The Math for Multifamily Investing is Broken. Here’s the New Model.

Why many owners are facing a painful "funding gap" at the closing table, and the strategic shift required to navigate today's market.

I want to talk about the biggest trap in multifamily right now. It's not just the interest rates. It's the math.

Across the industry, I see apartment owners feeling like "mortgage prisoners", trapped by high rates and unable to refinance on favorable terms. But the real trap isn't the rate itself, it's being mentally anchored to a set of assumptions that are now fundamentally broken.

The playbook that worked perfectly in 2021 will lead you straight to a painful funding gap today.

The Old Math vs. The New Reality

Think back to your last acquisition or refinance. The underwriting was likely based on a world that looked like this:

• THEN: Interest rates were in the 3-4% range.
• THEN: Aggressive double-digit rent growth felt inevitable.
• THEN: Expenses were predictable and lender requirements were flexible.

That world is gone. The new math of 2025 is governed by a harsher set of rules:

• NOW: We are in a "higher for longer" rate environment, with permanent loan rates hovering in the high 5s and 6s.
• NOW: Rent growth has moderated to low single digits nationally.
• NOW: Operating costs, especially property insurance, are soaring, putting pressure on your Net Operating Income (NOI).
• NOW: Lenders demand a much higher Debt Service Coverage Ratio (DSCR), typically over 1.25x, leaving far less room for error.

The Consequence: The "Funding Gap"

When you apply today's new, harsh math to a property that was underwritten with old assumptions, the result is a "funding gap."

It’s that painful moment when you discover your property's current NOI simply cannot support the loan amount you need at today's rates. This is the scenario that forces an unexpected and often substantial "cash-in refinance." It's a shock to the system for owners who thought their property was performing just fine.

The Strategic Shift: From Waiting to Re-Underwriting

So, what is the path forward?

The amateur investor is waiting for a miracle, for rates to return to 2021 levels. This is not a strategy; it's a passive hope.

The sophisticated investor, however, is doing something different. They are ruthlessly re-underwriting their entire world based on the new math of 2025. They are stress-testing their portfolios against this new reality and making proactive decisions.

Your Takeaway

Stop anchoring your strategy to a market that no longer exists. The feeling of being a "mortgage prisoner" comes from using an old map for a new world.

The path forward isn't about waiting; it's about mastering the new variables. When you have a framework to navigate this reality, with its higher expenses, moderate rent growth, and stricter lender requirements, you regain control. You stop being a prisoner of the market and start making strategic moves again.

If you're ready to start using the same frameworks the pros use for today's market, I've put them all in my Multifamily Capital Strategy Playbook. It’s a free, in-depth guide that provides the mental models you need to navigate your next high-stakes capital decision with confidence.