How I’m Thinking About Multifamily Heading Into 2026

Question

The last few years have been a reset for how I look at multifamily.

Between rising rates, tighter lending, and deals that suddenly stopped penciling, I had to revisit assumptions that used to feel pretty safe. Heading into 2026, I’m less focused on guessing where rates go next and more focused on what actually holds up when things get choppy.

A few things I keep coming back to based on what I’m seeing day to day:

• Predictable debt matters more than cheap debt. It’s hard to do anything when pricing is moving every month.
• Supply feels tighter than people realize. A lot fewer projects got started the last couple of years, and that’s starting to show up.
• Jobs still drive housing demand. In smaller and secondary markets especially, you feel it quickly when new employers show up.
• Leverage has to be respected again. Deals that rely on everything going right feel a lot riskier now.

Predictable debt matters more than cheap debt. It’s hard to do anything when pricing is moving every month.

Supply feels tighter than people realize. A lot fewer projects got started the last couple of years, and that’s starting to show up.

Jobs still drive housing demand. In smaller and secondary markets especially, you feel it quickly when new employers show up.

Leverage has to be respected again. Deals that rely on everything going right feel a lot riskier now.

I don’t think the next phase of the cycle looks anything like 2020 or 2021. To me, it feels more like a market that rewards patience, conservative assumptions, and knowing your market well.

I wrote a longer piece laying all this out in more detail if anyone wants to dig deeper, but I’m genuinely curious what others are seeing.

How are you thinking about leverage and underwriting heading into 2026?
Are you changing how or where you’re investing compared to a few years ago?

Looking forward to hearing how others are approaching it.

Drago Stanimirovic · Answer

Paul, you nailed it this market rewards discipline. Predictable debt is now more valuable than cheap debt, and conservative leverage is a must. Underwriting has shifted to stress-test flat rents and rising expenses, especially in markets driven by real job growth. With supply tightening, 2026 could favor those who stayed patient and precise.

Stevan Stojakovic · Answer

The biggest shift in underwriting right now is that lenders are finally assuming nothing improves. Flat rents, higher insurance/taxes, and exit caps that are wider than acquisition caps. If the deal survives that, it usually gets serious attention.

Leverage is definitely getting treated differently too. A lot of groups that used to run 75–80% are now intentionally staying closer to 60–65% LTV, not because they have to, but because it keeps the deal alive if the hold stretches longer than expected.

I also think you’re right about supply. The development pause from the last couple years hasn’t fully shown up yet, but once the current pipeline clears, some markets may actually feel tighter than people expect.

Feels like we’re moving back to a market where basis discipline and boring math win again, which honestly is probably healthier for the industry long term.

Happy to connect and exchange notes anytime.

All the best,Stevan

Rick Pozos · Answer

Thats right @Robert C. That 130k/u only makes sense with 3% or 4% interest rate. NOW I want to be at about 80k/u with 1000/mo, because you probably have to drop rates to 900 for the next year or two, and then get back to 1000/mo.

I do think NOW is the time to start bargain hunting. Underwrite with 7%int and 12-15% vacancy, 25% down and if you can cash flow with that, you are good for a good 5 to 7 year return when you sell. I am actually starting a fund to do just that.

Robert C. · Answer

2026:  The year of the basis reset...My observation is lenders and sponsors finally stopped holding out hope that lower interest rates will solve problems.   There are deals that just have too much debt relative to the gross rental potential and the cost basis must go through a reset.  $130,000/unit it debt does not work on a 40yr old apartment unit with a $1,000/mo market rental rate.   That reset can take many forms:  Foreclosure, note sales, deeds in lieu, friendly shot sales, but the reset is somewhere in the middle innings.Deals have to work with 5-6% interest rates, 8-12% vacancy factors, and rent growth equal to expense growth.

Paul Poteet · Answer

Thanks for sharing your thoughts Drago! I agree with you.

Paul Poteet · Answer

Thanks Brian, I just sent you a message to connect. How are you feeling about this upcoming year for multifamily? Bullish or bearish?

Brian Hollingsworth · Answer

The last few years have been a reset for how I look at multifamily.

Between rising rates, tighter lending, and deals that suddenly stopped penciling, I had to revisit assumptions that used to feel pretty safe. Heading into 2026, I’m less focused on guessing where rates go next and more focused on what actually holds up when things get choppy.

A few things I keep coming back to based on what I’m seeing day to day:

• Predictable debt matters more than cheap debt. It’s hard to do anything when pricing is moving every month.
• Supply feels tighter than people realize. A lot fewer projects got started the last couple of years, and that’s starting to show up.
• Jobs still drive housing demand. In smaller and secondary markets especially, you feel it quickly when new employers show up.
• Leverage has to be respected again. Deals that rely on everything going right feel a lot riskier now.

I don’t think the next phase of the cycle looks anything like 2020 or 2021. To me, it feels more like a market that rewards patience, conservative assumptions, and knowing your market well.

I wrote a longer piece laying all this out in more detail if anyone wants to dig deeper, but I’m genuinely curious what others are seeing.

How are you thinking about leverage and underwriting heading into 2026?Are you changing how or where you’re investing compared to a few years ago?

Looking forward to hearing how others are approaching it.

Love to chat w you about anything you've got in the works!

Brian

How I’m Thinking About Multifamily Heading Into 2026

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