Curious how people are thinking about multifamily underwriting right now

[Ying Tang]

At today’s rates, a lot of deals barely work. But if I model a refinance 1–2 years out at even 1% lower, suddenly the DSCR, cash flow, and IRR all look much healthier. My situation is a little different since liquidity/carrying the property short term isn’t really the issue. I can handle lower/slightly negative cash flow for a while if the long-term numbers make sense. So I keep wondering — is this actually the time to buy? Buy when rates are high, competition is lower, and wait for the refinance opportunity later? Or is relying on a future refi still too risky of a strategy? Curious how other people are approaching this market.

[J Castro]

Hi @Ying Tang, welcome BP!
From a lender’s perspective, underwriting to a future refinance can be a sound strategy—but it should be viewed as upside, not the foundation of the investment thesis.

The most disciplined borrowers and lenders approach today’s multifamily market with one core principle: the deal should make sense under today’s conditions, and any future rate improvement should be treated as a bonus.

How lenders view this strategy

When evaluating multifamily opportunities, lenders typically ask:

• Can the property support the debt at today’s interest rates?
• Does the borrower have sufficient liquidity to absorb temporary negative cash flow?
• Is there a clear path to increasing NOI through rent growth, expense reduction, or operational improvements?
• If rates do not decline, does the sponsor still have a viable hold strategy?

If the answer to those questions is yes, then buying in today’s market can be very attractive.

Why this may be an opportune time to buy

Periods of elevated rates often create:

• Less buyer competition
• More motivated sellers
• Better pricing opportunities
• Greater negotiating leverage

Investors with adequate liquidity and patience can acquire quality assets at basis levels that may look very attractive over the long term.

The refinance should be considered optionality

If rates decline by 50–100 basis points over the next 12–24 months, you may benefit from:

• Improved DSCR
• Higher cash flow
• Lower debt service
• Potential return of equity through cash-out refinance

However, relying solely on that outcome introduces unnecessary risk because rate movements are outside your control.

What stronger borrowers are doing today

The most successful sponsors are:

• Underwriting with conservative rent and expense assumptions
• Stress-testing for flat or modestly declining rates
• Maintaining strong cash reserves
• Locking in fixed-rate debt when appropriate
• Ensuring multiple exit strategies

A lender’s rule of thumb

If the deal:

1. Covers debt service under current market rates,
2. Has a manageable carry if performance is temporarily weak,
3. Provides meaningful upside through NOI growth, and
4. Still works if rates stay elevated longer than expected,

then it is likely a well-structured acquisition.

Yes, this can be an excellent time to buy multifamily—especially for well-capitalized investors with a long-term horizon.

Just avoid underwriting a future refinance as a necessity. If the deal works today and rates improve later, that refinance becomes a significant bonus rather than a requirement for success.