Navigating Multifamily Investments in a High Interest Rate, Volatile Market

The multifamily investment landscape has shifted dramatically over the past 18 months. With interest rates at decade-high levels, regional banking stress, and persistent economic uncertainty, many investors are asking the same question: Is this still a good time to invest in multifamily real estate?

The answer isn’t a simple yes or no. It depends on how you adapt.

As someone who has led the asset management of thousands of units through multiple market cycles—including lease-ups, distressed turnarounds, and value-add repositioning—here’s what I know: Uncertainty doesn’t eliminate opportunity. It simply demands sharper strategy and disciplined execution.

What’s Changed?

  1. Cost of Capital
    The most obvious shift is the spike in borrowing costs. Bridge debt and permanent agency loans that were once in the 3% range are now often well above 6%—a change that compresses returns and limits buying power.

  2. Bid-Ask Spread
    Sellers are clinging to 2021 valuations. Buyers are underwriting to today’s realities. The result is a frozen transaction market in many submarkets, particularly for Class B and C assets.

  3. Operational Risk
    Insurance premiums, property taxes, and labor costs have all increased. Rent growth is slowing or flat in some markets. And resident delinquencies, while still manageable, are climbing in certain submarkets.

How Smart Sponsors Are Responding

1. Focus on Fundamentals
In high-volatility environments, the basics matter more than ever. That means underwriting deals conservatively, stress-testing exit cap rates, and prioritizing strong in-place cash flow over pro forma upside.

2. Creative Financing & Capital Stacks
We’re seeing the return of preferred equity, seller financing, and fund-level capital raises to bridge the gap between new interest rates and stabilized returns. Debt service coverage is king. Lenders are scrutinizing NOI assumptions, so deals with true operational discipline rise to the top.

3. Active Asset Management
Now is not the time to “set it and forget it.” Asset management must be hands-on, data-driven, and relentless. That includes tightening expense controls, optimizing lease trade-outs, and addressing physical issues quickly to preserve NOI. This is where experienced operators shine.

4. Selective Acquisition
Rather than chasing volume, disciplined sponsors are targeting high-conviction markets with durable demand drivers—think job growth, supply constraints, and favorable landlord-tenant laws. Deals that didn’t pencil last year may now reprice to attractive returns for patient capital.

5. Communicating with Investors
Volatility makes transparency more important than ever. At Kendehl & Co., we keep our investors informed with real-time updates, conservative projections, and a clear thesis for every deal we pursue. We’re not chasing returns—we’re building durable value.

Where Do We Go from Here?

The truth is, multifamily remains one of the most resilient asset classes. People always need a place to live. But the days of easy leverage and fast exits are behind us—for now.

For thoughtful investors, this market offers a chance to acquire quality assets with less competition, build generational wealth, and stand out as a sponsor who thrives under pressure.

If you're investing in this market, ask yourself:

  • Am I underwriting for today’s risks, not yesterday’s rewards?

  • Do I have the operational capabilities to protect and grow NOI?

  • Are my partners and investors aligned for the long haul?

If the answer is yes, you're already ahead of the curve.

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Holding Steady When the Market Won’t Budge: Navigating the Emotional Toll of the Bid-Ask Spread

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