👨‍🔬 Only 11 states pass the affordability test

👋 Happy Sunday, Best Ever readers! 

In today’s newsletter, states fail the affordability test, the five-year takes the lead, rent fees roll up, industrial steadies, tenants pay on time, and much more.

🏢 One of our Inner Circle members just closed on a 188-unit multifamily acquisition in Arlington, Texas. Learn how Kevin McCarthy leverages the Best Ever Inner Circle to surround himself with experienced operators, pressure-test ideas, and solve real business challenges. See why he calls the community "a genuinely valuable addition" to how he operates his business. Learn more.

📚 Our library of live education keeps growing. Watch free sessions on capital raising, tax strategy, underwriting, and much more from CRE experts. Browse now.

Let’s CRE!

🗞️ NO-FLUFF NEWS
CRE HEADLINES

🏗️ Builder Backstop: New draft legislation would direct Fannie Mae and Freddie Mac to buy and securitize homebuilder construction loans, aiming to lower borrowing costs and boost supply by shouldering more risk on brick-and-mortar projects.

🏷️ Full Disclosure: Six states — including MN, VA, and CO — now require landlords to fold every mandatory fee into one all-in rent price after 81% of renters said they prefer seeing the full monthly cost upfront.

💵 Reserve Gap: Apartment repair costs have outrun the reserves set aside to cover them, with Fannie Mae and Freddie Mac still requiring roughly $250 per unit annually even as flooring replacements top $11,000 in some markets.

🏭 Steady Ground: The national industrial vacancy rate has held at 8.8% in May as a cooling construction pipeline stabilizes supply, while in-place rents have climbed 5.2% YoY to average $9.12 PSF.

🏘️ Collections Climb: On-time rent payments at mom-and-pop rentals have ticked up 22 bps from a year ago to 83.8% in June, ending a 34-month streak of annual declines — the first yearly gain since early 2023.

🏆 TOP STORY
ONLY 11 STATES PASS THE AFFORDABILITY TEST

The math of homeownership now turns on which state line you fall behind. A nationwide shortage hovering near four million homes has hardened into a regional divide, and a fresh 100-point scorecard grading all 50 states and Washington, D.C., on affordability and homebuilding shows that gap widening.

The grade splits evenly between how affordable homes are for local earners and how actively each state builds to meet demand. No state earned an A+, a reminder that even the strongest performers have room to run.

• Indiana Tops the Class: Indiana climbed from No. 4 to No. 1 with an A (76.3) on a well-rounded scorecard rather than a single standout metric. Its median home of $295,810 takes just 28.3% of median household income, under the 30% affordability threshold, while Iowa held at No. 2 with the lowest income share in the country at 25.4%.

• The Rest of the Top Five: South Carolina (No. 3) and Texas (No. 4) hold A-range grades on the strength of competitively priced new construction — South Carolina delivers new homes 5.7% below existing inventory, and Texas accounts for 14.6% of all permits issued nationally. North Carolina rounds out the top five at No. 5, where new homes also price below existing stock.

• The Coasts Stay Stuck: Every A and B grade belongs to a Southern or Midwestern state, with Western states averaging a 41.8 score and the Northeast just 30.0. New York fell to last at No. 51 with a score of 8.5, where the median listing eats 55.2% of median income and permits run less than half its population share.

The year's sharpest climbs came from Delaware and Utah, each up 12 spots, while New Jersey, Maryland, and Alabama each slid eight as solid incomes failed to offset thin construction.

The affordability gap doubles as a rental demand map. In high-cost states where ownership consumes 40% or more of median income — Utah, Colorado, and New York among them — a blocked path to buying keeps households renting longer, supporting apartment occupancy and rent growth even where new supply lags. The affordable Midwest and South leaders present the inverse: an accessible ownership off-ramp that can soften renter retention, in the very regions where most apartment supply has landed.

THE BOTTOM LINE

Just 11 of 50 states and D.C. have a median home their median earner can afford, and nearly all sit in the South or Midwest. For multifamily, the coastal and Mountain West markets where ownership stays out of reach are where renter demand holds firmest, while operators across the affordable building belt will work harder to keep residents who can increasingly buy. Where for-sale supply stays tight and expensive, the case for rentals only sharpens.

🌟 BEST EVER INNER CIRCLE
MEMBER SPOTLIGHT: KEVIN MCCARTHY

Last week, Inner Circle Founding Member Kevin McCarthy and his business partner, Ryan Morehead, closed on a 188-unit multifamily acquisition in Arlington, Texas, adding another milestone to their growing $180 million AUM portfolio.

Kevin is Managing Partner at Westline Equity Partners and has been part of the Best Ever Inner Circle since day one. As an active multifamily operator, he's in the trenches every week; acquiring deals, raising capital, and sharing what's working with fellow members while learning from operators across multiple asset classes.

💡 The Best Ever Inner Circle isn't another mastermind. It's designed to be an extension of your business, a room where experienced operators bring real challenges, pressure-test ideas, and help each other make better decisions, faster.

Think you'd be a good fit? Schedule a quick call with AJ to see if you qualify for membership.

💰 CRE TRENDS
5-YEAR CONDUIT LOANS TOP 10-YEAR AS CMBS STANDARD

The 10-year conduit loan spent two decades as the closest thing CMBS had to a sure thing. In 2019 it accounted for 95.6% of originations. By mid-2026 that share has collapsed to 12.3% of new issue counts, and the five-year structure that was once a fringe product now runs the market.

• The Speed of the Break: The shift happened in barely three years. Ten-year loans held more than 91% of loan counts as recently as 2022, then fell to 53.7% in 2023, 24.2% in 2024, and into the low 20s through 2025 before reaching today's single digits. Borrowers traded duration for the option to refinance or reposition if conditions move.

• Cheaper but Harder to Get: Pricing is no longer the obstacle. Ten-year spreads ballooned to 301 bps in 2023, then tightened to 201 bps by 2026 as the best collateral pulled premiums back toward pre-2022 levels. Even so, originations stay rare, a sign that sponsor quality and low leverage now gate the long-dated deals.

• Where Risk Still Prices Wide: The retreat has been uneven across property types. Retail posted the tightest 10-year spread at 216 bps by 2025, while lodging and office stayed elevated after peaking at 349 and 320 bps, respectively, in 2023.

The 10-year loan hasn't vanished, but it has been recast as a niche product reserved for best-in-class sponsors and assets, with a heavy wave of office maturities in 2026 testing how much appetite remains for long-term commitments.

🎓 BEST EVER LIVE EDUCATION
SESSION REPLAYS. AVAILABLE ANYTIME.

Capital raising. Tax strategy. Private lending. Underwriting. The topics that matter most to CRE investors are sitting in our webinar library right now, and every session is free to watch.

Recent replays include a deep dive on vertical integration as a risk-management tool, a breakdown of checkbook IRAs versus solo 401(k)s for real estate investing, and a session on private debt strategies targeting double-digit annual cash flow. Past sessions also cover capital raising systems that scale beyond the founder, land entitlement as an underused return driver, and tax strategies most investors overlook entirely.

These aren't recycled webinars. Our partners bring operators and experts who've actually built the businesses they're talking about, and every replay is built to apply directly to your next deal.

No live attendance required. No scheduling around someone else's calendar. Just watch and learn.

🎙️ THE BEST EVER CRE SHOW
HOW TO TURN A DISTRESSED PROPERTY FAST

A 256-unit property running at 72% occupancy, with a caving roof and an armed guard at the door, carries a return that hinges almost entirely on speed. On a deal that size, empty units can bleed $50,000 to $70,000 a month.

This week on the Best Ever CRE Show, Candice and Corey Muldrow of M Group Capital joined Matt Faircloth to break down how they take distressed multifamily from chaos to cash flow, often in about 120 days.

• Overstaff Before You Close: The Muldrows load up on maintenance and leasing staff ahead of takeover, knowing a property in the 60% to 72% range hides deferred maintenance and ignored work orders. That depth up front is what makes a 30-unit-a-month turn pace possible.

• Budget for the Dip: They carried roughly $1 million in operational reserve on the Dallas deal to cover negative carry as occupancy fell. Moving fast meant they barely touched it, ending with a surplus on a $3 million renovation.

• Let Occupancy Fall First: Rather than chase a quick lease-up, they cleared out nonpaying and problem tenants immediately, dropping the property from 72% to 50% before building it back. Six contractor crews turned units at pace, and the full reset took about 120 days.

That urgency reshapes the marketing budget. With vacancy bleeding tens of thousands a month, the $8,000 to $10,000 the Muldrows put toward billboards, call centers, and listing services pays for itself quickly. Now they're aiming that operating muscle at a different target — hunting distressed operators rather than distressed buildings, picking up clean assets from owners days from foreclosure. 

Given the choice between an 18% IRR on a turnkey deal and a 20% IRR that demands sweat equity, they take the clean one every time.

🎙️ Listen to the full episode here.