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Is Anyone Actually Buying Multifamily?

By: Jonathan Kessler

Most of us lived through the past decade in this business, so I won't recount every detail of how we got here. But after eleven years of selling apartments, I'm hearing something for the first time: investors who entered during the last wave are openly questioning whether multifamily is still worth the trouble.

It makes me wonder what the fourth wave will look like.

When I was in high school in Central Massachusetts, I worked for an X-ray technician who owned more than 50 residential units entirely by himself. He worked a full-time job, turned units on weekends, and took full accountability for every building.

When I entered multifamily brokerage in 2015, I assumed that was how the business worked. It didn't take long to see how rapidly that model would be rewritten.

The Three Waves

Over the next seven years, three distinct waves of capital reshaped our market.

Wave 1 (2015): Following the JOBS Act and the introduction of SEC Rule 506(c) in 2013, sponsors found new opportunities to publicly solicit accredited investors. Early adopters benefited from extraordinary timing. Cheap debt, rising rents, and compressing cap rates made nearly everyone look like a genius.

Wave 2 (2018): Pricing surged, and deals became hot potatoes passed at ever-higher valuations. Coaching programs and online real estate courses multiplied, bringing in buyers whose operational experience sometimes started and ended in a seminar.

Wave 3 (2020–2022): The free-for-all peaked. Out-of-state syndicators poured into the Southeast, often viewing properties through a relative-value lens compared with New York or California. Cheap debt and aggressive rent projections justified increasingly questionable acquisitions.

Not everyone who entered during these years was inexperienced. Some of the strongest operators in our market expanded during this period. But somewhere along the way, the ability to raise capital became more valuable than the ability to operate the underlying real estate.

Perhaps the most concerning byproduct was the proliferation of co-GP arrangements, with eight to ten general partners attached to a single acquisition.

I remember touring a deal with a prospective buyer who arrived in a van full of people and a camera crew. It was difficult to tell who was there to evaluate the property and who was there to film it.

When things went sideways, the flaw in these arrangements became obvious. Who was actually in charge? Who made the tough calls when renovations blew past budget, collections deteriorated, or loan maturities arrived?

What Was Missing?

Fundamentals, disciplined underwriting, and execution after closing.

As Aleksey Chernobelskiy of Centrio Capital Partners observed, "People were gambling, but they didn't know it."

The brokerage industry shared in that frenzy. Transaction volume was fueled by social media clout, steakhouse dinners, and an alignment of incentives where everyone got paid at closing.

And don't blame us. We just sold the nooses.

Of course, some of us knew exactly how much rope we were selling.

When everyone gets paid at closing, who is incentivized to ask whether the transaction should happen in the first place?

Good brokerage must function as an advisory relationship. Sometimes that means telling a seller that needing $5 million doesn't make a property worth $5 million. Other times it means telling a buyer to walk away.

We're increasingly caught between owners whose retirement expectations are tied to yesterday's valuations and buyers underwriting today's reality.

A building worth $4 million doesn't become worth $5 million because its owner needs the extra million to retire.

The Reckoning

The asset class isn't dead. A particular era of financial engineering may be.

We're navigating a market where perfectly good apartment buildings are attached to very bad debt. In other cases, rising insurance, taxes, and operating expenses have exposed business plans that were questionable from the beginning.

Cheap debt concealed problems. Rent growth concealed problems. Cap-rate compression concealed problems.

Now the market is separating operators who understood their real estate from those who simply benefited from the cycle.

CBRE's 2026 capital markets outlook puts it succinctly: "Total returns will be driven by income in 2026."

That's increasingly what I'm hearing from buyers. They want cash flow today, not a business plan dependent on tomorrow.

At last month's IMN conference in Charlotte, I believe it was Randy Holland of Urban Equities Capital Management who made one of the more memorable comments. The conference was a bit of a whirlwind, so forgive me if I've misattributed it, but his investment thesis was simple:

We need to get back to buying at 8 caps.

It was refreshing to hear someone say it without a complicated explanation attached.

What Will Wave 4 Look Like?

The first wave benefited from timing. The second chased appreciation. The third took financial engineering to its limits.

What will define the fourth? Wave three is not excited or able to raise money I hear.

I think back to the X-ray technician I worked for in Massachusetts. He didn't need an investor relations department or eight general partners to tell him how his buildings were performing. He knew because he was responsible for them.

We're not going back to a world where every apartment building is owned by an X-ray technician. Nor should we. Syndication and institutional capital have their place.

But somewhere along the way, we confused the ability to raise capital with the ability to operate real estate.

The last decade rewarded people for buying apartments. The next may reward people for knowing how to own them.

Hopefully Wave 4 brings a little less TikTok and a little more fundamentals.

Now, if you'll excuse me, I'm getting back in my DeLorean to find some eight caps to sell in 2015.

Or maybe 2035.