Wish You Bought Real Estate in 2012? A Similar Opportunity Just Arrived in Multifamily

In This Article

After reaching an all-time high in 2007, single-family home prices collapsed 27.4% until hitting a low in 2012. Since then, the Case-Shiller U.S. National Home Price Index has exploded by 141.23%. 

Don’t you wish you had a time machine and could buy a home at 2012 prices? 

You don’t, and you can’t, of course. But you can invest in another type of real estate that’s coming off a similar collapse in prices. 

Multifamily apartment building prices have fallen by 23.5% since reaching a peak in July 2022, according to CoStar. The Freddie Mac Multifamily Apartment Investment Market Index (AIMI) fell 28.1% before bottoming out and starting to rise again. 

And you don’t need millions of dollars to invest in multifamily properties. You can invest fractionally with $5,000 and enjoy all the cash flow, appreciation, and tax benefits of ownership. 

Why Multifamily Looks Like It’s Bottomed Out

First, take a moment to remember the narrative around real estate in 2011-2012. The mood was bleak—all you read were doom-and-gloom headlines, and the narrative was all negative. In other words, there was “blood in the streets.” 

Today, you are in the same mood in multifamily real estate. Investors are running scared after three years of capital calls and distressed sales. 

Every investor knows the famous Warren Buffett’s advice to “be fearful when others are greedy, and greedy when others are fearful.” But the mood among investors is far from the only reason to consider multifamily right now. 

Dropping construction starts

What drives market prices? Supply and demand—and multifamily housing supply rose sharply between 2021-2025. 

But after peaking at 614,000 in late 2022, multifamily unit housing starts have dropped to 370,000 as of February. You can thank the “blood in the streets” for that. 

In 2024 alone, new multifamily construction starts fell by 25%. 

So yes, the U.S. saw a lot of housing construction post-pandemic. But that surge in new construction has passed and crashed, while the country remains in a housing shortage. 

Continued housing shortage

A 2024 report by Zillow estimated that the U.S. is still short 4.5 million housing units. Most markets don’t have to worry about an oversupply of housing. Quite the opposite. 

Rising rents

Multifamily prices are calculated based on rental income. And rents keep rising faster than inflation. In fact, rents are one of the primary drivers of inflation. As of February, rents nationwide are up 4.2% year over year. 

Rising prices

After hitting a low in 2024, multifamily prices have started rising again. 

The Commercial Property Price Index (CPPI) index, calculated by MSCI Real Capital Analytics, shows multifamily properties hitting a low in February 2024, leveling out over the next few months, and rising since. 

The CPPI also shows multifamily prices far below their long-term trend line:

That means they have some serious catching up to do, marking now as the perfect time to buy into the market.

Multifamily cap rates are starting to compress again

After seeing how low they could go in 2021, multifamily cap rates expanded sharply from 2022-2023. But in 2024, they stabilized, and in the second half of the year started shrinking again, according to the CBRE’s 2024 Cap Rate Survey.

As a refresher, cap rates are the other part of the price equation for commercial real estate. You divide a property’s net operating income (NOI) by the cap rate to come up with the value. 

Lower cap rates mean higher prices. So, one of the drivers of rising multifamily prices is cap rates turning around and compressing again. 

How to Invest in Multifamily Without Betting the Farm

I get it: There’s a lot of uncertainty in all financial markets right now, real estate included. The Trump tariffs and trade wars, as well as recession uncertainty, all make for fearful investors. So, how can you invest in multifamily while keeping your risk in check? 

Invest small amounts

If you invest in a multifamily syndication yourself, it typically requires a minimum investment of $50,000 to $100,000. I don’t like that. So, I go into these investments with other people through a co-investing club. 

It’s how I practice dollar-cost averaging with my real estate investments, steadily investing $5,000 each month. 

Protect against recession risk

Some investments are recession-resilient, continuing to thrive even during downturns. 

For example, I’ve invested in mobile home parks with tenant-owned homes. If a renter has to choose between paying a $500 lot rent and paying $6,500 to move their mobile home, which do you think they’ll pay? 

Likewise, I’ve invested in multifamily properties that get a property tax abatement for setting aside 50% of their units for affordable housing. Those units have a waiting list—imagine how much more the demand would rise in a recession.

Here are other recession-resilient real estate investments for more examples.

Don’t count on compressing cap rates

The trend line looks positive for cap rates compressing again. But I’m still not counting on that for the success of my investments. 

In my club, we generally like to see strong cash flow in the multifamily investments we vet. We like collecting distributions, like properties that don’t rely on price improvements for returns. 

With strong cash flow, the operator (and you) can sit back and hold the property long term, waiting out rough patches—all while collecting plenty of rental income. 

Diversify with other property types

Yes, it looks like a great time to buy multifamily properties. But you should look to diversify your portfolio. That includes taking a look at industrial properties, mobile home parks, raw land, hotels, and vacation rentals. 

I don’t have a crystal ball, so I can’t predict the next hot asset class. And I don’t have to because I invest in so many different types of properties. 

Diversify across states

I have cash tied up in over 30 properties across 13 states and counting. 

Again, no one knows where the next “hot” market will be. Who cares? Spread your money across many geographical markets, and you’ll catch some of the hot ones. 

Diversify across other passive investments

Syndications are just one type of passive real estate investment but aren’t the only option. You can also invest in private partnerships, private notes, secured debt funds, and real estate equity funds. That also helps you invest for different timelines, including some investments as short as nine months. 

Final Thoughts

Multifamily properties experienced a bear market from 2022-2024, along with the losses and fear that come with them.

The bottom of a bear market doesn’t look and feel optimistic yet. The press and mood remain mostly negative at the bottom before it becomes obvious to everyone a new bull market is starting. That’s precisely the time to buy in. 

As someone who invests steadily every month, I don’t advocate trying to time the market. But as far as I can tell, most market metrics are signaling the bottom of the bear market and the beginning of a new bull market in multifamily. 

It doesn’t feel like the giant party that it was in 2021. And that’s precisely what makes it a better time to buy.