaces=\"true\"> lower-income residents <\/span><span data-preserver-spaces=\"true\">can<\/span><span data-preserver-spaces=\"true\"> move in.<\/span><span data-preserver-spaces=\"true\"> Theoretically, this can continue indefinitely.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">To succeed long term, an investor needs a very different landscape: <\/span><span data-preserver-spaces=\"true\">Healthy<\/span><span data-preserver-spaces=\"true\">, steady demand for rental units in areas where the overall <\/span><span data-preserver-spaces=\"true\">ratio of homeowners to renters<\/span><span data-preserver-spaces=\"true\"> is unlikely to change dramatically any time soon.<\/span><span data-preserver-spaces=\"true\"> To put it simply, you want an area where people are comfortable enough renting and are, say, five to 10 years away from buying a home. <\/span><span data-preserver-spaces=\"true\">This<\/span><span data-preserver-spaces=\"true\"> can change much <\/span><span data-preserver-spaces=\"true\">faster<\/span><span data-preserver-spaces=\"true\"> in boom-and-bust <\/span><span data-preserver-spaces=\"true\">areas<\/span><span data-preserver-spaces=\"true\">, where a <\/span><span data-preserver-spaces=\"true\">surplus of<\/span><span data-preserver-spaces=\"true\"> new construction suddenly makes homes more affordable and increases vacancies at an <\/span><span data-preserver-spaces=\"true\">unusual<\/span><span data-preserver-spaces=\"true\"> rate.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Now that construction and demand are <\/span><span data-preserver-spaces=\"true\">coming into alignment<\/span><span data-preserver-spaces=\"true\">, as per the Yardi report, investors can focus on refining more traditional-looking business plans and investing in areas with stable, predictable renter population movements rather than in migratory spikes.<\/span><span data-preserver-spaces=\"true\"> You might only be looking at 2% rent growth for the foreseeable future, but you\u2019re also not looking at having to deal with unexpected multiunit vacancies.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">What Investors Need to Think About in 2026 and Beyond<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">According to the Yardi report, as markets return to normal, investors will need to adjust their strategy. <\/span><span data-preserver-spaces=\"true\">What that looks like in practice is an emphasis on cost control in existing markets<\/span><span data-preserver-spaces=\"true\">, <\/span><span data-preserver-spaces=\"true\">as opposed to<\/span><span data-preserver-spaces=\"true\"> scouting <\/span><span data-preserver-spaces=\"true\">out<\/span><span data-preserver-spaces=\"true\"> new ones.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The <\/span><span data-preserver-spaces=\"true\">biggest<\/span><span data-preserver-spaces=\"true\"> challenge investors will face is shrinking margins amid high operational costs, <\/span><span data-preserver-spaces=\"true\">especially<\/span><span data-preserver-spaces=\"true\"> insurance.<\/span><span data-preserver-spaces=\"true\"> Testing prospective investment locations for stable occupancy rates will be paramount. According to CRE, \u201cHousehold formation, while soft in the near term, is expected to rebound mid-decade, offering a firmer demand base just as new inventory comes online.\u201d&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The questions will be: Where do these newly formed households want to stay until (and if) they are in a position to buy? <\/span><span data-preserver-spaces=\"true\">Where do families renew their leases <\/span><span data-preserver-spaces=\"true\">consistently<\/span><span data-preserver-spaces=\"true\">, <\/span><span data-preserver-spaces=\"true\">instead of<\/span><span data-preserver-spaces=\"true\"> passing through and moving on?<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">In many ways, investors will have to go back to the <\/span><span data-preserver-spaces=\"true\">strategy<\/span><span data-preserver-spaces=\"true\"> drawing board, performing meticulous research <\/span><span data-preserver-spaces=\"true\">into<\/span><span data-preserver-spaces=\"true\"> each potential lead and assuming <\/span><span data-preserver-spaces=\"true\">that<\/span><span data-preserver-spaces=\"true\"> margins will be very tight.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Another Investment Option<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Don\u2019t want to deal with all that? You have other options. For example, you can invest in real estate short notes with <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.connectinvest.com\/how-it-works\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Connect Invest<\/span><\/a><span data-preserver-spaces=\"true\">. Essentially, you\u2019ll be investing in a diversified portfolio of real estate at every stage of construction: no need to worry about picking the right metro area!&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">What\u2019s even better is you can lock in at 7.5%-9% interest earned on your investment, with a minimum investment amount of as little as $500.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">You can invest for <\/span><span data-preserver-spaces=\"true\">a period of six<\/span><span data-preserver-spaces=\"true\">, 12, or 24 months, which mitigates the risk <\/span><span data-preserver-spaces=\"true\">from that<\/span><span data-preserver-spaces=\"true\"> ever-present potential <\/span><span data-preserver-spaces=\"true\">of<\/span><span data-preserver-spaces=\"true\"> market shifts.<\/span><span data-preserver-spaces=\"true\"> It\u2019s a great way to dip your toes in the water and find out if real estate investing can work for you without having to do all that work yourself.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>This article is presented by Connect Invest. \u201cPredictable\u201d isn\u2019t exactly the most exciting qualifier for a real estate market, but it\u2019s the exact word that investors in the multifamily sector [&hellip;]<\/p>\n","protected":false},"author":613618,"featured_media":162473,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7382],"tags":[],"class_list":["post-185949","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-rental-prices"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/185949","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613618"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=185949"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/185949\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/162473"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=185949"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=185949"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=185949"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}