What happens after a $117 million deal goes wrong?

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What a multifamily market crash taught us—and what’s coming next

On October 8, 2020, real estate investor Jonathan Twombly and I watched a $117 million multifamily deal unravel into a $60 million reality. That’s a 50% collapse, wiping out limited partners, forcing banks into haircuts, and leaving wreckage in its wake.

We called it. We warned about the froth, the dangerous short-term debt, and the unsustainable underwriting. And while it wasn’t popular at the time, we were right.

Now, it's May 2025—and it’s time to talk about what comes next. Because while the pain isn’t over, opportunity is starting to emerge. And for investors who are prepared, the next two years could be life-changing.

Here are Jonathan and I's 5 key takeaways about what’s on the horizon for the multifamily market.

1. This will be the greatest buying opportunity since the GFC

Multifamily values have already fallen 25–30% in many markets. But we haven’t seen the bottom yet. We are already seeing properties that once traded at $220,000 a door now selling at around $150,000. But the other shoe has yet to drop, Jonathan says.

Thanks to “extend and pretend” tactics by lenders, the pain has only been delayed—not avoided. As five-year debt issued in 2021 and 2022 comes due between now and 2027, we expect a second wave of short sales, foreclosures, and deeply discounted assets. If you have access to capital and can protect your downside, this is your window for great deals. You could be one of the investors who are currently finding deals that cash flow right away.

2. While Class A is trading, Class B & C are frozen and fragile

Top-tier assets in primary markets have already seen 20–25% discounts—we’re noticing this with luxury properties in places like Henderson, Nevada. But the real dislocation? It’s coming for mid-tier and workforce housing.

Why? During the low-rate frenzy of 2021, cap rate spreads vanished. The risk premium between a Class A asset in a top market and a Class C property in a tertiary city essentially disappeared. Now, investors are waking up to the real risks of older assets—higher maintenance costs, tenant turnover, and weaker collections. And with no yield cushion to offset that risk, pain is coming to B and C deals—which means there could be opportunities for Class C purchases at a 10 or 11% cap rate.

3. The market won’t “bounce”—it’ll drag

This isn’t a quick V-shaped recovery. In fact, we’re looking at a timeline similar to the GFC, when the multifamily bottom didn’t hit until 2013—five years after the peak. Owners can hold on longer in multifamily. There are fewer forced sellers. But that just means the downturn is slower, not softer. As the extensions expire, the clock runs out. Expect the real wave of distress to hit in 2026 and 2027. And if you’re positioned, you’ll be ready to buy smart and ride the next upcycle.

4. We’ve seen this movie before

In 2009, we were buying houses for $0.50 on the dollar. Multifamily took longer—our first foreclosure purchases came in 2012–2013. That’s how this works. The bigger the loan, the longer the banks negotiate. But eventually, the math doesn’t lie.

The peak debt vintages of 2021 and 2022 are aging fast—and refi capital just isn’t there. Sponsors who used short-term bridge loans with interest-only periods and aggressive projections are about to learn the same lesson we saw play out a decade ago: debt kills.

So, what should you do now as a savvy real estate investor?

First, get liquid. Cash is king—it will be the key to stepping in when assets sell at a discount.

Second, build relationships with brokers now. They know the storm is coming and you want to be their first call when it hits.

Third, protect your downside. Buy at the right price, with long-term fixed-rate debt, and be patient.

Lastly, stay sharp and keep your eyes open. The market won’t announce the bottom—it’ll just arrive, slowly, one broken deal at a time.

Back in 2020, we were ridiculed for “trying to time the market.” But holding forever while ignoring the signs? That’s also timing the market. If you’re serious about building wealth in real estate, the next two years could offer your best shot in over a decade. But you’ve got to be ready. This window won’t stay open forever.

ResiClub chart of the week:

Last week, ResiClub’s Lance Lambert reported on how the supply-demand equilibrium—measured by shifts and levels in active housing inventory and months of supply—has shifted directionally in favor of homebuyers. 

Lance highlighted how this shift is now showing up in the pricing data—specifically the rate of change. His analysis found that 49 of the nation's 50 largest metro area housing markets have a weaker year-over-year home price shift this spring than a year ago.

As ResiClub has closely documented, the recent softening and weakening have been more pronounced in the Sun Belt, particularly in Gulf housing markets. The greatest weakness is evident in parts of Texas (especially Austin and San Antonio) and Florida (notably its condo market and Southwest Florida).

“That doesn’t mean buyers have all the leverage, or that the picture is the same in every market,” Lance explained. “But, directionally, homebuyers in most markets have gained leverage compared to the 2024 spring housing market.”

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