Article #100: A Multifamily Special + A Report Card
We did it, 100 articles!
Before we do anything else this week: thank you for being here.
Thank you for reading… or… at least asking your AI to summarize it for you. :-)
If nobody read this, I’d probably just…. well I may do this anyway. But it’s been great having you along for the ride. Keep brining those smart comments, I can take a punch.
This week we’re talkin multifamily, I give away my top 25 secrets to underwriting your next deal. Plus jobs data and a free Nashville economic and housing report for all of you.
Let’s get into it.
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Today’s Interest Rate: 6.64%
(☝️ .04% from last week, 30-yr fixed mortgage)
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The Weekly 3 in News:
- --Jobs Tuesday. We get a much anticipated June CPI inflation print at 8:30am ET, the last major inflation reading before the July 28–29 FOMC meeting (BLS release schedule). May ran hot at +4.2% YoY, driven by a 23.5% surge in energy prices (BLS). Consensus sees June cooling as oil rolled over; Truflation’s forecast (my preferred measure/source) pegs headline at 3.9% (Truflation). PLUS, five megabanks (JPMorgan, Goldman, BofA, Wells, Citi) report Q2 earnings before the open (Motley Fool). Watch what the banks say about credit and commercial real estate reserves. One morning, two readings on the economy.
- --The disinflation engine is still running. WTI crude sits near $71 a barrel, down from a first-quarter peak near $118, which was the largest inflation-adjusted quarterly jump since 1988 (Fortune, EIA). I wrote in April that energy prices had peaked and doubled down in June with Inflation Reset. Oil is doing exactly what the thesis needed it to do. The risk that remains: the Strait of Hormuz premium puts a floor under crude, and any re-spike would put the whole disinflation story on ice.
- --The labor market is quietly cracking. June payrolls came in at +57,000 against roughly 115,000 expected, and April and May were revised down a combined 74,000 (BLS, CNBC). Unemployment fell to 4.2%, but for the wrong reason: participation dropped to 61.5%, the lowest since March 2021. Construction unemployment jumped a full point to 6.2%, the highest since July 2021 (NAHB). This is the thing I keep repeating: forget inflation, watch the labor market. Labor is what moves the Fed, and labor is softening.
A Few Fun Things Happening in Nashville This Week
- --Paul Simon at FirstBank Amphitheater, Franklin: Wednesday, July 15. The “A Quiet Celebration” tour, a legacy act in an intimate outdoor room, and one of the last chances to hear “American Tune” under an actual open sky (tickets). [Note: Live Nation shows 8:00pm, AXS shows 9:00pm; double-check start time before publish.]
- --Tori Amos at the Ryman: Friday, July 17, 8:00pm. The “In Times of Dragons” tour with Bartees Strange opening, at the Mother Church, where the room itself is half the ticket (Ryman).
100 Issues In: Grading My Own Calls
We made it!
One hundred issues.
That’s two years of Sunday mornings, 13.5 lbs of coffee, 265 charts, several thousand data points, and at least one call I got wrong bad enough to mention.
Speaking of which, let’s take a quick look at the bold calls I made.
After all, a newsletter called The Skeptical Investor should be skeptical of its own author too.
So for issue #100, here’s my report card. Real calls, real dates, real links, graded against what actually happened.
Does Being Skeptical Pay?
***Full disclosure, and to help be objective, Claude, Grok and Chat GPT all were very useful here in looking back on what I did and did not get right. Man, these research tools are getting good.
Still shit writers though 😂.
Ok, the bold calls in question are:
It seems like market pundits are never wrong; they just neglect to mention the calls that didn’t work.
Me? I like my laundry flowing in the wind.
Fun fact: Research on “expert” forecasting has found the same thing for decades: the more confident the forecaster and the bigger the audience, the less anyone ever checks the tape.
A newsletter named The Skeptical Investor should hold itself to a different standard. I try to be contrarian and steelman the case if I’m wrong when I can.
So for issue #100, I pulled my own tape. Eight bold calls, dates, links, and grades against what actually happened.
Although I will say, I was pretty spot on :).
So without Further Ado…
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My Bold Calls Report Card
“Headlines Scream Crisis. Data Say Calm.” (). Grade: A-
The headlines that month were recession, CRE collapse, consumer cracking. I argued the underlying data said “slowdown, not crisis.” Since then: the S&P sits near 7,575 (CNBC), existing home sales rose 3.2% in May (NAR), and no crisis arrived. Great call. The negative: the labor market is now softening, so “calm” has an expiration date I need to keep an eye on this.
“Energy prices have peaked” (). Grade: A.
WTI was coming off a quarter that touched roughly $118, the largest inflation-adjusted quarterly jump since 1988. I said the peak was in. It’s around $71 today (Fortune, EIA). BOOM! I nailed this. Iran conflict is noise, and even this week with all the new news. Investors should ignore it. This was the call the entire disinflation thesis hung on, and it’s the one I’d least like to have gotten wrong. Watch inflation trend continue down from here, with some volatility.
“Rents are turning” (also ). Grade: B+.
RealPage just printed the strongest quarterly rent growth in years, occupancy is up two straight quarters, and vacancy is falling for the first time since 2021 (much more on this below). But national rents remain slightly negative year-over-year, so the call was early. Early is a polite word for wrong until the day it isn’t; ask anyone who shorted housing in 2004. So far, a little early but on target.
“Forget inflation. Watch the labor market.” (). Grade: A−.
The argument: inflation headlines were backward-looking energy noise, and labor would be what actually moves the Fed. Since then payrolls decelerated to +57,000, prior months were revised down 74,000, and participation hit a four-year low (BLS). The miss: honest bookkeeping. the Fed hasn’t actually moved yet, so the mechanism is confirmed but the payoff isn’t. Wait a few months, it will.
The Fed holds while the market flip-flops (). Grade: A.
Four consecutive holds at 3.50–3.75% (Federal Reserve), while the market swung from pricing cuts, to a hike, to roughly nothing. Fading the bond market’s mood swings has been the most reliable trade in this newsletter’s brief history. Nailed this. Don’t listen to any consumer sentiment charts/stories. Those surveys are famously terrible predictors / measures.
“Revenge of the Seller’s Market” (). Grade: C+.
Here is my one flub. I predicted that for-sale inventory would flip negative and the balance of power shift back to sellers. Hasn’t happened yet. Partly because inflation stagnating has put the breaks on interest rate cuts. In fact, this tracker whipsawed almost immediately after I published the article. The direction may still prove out, but the timing was just wrong. Lesson re-learned, and it’s tattooed on the inside of my eyelids now.
“The $6.6 Billion Bet on Nashville” (). Grade: B.
The claim: Nashville’s demand engine (jobs, in-migration, capital investment) would hold up even while national data wobbled. The jobs half is aging well; metro unemployment sits near 2.9% against 4.2% nationally (BLS). But Nashville rents are still down roughly 4% year-over-year (Apartment List) as the supply glut works through the system with positive net absorption numbers. So the investment case remains a demand story waiting on supply. Half right, half pending. I think both will be right though by the end of the year. I’m doubling down!
“The next Fed move is a cut” (). Grade: To Be Determined.
TB here. Markets currently price roughly zero cuts in 2026 and Goldman pushed its first-cut call to mid-2027 (Forbes). But many analysts and investment banks are still calling for rate hikes! (they are wrong). I still think the labor data gets there first, and Tuesday’s CPI is the next domino either way. Ask me again at issue #150.
What I Learned
My bolder larger/bolder structural calls were quite accurate, but when it comes to timing calls, that’s far more difficult. So with this in mind, our weekly deep dive into multifamily real estate below is about process, not prediction.
Lessons learned.
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How to Actually Succeed in Multifamily: 25 Items for Great Success
First, the market: rents woke up
Apartment rents just posted their strongest quarter in years.
RealPage reports effective asking rents rose 1.4% in the second quarter, after barely inching up in the first, with net absorption of more than 187,000 units, a pace notably above seasonal norms for what is already the strongest leasing season of the year (RealPage 2Q 2026 Data Update). Occupancy climbed to 95.5%, up two straight quarters and a touch above the decade average.
But the negative supply is what makes me think this will continue. For the first time in three years, annual apartment deliveries (roughly 340,200 units in the year ending Q2) dropped below the decade norm, the 6th consecutive quarter of declining supply since the peak near 588,000 units in late 2024 (RealPage). The Census data shows the same wave cresting:
Apartment List’s independent data corroborates. Their national vacancy index is declining for the first time in over four years (now 7.2%), year-over-year rent growth has ticked up two straight months off its April bottom, and the national median rent has risen five consecutive months (Apartment List National Rent Report). There’s even evidence of renters trading up: with concessions widespread on new Class A product, would-be Class B renters can afford Class A units, opening up B units for C renters, a filtering effect RealPage has documented in its concession data (RealPage concessions report).
A skeptical caveat.
Rents are still 0.2% below a year ago on RealPage’s data, and 1.2% below on Apartment List’s. Roughly a quarter of all units (24.6%) are still offering concessions averaging 7.6% off (RealPage). CoStar’s June report reads notably cooler than RealPage’s, with national rents up just 0.1% in June (CoStar/Apartments.com). And the recovery is wildly uneven:
San Francisco rents are up 7.4% year-over-year on Apartment List’s estimates (RealPage has it at +10.6%), powered by AI hiring. San Antonio is down 5.0%, Austin down 4.3%, and our own Nashville down roughly 4.0% as the Sun Belt keeps digesting its supply hangover (Apartment List, RealPage). “Apartment rents are back” is directionally right and locally wrong in half the country.
This brings me to the real subject this week.
My Top 25 Multifamily Deal Criteria
Every week someone asks me some version of “should I buy multifamily when rates come down?” And every week I give the same unsatisfying answer: rates are one input. A multifamily deal is a machine with dozens of moving parts: capex, legal, debt terms, operations, taxes, insurance, supply, submarket, exit. Each one has to be weighed and stress-tested, because any one of them, ignored, can take the whole machine down.
After 100 issues and a couple decades of doing this, here is the checklist we actually run.
Feel free to steal it.
Buy right
Criteria. We underwrite to stabilized cash flow and equity multiple, targeting 8%+ cash-on-cash at stabilization, ideally 10%. We get there with reasonable in-place rents and defensible rent growth, using roughly 33% of median household income as our rent affordability ceiling (this is a calculated affordability assumption, not a market forecast). Cash flow is your buffer. If your deal needs a refinance or heroic rent growth to cash flow, it is not a deal. It’s a hope.
Deal basis. We are deal-dependent, not market-timing dependent. For Class C property we target 75% of replacement cost. For Class B we want 50% below replacement cost or better. Basis is the one variable you lock in permanently on day one; everything else you manage.
Due diligence: you, personally, in every corner
Walk the whole property yourself. Every unit. Every closet, every mechanical room, all grounds, all common areas. Do not outsource this to a firm. This is not a house; this is a serious business with serious money at stake, and nobody inspects your business like you do. Hot tip, I bring this laser measurer with me on all my property walks, the Fanttik Pro. Super helpful for planning my CapEx vision.
Build a unit-by-unit renovation and capex budget while you walk. Then bring in specialists for the big-ticket systems: a roofer, a plumber, an electrician, a structural engineer, a concrete contractor. Not just a general inspector. Single-family habits have no place here; a surprise roof, water management, retaining wall or structural issue can be a six-figure hole.
Two additions most checklists miss: audit the lease files and collect estoppels (does the rent roll you were sold match what tenants actually signed and actually pay?), and get a Phase I environmental report (if need…this may be up to your lender and state/location. Some lenders will usually require the Phase I anyway; the lease audit is most important.
Paper it
Legal. For the record: a reputable attorney should draft your PPM, operating agreement, and subscription agreement. I do much of this work myself, but I’m a broker and former policymaker, I’m confident in my numbers and drafting, and I still have the title company’s lawyers review it. If you are raising outside money or bringing in partners, an attorney stops being optional. Securities law does not care about your good intentions; sloppy fundraising documents can genuinely land you in prison. For reelz.
Lender documents. Lenders can bury language in loan docs that can hurt you, including vague provisions letting them call the loan if they “deem themselves insecure.” Have your attorney comb through it and strike what you can; lenders have always negotiated these points with us. And here’s a modern trick that costs nothing: feed the loan docs to your favorite AI model and ask it to tell you what questions you should be asking. AI is great at answering questions with a clear answer, like many legal questions, it’s like an English math problem. And a cheap second set of eyes before the $600/ hour attorney.
Debt: boring on purpose
Fixed rate, five-plus years of term, 75% LTV, or lower if you want to sleep well. Get as much interest-only as they’ll give you, for as long as they’ll give it. And I strongly recommend against variable-rate debt. The floating-rate bridge loan is the single biggest reason 2021-vintage syndications died; the ones that survived bought rate caps that then cost hundreds of thousands to renew. If you must float, price the cap, then price renewing the cap, then calculate if the deal still works. It usually doesn’t.
Underwrite like a skeptic
Cap rates. Always assume expansion at exit, at least 10-15 basis points per year of hold, assuming you’re operating in a normal cap rate environment. If you’re buying at record-low cap rates, assume reversion to the mean instead. Here’s what expansion does to your exit, holding NOI perfectly constant:
Same property, same $1M of NOI: 100 basis points of expansion erases roughly 17% of your exit value (calculated: value = NOI ÷ cap rate). Your entire projected profit can live inside that 17%.
And don’t forget the tax-adjusted exit cap. THIS IS IMPORTANT. Your buyer will underwrite the reassessed property taxes based on their purchase price (just like you did when you bought it, right?), not your current tax bill. If you’ve meaningfully increased the value, that difference is material, and it comes straight out of the price they can pay you. Market dependent; know your county.
Exit price per door. Stress test it. Am I underwriting a record-setting sale price at exit? The answer needs to be no. I assume median pricing against comparable properties, which should flatter your renovated asset anyway. A reasonable exit per door is the underwriting; a record price is the cherry on top.
Interest rates. Assume a slightly higher rate at exit and during the hold. You never, ever underwrite rates declining. If rates fall, great, you get a cherry. A deal that requires the bonus is not a deal. (Yes, I still very much think the next Fed move is still a cut. I still won’t underwrite it. Opinions are for newsletters; underwriting is for money.)
Rent growth. Do not underwrite rent growth above inflation, and honestly, I include zero rent growth for the first five years. If your submarket just ran 30-40% during Covid, flat-to-negative for a few years is the likely path, and the market data above (concessions on a quarter of all units, Sun Belt still soft) is the proof. If your submarket is genuinely supply-starved like in a city that cant build anything (**cough San Francisco cough**) you may get consistent growth; treat it as upside, not base case.
Expense growth. If you’re assuming inflation carries your rents, it carries your expenses too. Insurance and payroll have been growing faster than rents in most markets. Maybe you have systems and scale that break the 1:1 link; most buyers don’t.
Breakeven occupancy. Is your breakeven occupancy for debt service palatable? Would Great Financial Crisis or Covid-level vacancy and delinquency blow you up?
The gap between a deal that breaks even at 78% occupancy and one that breaks even at 92% is the gap between a bad year and a foreclosure (illustration calculated on a 40-unit example; run your own numbers). If a recession-grade shock kills the deal, I’d pass (or better yet, offer less).
Deal timelines. You may want a 3-5 year hold but the market doesn’t care what you want. Exit liquidity is not guaranteed; there are stretches when lenders simply aren’t lending and buyers can’t transact (we just lived through one). Your deal must cash-flow on a 10-year hold even if you never intend to hold ten years. If holding to year ten bankrupts you, you are fucked.
Capital is oxygen
Reserves. The deal needs ample reserve cash, and you personally need ample reserve cash behind it. Go in on the razor’s edge, praying cash flow covers capex, and the probability of a capital call approaches certainty. Capital calls destroy your partner’s trust, and that trust is the actual asset of a GP’s career. I don’t raise money anymore and I still always make sure I have cash on the sidelines just in case.
Capex budgeting. Be lax here and you will get bodyslammed, especially on pre-1990s vintage buildings. Assuming future cash flow will fund the renovation isn’t a gamble, it’s recklessness with other people’s money. Raise the capex budget up front, fully funded, before close.
Insurance. Get a real quote during due diligence, and make sure the carrier knows the actual condition of your roofs and electrical. Do not lie about the structure’s integrity, a rescinded policy after a fire is bankruptcy. And this can also blow up a deal halfway through DD. Do this ahead of time.
Tax reassessment. Every market is different. If your state caps reassessment, easy to model. If it’s variable, stress test the taxes at 100% of your purchase price. Add the commercial-use business taxes and any special levies, like school funding taxes (looking at you, Texas). If you can’t confidently model the post-sale tax bill, you shouldn’t be buying the property.
Know things other buyers don’t
New supply. Talk to local brokers, not just databases. Commercial real estate is still an “old boys network” and brokers have the keys. There is no MLS for commercial real estate. Plus, your ideal property is likely owned by somebody who wants to sell. They just don't know yet. Prospecting is your friend.
National deliveries are rolling over hard (see the chart above), but the remaining lease-ups will still force concessions and vacancy in specific submarkets. Your deal has to tolerate local softness even while the national picture improves.
Occupancy reality. Research historical market occupancy, then overlay the supply risk. And remember: rental rate is the ultimate competitive advantage. If your underwriting depends on scratching $25 above market rent in an affordability-first market, you’re in for a reality check.
Macro awareness. You can’t operate with your head in the sand. You need to know what’s happening (this newsletter is my attempt to help) and your portfolio needs to absorb stress-level disruption: vacancy, delinquency, supply-chain problems for your renovation materials. Covid taught everyone that lesson.
Third-party management. Trusting someone else to run your property adds a variable, and variables are risks. Some folks “manage the manager” with excellence. But it is another cog that can break, and usually the one that breaks quietly, for months, before you notice. After a few deals, consider bringing this in house.
Submarket mastery. The hardest edge to quantify and the one that has protected me most. Know every street, every corner, the cops, the city staff, the culture of each pocket. A lot of people think CoStar plus AI equals market research.
No.
You need boots on the ground. Shop the local businesses. Meet your city council representative; they are genuinely eager to meet property owners, and that relationship pays off the day you want to build or renovate.
Pound the pavement.
Economic occupancy vs. physical occupancy. A building can be 95% physically full and 85% economically occupied once you subtract loss-to-lease, concessions, bad debt, and non-paying tenants. Post-Covid, application fraud and delinquency have become their own underwriting line: screen hard, budget bad debt explicitly, and in DD, compare the rent roll to actual bank deposits, not to the seller’s pro forma.
Regulatory risk. Rent regulation, source-of-income laws, eviction laws, and mandatory inspection regimes vary wildly by state and city, and they change. A jurisdiction’s regulatory direction belongs in your underwriting the same way its tax regime does. Tennessee, Texas, and Florida are friendly; California, New York, Washington, DC, and Illinois are not; underwrite what happens to your business plan if your market politics/policies start to drift.
Your exit buyer’s financing. You will sell into someone else’s debt market, not today’s. Small deals under roughly $2M trade to buyers using local bank debt; institutional deals need agency financing to be flowing. Part of the reason transaction volume collapsed in 2024-25 was that nobody’s buyer could borrow. Ask yourself: who is the realistic buyer of this asset in year 7, and what does their lender need to see? If the answer is “a syndicator using bridge debt,” your exit depends on the most fragile buyer in the ecosystem.
Will everything go wrong? No. Will everything go right? Also no.
A deal should not require perfection from every variable, or it is not a deal. They’re called variables for a reason. Some will move against you no matter how well you plan, which is precisely why you build the buffer.
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My Skeptical Take
One hundred issues ago I started writing this blog for those who saw the genius in looking at markets with a contrarian and skeptical eye.
Too many believe things they read or watch because smart-sounding people pronounced them confidently.
The cure for that, I’ve learned, isn’t cynicism, however. Cynicism is just credulity wearing a leather jacket; a cynic believes every bad headline as uncritically as the optimist believes every good one. The cure is diligence. Rigor. First Principles. Truth Seeking. Transparency.
In other words, a Skeptical mind.
When you read something, ask who benefits from the framing. Grade your own calls in public, and when you get something wrong, say that. That’s what this blog tries to be.
But I couldn’t do this alone.
Every reply that’s challenged me, every comment that sharpened an thoughts, every one of you who forwarded an issue to a friend or trusted me enough to read a 3,000-word essay about cap rate expansion on a Sunday morning: you built this as much as I did.
One hundred issues is not my milestone.
It’s ours.
Thank you. Sincerely, truly, thank you.
The market this week will hand us a CPI number, five bank earnings calls, and a thousand confident takes within the hour. Some of them will even be right. Our job, yours and mine, issue #101 and beyond, is the same as ever: stay curious, stay humble, check the data, and never outsource the thinking.
Richard Feynman said it best, and this idea has permeated this newsletter since issue #1:
“The first principle is that you must not fool yourself — and you are the easiest person to fool.”
Here’s to a hundred more issues of not fooling ourselves. You are awesome folks. I’m glad you’re here.
Until next time. Stay Curious. Stay Skeptical.
Herzliche Grüße,
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