The multifamily asset class was considered a strong bet in CRE investment for many years. In the last year, this asset class has found itself in a state of transition, as multifamily lending has become more and more challenging. Several factors including rising vacancy rates, cooling rent growth, and rising interest rates have caused lenders to be very cautious in today’s market when lending on apartment complex sales.

Below is an example of a recent experience we’ve had that speaks to the challenges in today’s market.

Since July, we have been working on the sale of an 8-unit apartment complex in Spokane. It is a great building, well maintained with a new roof, updated vinyl windows, and is freshly painted.

When it went under contract in August, the issues found during the inspection were minimal, and a small price reduction was agreed to with the seller. At time of contract the buyer was quoted 25% down and 6.75% interest rate. Almost weekly we received updates from the lender that rates were creeping up. The lender at time of contract was basing their Debt Service Coverage Ratio on a pro forma basis, rather than actuals, which was surprising to us.

We hit the exact value on the appraisal and were hoping to move forward to close by mid-October. Then the stark realization hit, interest rates were now at 8.25%, the lender would no longer base DCR on a pro forma basis and the buyer would be required to put 45-55% down. After speaking with every traditional lender in town and reaching out to a laundry list of hard money lenders, our buyer still has not found a viable option that works for them. We proposed an owner financing scenario to the owner as our last resort but the seller has indicated he is not willing to carry a contract.

This is an example of the state of multifamily lending in Q4 of 2023. The days of 25% down and an interest rate below historical averages are a thing of the past. Seller financing, assumable financing, and cash are going to be the main deal movers through the rest of this year and well into 2024.

Reach out to us for off market seller financing deals in our pipeline.


SVN Cornerstone Multifamily Team

Nate Gant is an Advisor with SVN Cornerstone. Nate has been an active member of the Eastern Washington real estate community since 2010. He has brokered more than $100 Million in real estate transactions, specializing in land development, REO and investment properties. To get in touch with Nate, email or call 509.993.4440.

Jordan Lester is an Associate Advisor with SVN Cornerstone. Jordan served as a brokers assistant for 3 years with SVN Cornerstone before becoming a full time broker. Jordan specializes in the multifamily sector of commercial real estate. To get in touch with Jordan, email or call 509.496.6922