MULTIFAMILY AP360

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This episode warns that projected rent growth assumptions in multifamily offering memorandums (often 3–4%+) can quietly break deals, especially in 2026. It argues sellers and brokers use optimistic pro formas—based on national averages, peak 2021–2022 growth and ignoring concessions and lease-up competition—to make returns look stronger than the actual submarket supports. In today’s higher-rate environment, missing rent growth can reduce DSCR, erase cash-on-cash returns, and lower refinance or exit values, undermining the entire business plan. The script notes rent growth is uneven: parts of the Midwest and some gateway markets are still gaining while many Sun Belt submarkets face heavy new supply and weak pricing power. It recommends underwriting with conservative, submarket-specific numbers, using effective rents after concessions, stressing flat rents for 2–3 years, and rejecting deals that only work due to aggressive rent growth.

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The script explains why high-supply multifamily markets can be risky in 2026: heavy Class A deliveries increase competition, drive concessions, pressure occupancy, and lead to stagnant or declining effective rents, especially in Sun Belt markets still absorbing record construction. It argues high supply doesn’t automatically eliminate opportunity if investors buy at a real discount to replacement cost or peak values, focus on stabilized Class B, target submarkets with clear demand drivers, use strong operators, and underwrite modest rent growth early on. Instead of asking whether a market is high supply, it recommends evaluating what supply is delivered versus still coming, whether supply is concentrated, the rent gap between Class A and Class B, and how long rebalancing will take, noting markets that peaked 12–24 months ago may be closer to recovery.

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My 10-Minute Multifamily Deal Filter (2026 Underwriting Checklist)

This episode explains a 10-minute process to quickly decide whether a multifamily deal is worth pursuing in 2026. It starts with three front-end checks: location and submarket supply, current occupancy and collections, and the asking price per unit and going-in cap rate—passing immediately if any are weak. On income, it ignores seller pro forma rents and instead compares in-place rents to recent leases and market rents, reviews near-term lease roll, and applies realistic submarket rent growth assumptions. It then rebuilds expenses and CapEx with today’s costs, including insurance, taxes, payroll, repairs, turnover, year-one CapEx, and ongoing reserves. Finally, it stress-tests debt and returns using current debt costs, DSCR, cash-on-cash, and break-even occupancy, and buckets deals into pursue, negotiate hard, or pass.

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This episode breaks down the 10 biggest red flags to watch for in a multifamily offering memorandum (OM), emphasizing that an OM is a sales document and your job is to find what’s missing, exaggerated, or risky. It covers income-side issues like aggressive rent assumptions, “perfect” trailing 12-month income despite slipping occupancy or collections, and unrealistic rent growth projections in high-supply Sunbelt markets. On the expense side, it flags outdated expense ratios (especially insurance and taxes), missing or understated CapEx, and lack of replacement reserves. It also warns about pro formas based on cheap floating or interest-only debt, unjustified exit cap rates, vague value-add claims without a scoped timeline and budget, and broker language that avoids hard numbers. The speaker uses a printed checklist and recommends major price adjustment when three or more red flags appear.

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When Your Multifamily Exit Fails in 2026: What Happens Next (and How to Protect Yourself)

The script explains how multifamily exit strategies underwritten in 2021–2023—refinancing in year three or selling in year five—are failing in 2026 due to higher rates, weaker rent growth, and rising expenses, along with Fed hikes, a maturity wall, and elevated insurance and taxes that undermine refinance proceeds and sale prices. It outlines four common outcomes: forced equity injections to refinance, discounted sales that permanently reduce IRR and equity multiples, lender transfer to special servicing with higher fees and reduced control, and in worst cases handing back the keys (rarer than office but occurring on over-levered deals). Those hit hardest include floating-rate/bridge loans, 2026 maturities, over-budget value-add projects, aggressive rent-growth assumptions in high-supply markets, and partnerships without dry powder. The script advises underwriting failed-exit scenarios, keeping reserves, building multiple exit paths, and not relying on market timing.

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On Multifamily AP360, host Rama welcomes Brian Burke, president and CEO of Praxis Capital and author of The Hands-Off Investor, to discuss why he shifted from multifamily to senior housing after selling most multifamily holdings by early 2022 and beginning acquisitions in early 2025. Burke explains the senior housing thesis: rapid growth in the 80+ population (10,000 turning 80 daily), decade-low construction, and a post-COVID cycle bottom creating low values and rising demand. He outlines why portfolios should diversify across acuity levels, operators, geography, lenders, and acquisition timing, and stresses the operator’s critical role and culture-focused due diligence. He covers underwriting using EBITDA (akin to NOI), sourcing off-market deals, typical facility sizes and occupancies, triple-net considerations in skilled nursing, key risks like another pandemic, and ways LPs can evaluate sponsors and gain exposure, including REITs and funds.

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The Real 2026 Multifamily Killer: Expenses (Insurance, Taxes & Repairs)

This episode argues that in 2026 the biggest threat to multifamily deals isn’t rent growth but rapidly rising expenses that crush net operating income. It highlights insurance as the fastest-growing cost, citing Trepp’s estimate that multifamily property insurance is up 58% over five years, with some analyses showing per-unit costs rising from about $100 to over $250 nationally and worse in high-risk coastal and southern markets, where owners can’t fully pass increases to tenants. Property taxes are also climbing 5–10% annually due to lagging assessments, and combined with insurance can erase years of rent gains, pushing some loans into distress as DSCR falls below 1x. Repairs and maintenance are up roughly 30% in five years, with deferred CapEx now becoming urgent, especially for older Class B/C assets, making aggressive expense underwriting essential.

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Why many multifamily owners are struggling to refinance as a major 2026 loan maturity wall collides with higher rates and weaker fundamentals. About $160 billion in multifamily loans mature in 2026, many originated in 2021–2022 at 3%–4.5% with optimistic rent growth assumptions, while the Fed is now at roughly 3.75%–4% and permanent debt is more expensive. Refinancing is being constrained by higher lender requirements for debt yield and DSCR amid slower rent growth, lower appraised values as cap rates expand, and rising operating expenses like insurance and taxes that reduce true cash flow. The most impacted are 2021–2022 floating-rate and bridge loans, deals that never stabilized, high-supply Sunbelt markets, and max-leverage owners, while stabilized Class B assets with fixed-rate agency debt fare better. Likely outcomes include equity injections, discounted sales, or special servicing, creating opportunities for well-capitalized buyers and debt investors.

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This episode explains why many apartment owners are selling ahead of 2026: low-rate loans from 2021–2022 are maturing, refinancing is far more expensive after Fed hikes, and rent growth in many markets hasn’t kept up, leaving property values down from peak levels. As a result, new loans often won’t cover old balances, forcing owners to either inject significant equity or sell. The biggest sellers are owners with 2021–2022 floating-rate/bridge deals, projects that never fully stabilized, properties in high-supply Sunbelt markets, and partnerships running out of capital or patience, while stabilized owners with fixed-rate agency debt in stronger Midwest and gateway markets are less motivated. For buyers, forced sales can be opportunities only with realistic underwriting, since many deals have deferred maintenance, soft rents, or higher expenses than advertised.

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This episode explains why multifamily deals often fail due to bad assumptions, then breaks down five underwriting mistakes to avoid in 2026: assuming aggressive rent growth based on “market rent” instead of achievable rent and submarket comps; ignoring incoming new supply and the 24–36 month delivery pipeline; underwriting expenses too low by relying on seller numbers instead of normalized taxes, insurance, repairs, utilities, payroll, management, and turnover (showing how a $150K NOI miss can erase about $2.5M of value at a 6% cap); using too much leverage and not stress-testing refinancing risk as rates and maturities (13% of balances in 2026) impact DSCR, LTV, valuation, and proceeds; and relying on overly optimistic exit cap rates instead of running best, downside, and stress cases.

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Website: www.ushacapital.com

To find out more about partnering or investing in a multifamily deal: 
email: [email protected]