11 Lessons From The Last Multifamily Cycle

release edition [071]

read time [10 minutes]

Welcome to The Multifamily Download, a weekly newsletter where I provide institutional insights to help you build an exceptional Multifamily career.

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Today at a Glance:

Debt: Easy Mode vs. Hard Mode
Economics: Compression vs. Expansion
Equity: Appetite vs. Scars
Weekly Listen: Walker Webcast

Today's newsletter is a special Memorial Day edition.

Before we start, I'd like to acknowledge and thank every service man and woman that has given their life to protect and preserve the freedoms that we enjoy in the United States of America.

One of my favorite childhood memories occurred in the crisp Fall evenings under the Friday night lights just before kickoff, when right before the band began to play the Star Spangled Banner, our home field PA announcer proclaimed, "Tonight, let us remember that freedom is not free, lest we forget".

Today, we remember and honor those that gave the ultimate sacrifice and paid the highest price for America's freedoms.

In the spirit of this Memorial Day theme, I thought it would be interesting to look back to remember the most recent Multifamily cycle (2010-2021) against what's unfolding in the sector today (2023-present).

As we begin, I'd like to open with a quote that I think about often:

"Those who do not learn history are doomed to repeat it." - George Santayana

I've been thinking a lot lately about the post-GFC era versus the current era within the Multifamily sector, and specifically how I can learn from what worked, what didn't, what went wrong, and how to avoid those mistakes in the future.

As Ray Dalio says, pain + reflection = progress, but hopefully this newsletter helps you make progress while avoiding the pain.

The 2010-2021 era wasn't normal, to say the least, as it was the longest stretch of cheap capital in modern Multifamily history.

ZIRP, agency lending dominance, unrelenting rent growth, and consistent cap rate compression all did much of the work that operators previously had to do themselves by buying right, executing a business plan, and operating with excellence.

The result was that the market was abundantly forgiving, until it wasn't.

This unforgiving reset began in March 2022 when rates began their upward climb. This structural change in the Capital Markets rewrote the rules and math behind how Multifamily must be acquired, operated, and invested in as a profitable asset class.

This newsletter is Part 1 of a two-part mini comparison series.

Today we'll focus on what changed across the sector between the two eras, and then next Saturday I'll get into what has changed at the property level.

Let me know what you think of this comparison format. Enjoy!

The Debt

1. Agency Dominance: Then vs Now

For most of the 2010s, Fannie and Freddie were the easy button.

The program, the terms, and the leverage were all relatively stable (and therefore predictable) in the post-GFC era.

Today, the agencies still anchor many Multifamily capital stacks, but per Newmark's 1Q26 capital markets report, private debt funds now hold roughly a third of construction lending and bank originations are up 58% YoY.

The lender universe has evolved, and there are a wide array of options to choose from in 2026.

Building and maintaining debt fund relationships is now essential to executing in the current elevated interest rate environment. Debt optionality is a Multifamily operator's best friend right about now.

2. Bridge Debt: Triumph vs Fallout

From 2018 to 2021, floating-rate bridge debt was every syndicator's growth engine for two reasons:

First, it was an intoxicating blend of cheap, high-leverage, interest only, and included a rate cap that cost almost nothing.

Second, it was the only way to make most deals pencil, because the in-place DYs and DSCRs of peak priced deals were far below Agency requirements.

Today, those same bridge loans are necessitating capital calls, requiring rescue capital, and contributing to the foreclosure story.

I covered this directly in TMD 045 (using fixed debt at the peak and bridge debt at the trough), and again in both TMD 056 and TMD 058 as the data caught up to the thesis.

Knowing when to use which type of debt is critical.

3. Refi: Easy Mode vs Hard Mode

For an entire generation of operators, the cash-out refi was a predictable plan B behind a disposition.

Buy it, fix it, refi it, and repeat. "Extend and pretend" from 2010-2021 looked like a healthy cash-out refinance at a similar (or cheaper) cost of capital as a means of crystallizing a promote and continuing to own and operate an appreciating asset (NOI growing + cap rates compressing) until an opportune disposition moment arrived.

Today, "extend and pretend" is largely lender driven, and many borrowers are at their lender's mercy.

I wrote about this in TMD 049 (debt maturities as a 2026 risk), and the Newmark data backs it up: across maturing securitized Multifamily loans, 48% sit below 1.25x DSCR.

Many of those deals will need fresh equity to refinance, or they'll go back to the lender.

4. Rate Caps: Line Items vs Deal Killers

A $50K interest rate cap in 2019 is now a $500K-$1M rate cap today on the same loan size.

That cost now shows up as a real drag on returns, and these costs can swing a deal from investible to killable, or from being able to be refinanced to not.

Rehedging in today's environment is not a gimme, especially at tighter strikes for more challenged properties.

The Economics

5. Cap Rates: Compression vs Expansion

In the 2010s, appreciation did the work. Multifamily owners bought at a 5.0% cap rate, sold at a 4.5% cap, and the value-add was embedded in both the NOI growth and in the multiple expansion.

(For reference, a 5% exit cap equates to a buyer paying 20x the NOI for the property, where a 4.5% cap equates to a 22.2x for the same NOI).

In many cases today, the going-in cap rate is tied to the cost of debt (i.e. positive leverage) based on the need for immediate cash flow to mitigate risk.

I broke this down in TMD 008 (Cap Rates & Due Diligence) and TMD 011 (positive vs. negative leverage), and my 2025 prediction that cap rates had not peaked is still tracking.

Said differently: in the old era, the market gifted Operators with positive returns. In this era, they must be earned.

6. Mezz & Pref: Accelerants vs Rescue Capital.

One of my college coaches had a silly saying, "same lady, different dress", which was how he described running the same offensive play concept from a different formation, personnel grouping, or combination thereof.

Mezz and pref fit this "same lady, different dress" analogy perfectly: In 2019, a 12% pref piece juiced underwritten IRRs and made deals that much more exciting.

But in 2025, that same pref piece is what saves a deal from foreclosure, or it eats into common equity that's already underwater.

The arithmetic is the same but the conversation is completely different.

7. Economics: Promote vs Cash Flow

The 2010s rewarded the IRR story. Sell the upside, hit the catch-up, and collect a nice promote.

Today's environment rewards yield-on-cost and DSCR sizing.

Investing in the current environment is boring but defensible.

The reason this matters: A sponsor with a business model that assumes only a two to three year hold period isn't structurally built for an environment where the hold elongates to six or seven years.

For more, I covered this in both TMD 011 (The Truth About IRR) and TMD 054 (5 must-know equity metrics).

The Equity

8. LP Investors: Appetite vs Scars

Retail LPs spent a decade believing that Multifamily was a like investing in a bond with tax benefits. It provided steady distributions, modest appreciation, and the occasional home run.

Then 2023 happened: Distributions getting paused or cut, capital calls getting issued, and sponsors going quiet.

Today, the bar to raise Equity is dramatically higher than it was just a few years ago, and it should be.

Institutional capital pulled back with value-add dry powder down 32% from its 2022 peak, per Newmark. I wrote more about the LP-side of this dynamic in TMD 009 (Raising Equity).

9. Sponsor: Proliferation vs Consolidation

From 2017 to 2021, it seemed like anyone with a pitch deck and a podcast could raise money to syndicate Multifamily deals (okay, not really, but you get the idea).

Today, the field of Multifamily sponsors is thinning.

In TMD 049 I wrote that mistimed aggression could be one of the biggest risks of 2026.

Then in TMD 052 I predicted that syndicator struggles would go public this year and that operators would scale down to middle market, and both calls are still tracking.

The operators who survive this cycle will be the ones who didn't try to buy as much as they possible could from 2020-2022.

In fact, I expect a somewhat inverse relationship between AUM acquired from 20202-2022 and survivability to 2030.

10. Below Replacement Cost: Then vs Now

Savvy investors focused on buying below replacement cost in both eras, but the difference is what comes next.

In 2012, demand was waiting on the other side of the basis trade. Buy below replacement cost, ride the recovery, and sell to the next buyer doing the same for a healthy profit.

In 2026, the basis trade is emerging again, but supply is still working through and absorption has decelerated sharply (Q4 2025 absorption down roughly 80% versus Q2 2025 per Yardi).

Basis is necessary, but it's not sufficient on its own. I made basis the first of four defensive strategies that I outlined in TMD 057, but all four must work together to have predictable success in today's environment.

11. Assumable Debt: Overlooked vs Attractive

The whole bid composition changes when the in-place debt is part of the investment thesis.

In TMD 047, I walked through 10 lessons from the $60M, 365-unit, three-property acquisition that my team and I closed in December 2025, and the three HUD loan assumptions were one of the most important variables in making those deals pencil.

Acquiring 80s vintage value-add deals with institutional equity is extremely difficult today, but the sub-3% weighted average cost of capital that resulted in double digit cash flow from day-1 allowed us to raise nearly $30M from a $1B+ Fund investor.

The takeaway: Don't overlook assumable debt, especially as interest rate volatility persists. Assumable debt was once a footnote, but now it can become an investment thesis.

Weekly Listen

This week's listen is a special-edition Walker Webcast from last summer. In it, Willy Walker brought together an extraordinary lineup including Admiral James Stavridis being in the Pentagon on 9/11, General David Petraeus on leading in high-stakes environments, and former Navy SEAL and astronaut Chris Cassidy on turning fear into focus.

The themes throughout, from service to resilience to preparation under pressure, fit this Memorial Day edition perfectly. Anthony Shriver said it best in the episode: "There's no more joy than a life of service."

A meaningful listen for the day, and a reminder that the lessons that build great leaders translate well beyond the battlefield.

You can listen to the full episode here.