What Savvy Investors Are Doing in 2025 and What That Means for Multifamily

After a decade of aggressive capital deployment and low interest rates, the commercial real estate landscape has fundamentally shifted. Operators who relied on easy money and cap rate compression are now navigating a very different environment—one where inflation is sticky, capital is cautious, and execution matters more than ever.

Debt markets have tightened considerably. Most lenders are capping leverage at 60% LTV or lower, and even with the Federal Reserve signaling potential rate cuts in late 2025, the cost of borrowing remains elevated relative to the last cycle. As a result, new multifamily development has slowed dramatically, with many projects shelved indefinitely due to unfavorable financing terms and rising construction costs. Transaction volume is still well below historical norms, and many groups that scaled quickly using floating-rate or short-term bridge debt are now facing refinancing challenges and liquidity constraints.

Despite these short-term headwinds, long-term fundamentals for multifamily remain strong. The United States continues to face a structural housing shortage—particularly in the workforce and attainable segments. Homeownership remains out of reach for many, with elevated mortgage rates and persistent price appreciation widening the rent-versus-own gap to record levels. According to Redfin, monthly mortgage payments for median homes are now 40% higher than average market rents in many metros, making rental housing not just an option, but a necessity for millions.

This affordability dynamic is fueling continued renter demand, particularly in secondary and tertiary markets with strong job growth and lifestyle appeal. As residents seek value without sacrificing quality of life, well-managed multifamily assets in these regions are positioned to outperform. But capital is no longer flowing indiscriminately. Institutional investors are back—but they’re being highly selective. They’re looking for partners who combine rigorous underwriting with cost discipline and operational clarity.

At Hammer & Hampel, we’ve experienced this shift firsthand. Investors today care less about top-line projections and more about durability of income, cost controls, and downside protection. The questions we’re fielding most often aren’t about five-year IRRs—they’re about expense growth, insurance risk, tax reassessments, and lease renewal strategies. And we believe that’s exactly where the conversation should be.

That’s why we’re doubling down on the fundamentals. Clean, transparent financials. Landlord-friendly markets with manageable regulatory risk. Conservative leverage and fixed-rate debt where possible. And, above all, a hands-on management approach that prioritizes resident experience and asset performance. In this market, every rent projection must be defensible. Every cost assumption must be vetted. And every business plan must be grounded in reality.

The era of easy growth is over. Cap rate compression won’t bail out mediocre execution. But for disciplined operators—those who know how to manage both assets and capital—this moment presents a window of real opportunity. As other groups sit on the sidelines or try to unwind overleveraged deals, well-prepared sponsors have the chance to buy quality assets at more reasonable valuations and create long-term value.

We believe the next 12–24 months will reward clarity, consistency, and operational depth. Investors who prioritize durable income, downside protection, and transparent reporting will be best positioned—not just to weather the current cycle, but to thrive in what comes next.

If you’re interested in learning more about investing alongside us in Iowa visit our website, Hammerandhampel.com.