05/13/2026
One area of the market I’m watching closely right now is small multifamily (2–4 units). 👀
There are some pretty substantial pricing discounts showing up compared to where these properties were trading 4–6 years ago.
A lot of that comes down to cap rates, financing costs, and what’s happening in the larger multifamily/commercial market bleeding down into smaller properties.
At the peak of the market, a lot of multifamily properties were trading at cap rates in the 3.5%–4.5% range.
Today, many properties are trading more in the 5%–7% range depending on the location, condition, age of the asset, and rent stability.
That shift matters because even relatively small changes in cap rates can create major swings in value.
The problem is rents haven’t really increased enough to offset the higher financing costs and cap rate expansion.
In fact, multifamily rents in many areas have softened over the past couple years as a wave of new apartment supply hit the market. That rent pressure has impacted larger multifamily the most, but it’s also bleeding into smaller multifamily properties now too.
Single-family rentals have generally held up better.
Part of that is because single-family homes don’t really trade on cap rates the same way commercial real estate does. They trade more on supply/demand dynamics, monthly affordability, and the availability of long-term fixed-rate residential financing.
The condo market has also been under pressure in many areas.
But condos have their own unique issues right now:
• HOA deferred maintenance problems
• Rising insurance costs
• Special assessment fears
• Financing restrictions on certain complexes
• Competition from large amounts of new apartment supply
Commercial real estate is different because the debt structure is different.
A huge amount of commercial debt from the low-rate era is now rolling over into a much higher rate environment. Many owners have spent the last few years in “extend and pretend” mode — extending loans and hoping rates would fall or values would recover.
That runway appears to be ending for a lot of owners.
The result:
• Lower values
• Lower leverage
• Tougher refinancing
• Softer rents
• More distressed sellers
• More negotiation opportunities for buyers
Meanwhile, the stock market continues pushing toward all-time highs, with many investors arguing equities are historically expensive by traditional valuation metrics.
Real estate feels like the opposite right now.
Not every property is a deal — far from it — but there are definitely segments of the market where pricing feels materially more attractive than it did a few years ago.
Transaction volume is still pretty sluggish overall because:
• Buyers hate current rates
• Sellers hate current pricing
• Banks are tighter
• Everyone remembers 2021 values
That said, I do think there may be some real opportunities emerging right now for:
🏡 Buyers looking to house hack a duplex or triplex
💰 Investors searching for better cash flow opportunities
🔄 Landlords considering a 1031 exchange from a single rental house into small multifamily for potentially stronger ROI and scalability
And here’s the interesting part…
If rates eventually come down, rents resume growing, the economy stabilizes, or we see another wave of liquidity/QE in the system, buyers who acquired quality assets during this cycle may end up looking pretty smart in hindsight.
The math is starting to make a lot more sense on some of these deals than it did a few years ago.
If you’ve been curious about small multifamily investing, this may be one of the more interesting windows we’ve seen in awhile.
