Understanding Market Cycles: Is Now the Right Time to Invest in Multifamily?

Whether you're a seasoned investor or just starting, the potential rewards of multifamily investments are undeniable—but so are the risks. This 2025 could present opportunities for multifamily investing, especially in markets with strong rental demand and population growth, but higher interest rates and inflation could pose challenges.

So, here's the question: Is now the time to dive into multifamily properties?

Take a look at what you need to know about multifamily investing this year:

• The Interest rates are expected to stay higher this year. This means borrowing will be more expensive, which could reduce the overall return on investment (ROI) for many multifamily deals. For those relying on debt financing, this could make the numbers less attractive. But don’t panic—alternative financing options, such as seller financing or joint ventures, might help you navigate the higher rates.

• But, despite rising interest rates demand for rental housing is expected to stay strong. With millennials and Gen Z still feeling the pinch of high homeownership costs, many are turning to rentals. This group values flexibility and affordability—traits that multifamily housing can easily provide.

• Across many cities, we’re seeing more rent control and rent stabilization policies put into place to keep rent prices from skyrocketing. While this helps renters, it can limit the potential rental income you can make as an investor. Understanding the local regulations where you’re looking to buy is critical in avoiding unexpected pitfalls.

• While tech is no longer a luxury in multifamily properties; it's expected. Integrating these kinds of technologies into your properties could attract a broader range of tenants, particularly younger, tech-savvy individuals. On the operational side, property management tech is a game-changer.

• It is clear—new construction is facing challenges. With rising material costs and supply chain delays, the number of new multifamily units being built has slowed. This, in turn, increases demand for existing units. For investors, this creates an opportunity to focus on well-located, well-maintained properties. Value-add investing (buying older properties, upgrading them, and raising rents) could be especially profitable in this environment. Fewer new units are entering the market, so improving older properties could offer great returns.

• The aging population means there’s more demand for senior housing options, such as 55+ communities or properties with accessibility features. Meanwhile, Generation Z is starting to rent. This group tends to prioritize modern amenities, flexibility, and sustainability—so consider making your properties more appealing to this cohort if you want to stay ahead of the curve.

• As more investors look beyond major metro areas, secondary and tertiary markets are gaining attention. These markets often offer lower entry costs, higher cap rates, and less competition, making them attractive options for those looking to diversify their portfolios.

Investors must always keep an eye on market cycles. We may see economic slowdowns, which could impact tenant demand. Being conservative with leverage and having a solid exit strategy in place will protect you in case the market takes a downturn.

The best time to invest will depend on your financial goals, the specific market you're targeting, and your ability to navigate potential challenges.