When financing is more expensive and uncertainty is higher, smaller deals can offer a lot of advantages: simpler financing, fewer moving parts, and more potential exit options. That doesn't mean larger deals have stopped making sense. But it does feel like more investors are prioritizing flexibility, liquidity, and downside protection than they were a few years ago.
In many ways, the market seems to be rewarding simplicity again.
This tracks with what I'm seeing too, both in the deals I'm working on and in conversations with the investors I work with.
The shift isn't really about smaller deals being better — it's about smaller deals being more manageable in an environment where financing is expensive, the gap between buy price and value-add upside is tighter, and the cost of being wrong is higher. A massive rehab that runs over budget or timeline at 8% bridge financing is a completely different problem than it was at 4-5%. The margin for error compressed and investors adjusted.
From my own experience in the Fayetteville, NC market, the deals that are still penciling cleanly right now are the ones where you're not depending on a huge delta between purchase price and after-repair value. Buy something that's a modest amount under market, improve it without a full gut, and hold it. That play is far less dependent on execution precision than a full renovation at scale.
The duplex and small multifamily play also makes sense from a financing perspective right now. You can still access residential loan products on 2-4 units — 30-year fixed, conventional rates, lower down payment requirements — which you lose the moment you go commercial. That financing advantage is real and it compounds over time.
The investors I see struggling are the ones still underwriting like it's 2021, trying to force large value-add deals to pencil by using optimistic assumptions. The ones doing well have rightsized their expectations and their deal structures to what the market actually supports today.