Why I’m Buying Large Multifamily in 2026 (Commercial Real Estate Outlook)
Summary
This article from BiggerPockets discusses the commercial real estate market outlook for 2026. While primarily focused on commercial properties like multifamily (5+ units), it provides insights into market dynamics relevant to all real estate investors, including those considering long-term investments in STR. Hosts should understand the factors influencing property values, particularly how interest rates and cap rates impact valuations.
Key Insights
- •Multifamily pricing is determined by a combination of net operating income (NOI) and cap rates. Rising interest rates and treasury bond yields push up cap rates, decreasing property values.
- •Lenders have tightened underwriting, reduced LTVs, and required higher debt service coverage ratios making it harder to get loans.
- •Commercial real estate values, including multifamily, have declined significantly in recent years due to factors like rising mortgage rates and tighter lending criteria. Multifamily pricing is down between 15-25% nationally, and office is down even more, between 25-35%.
Action Items
- ✓Hosts considering purchasing any property should understand the impact of cap rates and interest rates on valuation and cash flow.Effort: lowImpact: medium
Common Mistakes
- ⚠Failing to account for the potential for cap rate increases and interest rate changes can lead to incorrect property valuations and decreased profitability.
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