release edition [049]

read time [6 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:

• Risks: 10 to Avoid in 2026
• Weekly Listen: Howard Marks

Risks

To many investors, Multifamily investing is a sport or a game.

But, as in sports, it's critical to understand which quarter we're in and act accordingly. Going for it on 4th down from your own 10 yard line in the first quarter doesn't make sense. And sometimes it's simply best to punt.

2026 is going to be a year where many investors will go for it on 4th down. Some will get the first down, and others will wish they had punted.

With that context in mind, here are 10 risks that I'm thinking about going into 2026.

1. Supply

It's no mystery that new supply is the anchor that drags down near-term rent growth in Multifamily.

The number one risk to a successful investing strategy in 2026 is investing in high supply markets without the fundamental discipline to use conservative assumptions and achieve a compelling cost basis.

Here's why: The difference between 0% versus 3% rent growth in year-1 of a 5-year hold period can be 100-150 basis points of total return and 15-20% of a Sponsor's total promoted interests. Read that again.

2. Affordability

If the SFR market continues to soften, then homes may become relatively more affordable to prospective buyers, which may further soften demand for Multifamily.

I don't expect this effect to be material on Multifamily occupancies nationally, but it's something to watch heading into 2026, especially in many of the markets listed below.

The RealPage chart below (top) demonstrates this reality, with five of the top 10 lowest occupancy markets in Texas where home prices are also rapidly declining according to the below ResiClub graphic (bottom).

3. Employment

Cracks are emerging in the job market, as evidenced by this recent post from Chris Bruen, the Chief Economist at NMHC, in which he wrote the following:

While the jobs data isn't perfect (ADP, I'm looking at you...), the trend is clear: The job market has stalled, and productive job growth (i.e. non-government and non-healthcare, which is quasi-government since it's subsidized through insurance) have flatlined.

This reality will produce ripple effects that are likely to be felt throughout the economy in 2026.

4. Credit Loss

Consumers are tapping out, and despite headlines of strong Black Friday sales, the growing BNPL ("buy now, pay later") phenomenon is an indication that consumers are struggling.

According to this article from Retail Dive, BNPL on Cyber Monday rose +4.2% YoY to $1.03B. The reality is that the top 10% of the wealth holders cannot prop up America's consumer driven economy into perpetuity.

As employment softens, spending will too, and a vicious downward cycle may emerge.

5. Alternatives

In 2025, several of our Multifamily properties have been competing with private landlords of single family, condo, townhome, and small multifamily properties.

I view this phenomenon as the "investor lock in" effect, in which these now "accidental" landlords are doing everything in their power to avoid selling in order to hold onto their ~2.5% mortgages from 2021.

Additionally, if any of the above negative trends become problematic (employment, credit loss) then renters will double up, downsize, relocate to more affordable markets, or move home to live with family, placing additional downward pressure on Multifamily rents, NOIs, and values.

6. Interest Rates

Consensus views are that short rates (Fed Funds, SOFR) will continue to come down, along with T-Notes and T-Bonds, but could this future price action already be influencing investor behavior?

The Q3 2025 CBRE underwriting data below demonstrates that buyers are already aggressively underwriting new acquisition opportunities ahead of anticipated future rate relief.

(Note: Read my 4 observations about this table here).

7. Insurance

In 2025, there were 13 named storms in the Atlantic basin, of which five became Hurricanes and none made landfall for the first time since 2015.

Assuming that this non-landfall season only occurs once per decade, there's a 90% chance that notable storm damage will occur in 2026 and insurance prices are likely to rise as a result.

Remember, losses aren't free, and today's losses get paid by tomorrow's customers. Make sure you are underwriting sizable insurance increases (10%-20%+ YoY) for 2027.

8. Debt Maturities

In case you may have forgotten, the wall of loan maturities is still there (see below). It's highly likely that many of the loans issued in late 2020 and early/mid 2021 will become actionable in 2026.

Unless NOI has grown significantly over that time period (40-50%+), those owners will have some tough decisions to make: cash-in refinance, sell at a loss, or give the keys back.

Two of these three scenarios will cause for-sale inventory to rise (leading to more market sellers), cap rates to widen (due to buyer's increasing their risk premium), and prices to fall.

9. Black Swans

The tough part about the unknown or unknowable is that it's, well, unknown and unknowable. Even so, it's important to consider downside risks when investing.

History shows that strange things can happen: COVID, Lehman, Enron, Tech Wreck, 9-11, S&L Crisis, Flash Crash, Cuban Missile Crisis, and the list goes on.

I'll be thinking a lot about downside risk and protection in 2026.

10. Mistimed Aggression

To conclude, I would argue that mistimed aggression in 2026 could be the biggest risk of them all.

Being too aggressive to acquire properties could have lasting and damaging effects, especially in higher supply markets.

Buying a property is like entering into a marriage: It's a long-term commitment that's painful and costly to reverse, so avoiding the bad deals is more important than buying the good ones.

Strategic patience will be our friend in 2026. Rather than doing something quickly and then waiting patiently, consider waiting patiently and then doing something quickly once a compelling opportunity arises.

Market cycles, especially in Commercial Real Estate, always take longer to play out than we'd like to admit or recall.

Did any of these risks resonate with you? Anything you'd add?

Hit reply and let me know!

P.S. my calendar is still open. Book a free call here.

Weekly Listen

This week's listen is a long form podcast interview of Howard Marks, Co-Chairman and Co-Founder of Oaktree Capital Management.

Since its launch 30 years ago, the firm has grown into a global powerhouse in alternative investments, with $218 billion in assets. In this episode of the Richer, Wiser, Happier podcast, Howard explains how to prosper over decades by avoiding disaster & aiming for “steady excellence;” why he believes “most AI companies will end up worthless;” & why he’s no fan of Bitcoin or gold.

You can listen to the full episode here.

Wrap Up

That's it for this week. I hope you found this edition of The Multifamily Download insightful and enjoyable.

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I always welcome your feedback. Reply and let me know what you'd like to see in the future.

Thanks for reading. See you next week!

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