Why 2026 Might Be the Best Vintage You’ll Ever Skip

Let’s be honest, the good news in multifamily is limited these days. Supply is slowly waning, demand seems to be firming up, and foreclosures are finally happening. There are bright spots too, like San Francisco, San Jose, and the suburban Midwest. That’s all good news, but it isn’t having much impact on the industry as a whole. We still have operating costs rising faster than rents, muted transaction volume, interest rates higher than the market would like, and operators leaving multifamily altogether. And because so much money went into Sunbelt multifamily, sentiment won’t improve until those markets perform better.

If you think 2026 will be a great vintage for apartment acquisitions, what do you do? Let’s look at how operators approach acquisitions, market by market.

Sunbelt

If you’re a Sunbelt investor, there’s a good chance your portfolio is under stress. Falling rents, lower occupancy, higher insurance costs, and growing deferred maintenance are all weighing on your properties. On top of that, lenders are taking back over-leveraged assets that were bought at the peak. That’s painful, but it helps the market clear the distress and pushes owners to improve properties and make them sellable. And a market with more product to sell has better price discovery, which leads to greater predictability and a healthier environment. The product is coming, but the volume isn’t here yet. So what do you buy today?

The trouble is that without rent growth, new deals are hard to underwrite. A pro forma won’t work with 0% rent growth and 3% expense growth. Assuming expenses are 50% of revenue, that scenario produces a 3% drop in net operating income. To offset the short term (the next 12 to 24 months), the medium term (24 to 60 months) has to accelerate faster than the norm. Otherwise, you’re underwriting significant cap rate compression, or a refinance well below today’s rates. Who’s willing to underwrite that today? And even if you do, who will believe you?

So you can’t buy any run-of-the-mill deal. It has to be one with a story, where the going-in yield is high, occupancy sits below the submarket average, units can be renovated to capture upside, or there’s capital markets arbitrage. This has always been the case, but now it’s non-negotiable. In fact, it’s the bare minimum to earn a return anywhere near acceptable today.

Beyond that, you have to assume capital will accelerate once rents grow, because investment firms still have a mandate to follow migration patterns. This, I buy into. If more money flows into the Sunbelt, cap rates will fall once again. How far? Nobody knows. But investors will have to raise their rent assumptions, lower their exit cap rates, and take on more leverage to make deals work. So if you can find a deal now, or make a case for one, the timing may work in your favor.

Midwest

If you’re a (suburban) Midwest investor, your portfolio is pretty boring. Year after year, you get modest rent increases, flat NOI in a bad year, and positive renewal trade-outs today. It isn’t lighting the world on fire, but it performs, paying your investors and your lenders without any trouble. Cap rates are competitive in the suburbs, so you’ll have to take on a small amount of negative leverage to get a nicer deal done. These are the easiest deals to underwrite, yet some of the hardest to sell to investors, because the returns just aren’t great. After all, when the stock market is up ~9% year-to-date and bonds yield a tax-free 4.5%, a boring Midwest deal had better be a rock-solid performer.

In these markets, it seems the best investments are held the longest. That doesn’t mean keeping a single asset forever, but rather selling and trading into another, newer property with a similar profile. And if you have a long-term horizon, you might get lucky and catch cap rates falling during your hold period. Ideally, you’re clipping a tax-advantaged coupon with the option to sell if the market gets hot. It’s not the sexiest pitch, but it has done incredibly well over time. So if you have the investor base for this, I’m sure you can find deals today.

San Francisco Bay Area

If you invest in the Bay Area, you’re watching San Francisco go vertical while you wait your turn on the AI gravy train. San Francisco has seen major rent growth, but it’s also a market with few true market-rate apartments, since the majority are rent-controlled. So to buy a deal today at a mid-4 cap, like the broker OMs suggest, you have to assume rent growth above 5% a year, an exit cap in the 4s, and long-term tenants who vacate even though they never leave during your hold. Oh, and you also have to ignore future regulations on unreinforced masonry and turn a blind eye to the outdated electrical in your building. You can play hot potato with the regulations, and I could even get behind the high rent growth and low cap rates, since there’s data behind that, but I can’t get behind assuming long-term tenants will vacate. We’ve owned numerous rent-controlled properties, and we’re amazed at how long people stay in their units. It’s unpredictable, and if your model depends on it, you’re in trouble.

We own all over the Bay Area, and we most recently bought a portfolio in San Jose. Those assets are performing well, and we’d love to find more like them. There’s even justification to be more aggressive on rent and renovation assumptions, given our recent experience. The problem is that despite improving operations for everyone, there aren’t enough real sellers. Pricing expectations have moved ahead of these rosier assumptions as sellers try to recoup lost value. Deals bought today are often priced below what they sold for almost 10 years ago, causing sellers to remain hesitant. It feels like we’re seeing everything, on-market and off, yet few deals are actionable at returns our investors would find interesting.

Final Thoughts

In the end, without rent growth, it’s hard to build a scenario that works. Few markets have real rent growth, and even where it exists, values aren’t what they once were and sellers are reluctant to transact. So you’re left with a hard choice: wait for the math to change, or find the rare deal with a story good enough to work today. Neither path is easy. But the operators who stay disciplined now, who refuse to underwrite a recovery they can’t defend, will be the ones still standing when capital returns. And it will return. It always does.