Key Takeaways
- The distress in multifamily today is mostly broken financing sitting atop good, occupied buildings, not broken properties.
- Floating-rate bridge loans written from 2020 to 2022, then hit by the fastest rate-hiking cycle on record (about 4.88 percentage points), saw their payments roughly double while rents flattened.
- This is a slow squeeze, not a 2008 crash. The way these loans were packaged and sold forces lenders into selective choice harvesting rather than fire sales.
- A roughly 12- to 24-month window exists to buy stable assets at 25% to 40% below peak, refinance into fixed-rate agency debt, and operate them.
- The strategy doesn’t need the Fed to cut rates. The edge is capital-stack hygiene over rent-growth hope.
I get a version of this question more than almost any other right now:
“Half the people I follow say multifamily is dead and I should sit in T-bills until the Fed cuts. The other half say this is the best buying window in a decade. Both of them sound certain. Which is it?”
Here’s the short answer:
Multifamily isn’t dead. The old way of making money in multifamily is dead. Those are two different statements.
The distress you’re reading about is real. But most of it isn’t coming from bad buildings or weak demand. It’s coming from broken financing sitting on top of perfectly good assets.
That distinction is the whole game right now. We call this stretch the slow strangulation era. Once you see why it’s a slow strangulation and not a sudden crash, you can see where the opportunity is.
The Case for Staying Out, Which Isn’t Wrong, Just Incomplete
Let me make the strongest version of the other side first, because the people making it aren’t fools.
Here’s the version you’ve heard. Distributions got paused. Capital calls went out.
Rent growth fell from 16.2% at the 2021-to-2022 peak to roughly 1.4% as of January 2026. Valuations cratered. Some deals collapsed entirely.
The natural conclusion is the asset class itself is broken, and the smart move is to wait for blood in the streets, show up with cash, and name your price.
That conclusion is wrong in one specific way, and the mistake is expensive.
It assumes the distress is operational. It assumes these are broken deals: bad buildings, bad markets, empty units, no demand. If that were true, then yes, you’d want to wait for a 2008-style washout and buy the wreckage at 50 cents on the dollar.
But that’s not what the data shows, and it’s not what we see on the ground. The properties are largely fine. The operations are largely fine.
What broke is the capital stack: the financing strapped on top of the building.
What Is a Broken Capital Stack?
A broken deal is a property that doesn’t work. Bad submarket, deferred maintenance nobody addressed, occupancy stuck in the mid-70s because the operator dropped the ball.
Money doesn’t fix a broken deal. If you have a property at mid-70s occupancy in a good market, no amount of rescue capital saves you, because the problem is operations, and operations are the actual job.
A broken capital stack is a different problem, though the two can overlap. The building is stable. Occupancy is healthy.
Residents are paying rent, though operators have had to cut pricing to hold occupancy near the levels the boom years delivered more easily. Compressed revenues and expensive debt are squeezing from both sides. The asset is still performing, and it still can’t cover its loan payments, because the financing strapped to it was built for a world that no longer exists.
You can have a genuinely good property, run by genuinely thoughtful operators, in a genuinely strong market, and still watch the deal go sideways. The loan was the problem the whole time.
Picture two properties next door to each other. One has absentee management, deferred maintenance, and a frayed relationship with its residents. The other runs a tight ship and needs no real renovation.
In this market, both are in trouble, and plenty of deals carry both problems at once. But when the capital stack is the primary issue, money and good operations can fix it. The strategy this cycle rewards is the discipline to tell those deals apart.
How a Stable Building Ends Up Unable to Pay Its Loan
To see how a fine asset gets strangled, look at the loan, not the property.
A large share of the deals now in trouble were financed between 2020 and 2022, at the peak, with short-term, floating-rate “bridge” loans. They’re called bridge loans because they’re meant to carry a deal across a short gap until a refinance or a sale.
Most ran three or five years. “Floating” means the interest rate isn’t fixed; it rides on top of a benchmark short-term rate (usually one called SOFR), plus a margin the lender adds for your particular risk.
Then the fastest rate-hiking cycle on record happened. Roughly 4.88 percentage points. A loan that penciled at 3% floated up to 6%, 7%, 8%. On a stable building, the monthly loan payment doubled in some cases.
Revenue didn’t double to match. Rent growth flattened, insurance spiked, and property taxes got reassessed higher. The cushion in the business didn’t shrink; it vanished.
Rate caps made it worse. When you borrow on a floating rate, the lender usually requires you to buy a rate cap. People treat it like insurance: if rates spike, the cap pays out, the deal is protected.
That’s not quite what it is. A rate cap is a contract with an expiration date, and that date almost always falls before the loan comes due. It was cheap to buy at the start, in a low-rate world where it was unlikely to ever pay out.
When it expires and you have to replace it, in a high-rate world, the same protection costs dramatically more. A small cost in year one becomes a large, deal-threatening cost in year three, on a deal that budgeted for the cheap version and has no cash on hand for the expensive one.
The cap didn’t protect the deal; it put a time bomb on the calendar.
For years, none of this came to a head, because lenders papered over it. The polite name for that is extend and pretend. Rates would surely come back down, nobody wanted to lock in a loss, so the lender granted an extension and everyone agreed to look away.
That era is ending. The hard decisions that got pushed out of 2025 are now stacked into a wall of loan maturities concentrated in 2026 and 2027: an estimated $162.1 billion coming due in 2026 and $167.7 billion in 2027.
These aren’t loans that quietly roll over. They come due into a rate environment that won’t let them refinance on the old terms.
This Is a Lender-Pain Story, Not a Borrower-Pain Story
When a borrower is in trouble, the instinct is to feel for the borrower. Fine. But in most of these deals, the lender is the biggest stakeholder by far.
Look at the math. The borrower put up, say, $30 of equity against $70 of debt. The equity is wiped out.
The borrower has already lost. The one now staring at a live loss is the lender holding that $70.
Here’s the part that actually matters. The lenders have lenders.
Many of these bridge loans didn’t come from a bank that holds them quietly and waits. They came from non-bank lenders: debt funds and private credit shops. Those shops are funded in a way that matters here.
They raise a little of their own money, borrow much more from a big bank on top of it, and use the combined pile to make loans. Then they bundle hundreds of those loans together and sell the bundle to other investors, like pension funds, as a bond.
You don’t need the industry acronym for that bundle. You need the consequence: the people who made these bridge loans owe money to someone above them, and that someone wants to be paid.
That chain is why this is a slow strangulation and not a fire sale. Those bundles are rigid by design. The lender can’t foreclose, take a loss, and move on, because the rules of the bundle won’t let them.
Instead of a dam breaking all at once, you get a slow, deliberate squeeze. Lenders pick which loans to deal with and when. We call it choice harvesting, not fire sales.
The lender isn’t being merciful; the lender is doing math.
You can watch this happen in public filings. Ready Capital disclosed selling loans at 70 cents on the dollar, with multifamily driving the discount, and by mid-2025 it unloaded $494 million of 2021-vintage multifamily bridge debt for net proceeds of only $85 million.
Arbor Realty Trust, one of the most aggressive bridge lenders of the 2021 to 2022 period, reported a $1.1 billion pool of nonperforming assets. It announced plans to cut its $500 million of foreclosed real estate roughly in half by the end of 2026. Their CEO said on the record he believes they’re at the bottom of the cycle.
When the lenders themselves start selling the paper at a discount and calling the bottom, that isn’t noise. That’s the strangulation showing up on a balance sheet you can read.
The delinquency data says the same, and it says it’s accelerating, not stabilizing. The multifamily CMBS delinquency rate (CMBS being commercial mortgages pooled and sold to bond investors) hit 6.94% as of January 2026, more than double its level in August 2024.
The steepest single-month jump came between March and April 2025, a surge of 113 basis points.
In that one stretch, more than $1 billion in loans went newly delinquent while only $200 million were cured. That’s five new problems for every one resolution. The pressure isn’t bleeding off; it’s building.
Is This Multifamily Distress Like 2008?
I want to be precise here, because the comparison everyone reaches for is the wrong one.
This isn’t 2008. In 2008, a tsunami came, washed everyone out at once, and anyone with a little cash could show up and dictate terms. That’s not what’s happening, and frankly, that’s good news for a disciplined buyer.
In 2008, the demand was gone. Today it isn’t. We’re becoming a renter nation.
The ratio of home prices to income sits around 5.0, well above the 3 to 3.5 it used to run at, and a housing shortage of north of 4.7 million units persists. People aren’t renting because it’s trendy. They rent because they can’t afford to buy.
That demand is the reason the assets underneath the broken loans are worth owning at all.
The real problem was never demand. Good, full buildings are trapped under bad loans. That’s the entire thesis in one line.
It’s not a demand problem; it’s a financing problem. Financing problems, unlike dead submarkets, are solvable. They go to the operator equipped to solve them, not to whoever shows up with cash.
The Inflection Point and the Narrow Window It Lives In
Put the pieces together, and you get a rare setup. Delinquencies are climbing. The maturity wall is real and concentrated in 2026 and 2027.
Lenders are finally selling. Borrowers are exhausted and out of capital. Underneath all of it, demand is intact.
That creates a window in which a sponsor can negotiate favorable terms with both sides at once: with the stressed borrower on the purchase price and with the stressed lender on the financing.
For most of the last few years, that double opening didn’t exist. You’d find a willing borrower and an unwilling lender, or a willing lender and a borrower still in denial, still telling himself rates would drop next year.
A lot of borrowers spent three years working through the stages of grief before they reached acceptance. Now both sides are at the table simultaneously. That part is new.
This isn’t an all-weather strategy, and I won’t pretend it is. It works at a cyclical bottom and only at a cyclical bottom.
The signs point to a market moving from a downturn into early expansion: a historic wave of new apartment supply has now largely been absorbed, new construction starts have fallen sharply from their 2022 peak, and demand keeps grinding upward. By the time that’s obvious to everyone, the pricing advantage is gone. By my read, this is roughly a 12- to 24-month window.
It’s the hardest time to act, by design. This is the moment you read about 10 years later as the window when a small number of people made outsized returns. It’s simultaneously the moment that feels most uncomfortable to act on.
As Sam Zell, one of my favorite investing minds, put it: grave dancing involves confidence, optimism, conviction, and no small amount of courage. All the opportunity in the world means nothing if you don’t actually pull the trigger.
I’ll add the caveat the skeptics get right. If you can’t stomach holding an illiquid investment for years, this isn’t your strategy.
These aren’t high-liquidity plays, and they’re not 20%-plus moonshots. They’re about a low purchase price, downside protection, steady cash flow, and not swinging for the fences. If that doesn’t match what you need from your portfolio, this isn’t for you. Both can be true.
Capital-Stack Hygiene Over Rent-Growth Hope
What actually separates the sponsors whose deals survive this cycle from the ones whose deals don’t? It isn’t better luck on rates. It’s a different playbook.
The old playbook was rent-growth hope. Buy on Tuesday, new backsplash on Thursday, sell on Saturday, underwrite to a 25% return and endless rent growth, and let cheap debt and a rising market cover any mistakes.
That worked when rates were near zero. It made a lot of people look like a young Warren Buffett when they were riding a falling-rate environment. In good times, everyone’s a value investor.
The moment it gets hard, the real strategy turns out to be buy high and sell low.
The new playbook is capital-stack hygiene. It’s unglamorous, and it’s the entire job:
- Buy stable assets in stable markets at a discount to peak. Not the boondocks, not your cousin’s tertiary town. Real submarkets in solid metros, with healthy occupancy, little deferred maintenance, and no need for a heroic renovation. We’ve focused on the eastern Sun Belt, Florida, Texas, and Georgia, because the entry pricing has finally turned favorable and we live in these markets and know their good, bad, and ugly firsthand.
- Fix the financing; don’t pray about it. Resolve the debt directly with the lender and, where the deal supports it, refinance into long-term, fixed-rate agency debt. Agency debt is the financing backed by Fannie Mae and Freddie Mac, and it’s the gold standard here. The appetite is real: the agency lending cap rose to $88 billion in 2025, up from $73 billion the year before, and the government is signaling it wants to lend, but only to the best operators with the most stable assets.
- Then operate. Even a perfect purchase at a perfect price with a perfect refinance still fails without hands-on asset management. Resolve the lender issue, bring in a real operating team, and run the building. Skip that, and nothing works, period.
Notice what’s not on that list: a bet the Fed rides to the rescue. This strategy doesn’t need rate cuts to work. We’ve already absorbed the shock of rising rates.
If you take today’s rates and today’s fundamentals but reduce the price at which you buy, you’re ahead the day you walk in. In many cases, the tax benefits alone get you there.
Waiting for cuts isn’t a strategy. Learn to live on distress, and you won’t have to be at the mercy of interest rates.
We Weren’t Immune, and That’s the Point
It would be easy to catalog everyone else’s mistakes and quietly imply we floated above them. We didn’t.
In the first quarter of 2023, we made the hard call to pause distributions on our acquisitions. We got more pushback from general partners than from our own investors. Since then, we’ve had two successful exits and zero capital calls, and we built out new developments alongside the takeovers.
We’ve run the same playbook on other people’s broken stacks. Over the last two years, we stepped into deals at 25% to 40% below peak pricing and restructured them for an institutional partner to provide an accretive solution for all parties.
None of those were rescues of broken buildings. Every one was a stable asset with a broken capital stack.
Zoom out, and the longer record is the same shape: more than $800 million in transactions since 2017, and six full-cycle deals that averaged a 26.6% internal rate of return (IRR) and 2.0x equity multiple.
I don’t share those numbers because they’re impressive on their own. I share them because they’re the receipts for the boring work.
That’s not a brag. It’s the evidence for the only point that matters. The firms that come through this aren’t the ones with the prettiest pitch decks; they’re the ones that treated the loan as seriously as the property and made the unglamorous decisions early, before they were forced to.
That’s why I have so little patience for the part of this industry that sells the dream. A down cycle is a filter. The tide went out, and we’re finding out who can actually swim.
Walk into a conference now, and the room is visibly thinner. Sponsors who were along for a rising market are leaving, some for good, and that’s healthy for everyone who stays.
This is the moment to be more skeptical of advice, not less. Stop taking it from people less financially secure than you are.
You don’t need to become a deal sponsor yourself. You need enough knowledge not to get taken for a ride.
A practical place to start: if a syndicator tells you they’re sourcing distressed deals through brokers and public listings, be skeptical. Once the equity is wiped out, the lender controls the loan, and the real deal flow happens directly with lenders, not on a marketplace.
If you already have money in a current bridge-loan deal, ask your sponsor two questions in writing. What happens at the next rate cap renewal or loan maturity? And exactly where does the cash come from to cover it?
A strong answer names a number and a source. A weak answer pivots to a story about a refinance that hasn’t happened yet. That answer will tell you, within a paragraph, whether to wire more money into that deal or walk away.
What to Do With All of This
If you take one takeaway from here, take the reframe. The headline distress in multifamily isn’t a verdict on the asset class; it’s a financing failure atop assets that, in most cases, are doing their job. That’s why the opportunity exists, why it’s narrow, and why it rewards operators over opportunists.
Multifamily isn’t dead. The easy version of it is. Different cycle, same boring work. The boring work is the part that pays.
Frequently Asked Questions About Distressed Multifamily
Is multifamily dead?
No. The old value-add playbook (buy, lightly renovate, flip fast) is dead. The asset class isn’t. Demand is intact: the ratio of home prices to income sits around 5.0, and a housing shortage north of 4.7 million units persists. What broke is the financing on a specific vintage of deals, not the buildings.
What is a broken capital stack?
A capital stack is how a deal is financed. A broken capital stack is a stable, well-occupied building that still can’t cover its loan payments, because the financing strapped to it (usually short-term, floating-rate debt written from 2020 to 2022) no longer works at today’s rates. It’s the opposite of a broken deal, where the property itself is failing.
What is the maturity wall?
It’s the concentration of commercial real estate loans coming due in 2026 and 2027: roughly $330 billion in multifamily maturities across the two years (about $162.1 billion in 2026 and $167.7 billion in 2027). Most were written in 2020 to 2022 and can’t refinance on their old terms, which is what forces decisions now.
Why isn’t this a repeat of the 2008 crash?
In 2008, demand collapsed, and assets sold all at once. Today, demand is strong, and the distressed loans were packaged into rigid structures that keep lenders from foreclosing and dumping assets. Instead of a fire sale, lenders run a slow, selective squeeze: choice harvesting, not fire sales.
Does this distressed strategy need the Fed to cut interest rates?
No. The shock of higher rates is already absorbed. The opportunity comes from buying stable assets at a discounted price, refinancing into long-term agency debt, and operating them well. If you take today’s rates and today’s fundamentals but reduce the price you pay, you’re ahead the day you walk in.
This message does not constitute financial advice or an offer to sell securities, and Boardwalk Wealth and its affiliates recommend you speak with an investment professional before making any financial or investment decisions. Any offer to sell securities will only be made available through an exemption from registration pursuant to Regulation D, and qualified investors will be provided with a Private Placement Memorandum. Any historical returns, expected returns, or probability projections may not reflect actual future performance. Average historical returns are aggregated from a portfolio of investments, and certain investments may have performed below the average historical returns, since such averages may not have accurately reflected the performance of specific investments. All securities involve risk and may result in significant losses or total loss of capital.
Boardwalk Wealth, Dallas, TX, (469) 436-9213.