🧮 The new math driving multifamily cash flow

👋 Hello, Best Ever readers!

In today’s newsletter, renters stay put, rent control passes, the One Big Beautiful Bill advances, expenses keep rising, and more.

Today’s edition is presented by Capital Gains Tax Solutions. Selling a property shouldn't mean losing 20-50% to taxes. Let Capital Gains Tax Solutions create your personalized exit plan and calculate your savings today.

Let’s CRE!

🗞️ NO-FLUFF NEWS
CRE HEADLINES

Big Beautiful Bill: The House Ways & Means committee advanced a "One Big Beautiful Bill" amendment this week, which would reinstate 100% bonus depreciation through 2029 and offer immediate full write-offs for eligible property, potentially boosting CRE returns. The bill also makes QBI deductions permanent and extends Opportunity Zones through 2033. You can nerd out on all 389 pages of the bill here.

Lending Roars Back: The CBRE Lending Momentum Index jumped 13% quarterly and 90% YoY in Q1 2025, reaching its highest level since early 2023. Banks increased their non-agency loan share to 34%, while commercial mortgage spreads narrowed to 183 bps.

Retail Fizzles: Retail chains vacated six million more square feet than they leased in Q1 2024, the weakest performance since 2020. With 1,300 more store closures than openings amid high-profile bankruptcies, tariff uncertainty and inflation have tenants pausing, shifting leverage back to retailers.

Rent Control Passes: Washington State Gov. Bob Ferguson has signed rent control into law, restricting annual rent increases for existing tenants to 7% plus inflation or 10%, whichever is lower. Washington joins California, Oregon, and D.C. with statewide rent control while allowing unlimited rent adjustments for new tenants.

Hotel Slowdown: U.S. hotels face declining demand expected to persist through 2025, with all major hotel chains lowering RevPAR forecasts. March recorded fewer air travelers YoY and an 11.6% drop in international visitors as consumer confidence hit a five-year low amid economic uncertainty.

🏆 TOP STORY
RENTERS ARE STAYING PUT. LANDLORDS ARE CASHING IN.

Multifamily operators are enjoying the benefits of a surprising industry trend. Some of the largest landlords are seeing renter turnover at just 30% compared with the industry norm of 50%, largely due to an unaffordable housing market, a lack of rental supply on the coasts, economic uncertainty, the high cost of moving, and a shift to larger and more comfortable suburban apartments.

Operators are benefitting from improved pricing power on renewals as renters stay put while also improving cash flow through reduced turnover costs.

The formula to calculate annual turnover expenses is Number of units × Turnover rate × Cost per move-out. The National Apartment Association conservatively estimates the average cost of a single move-out at $1,800. So here’s the math for a 200-unit apartment complex:

• At 50% turnover: 200 units × 50% × $1,800 = $180,000 annually

• At 30% turnover: 200 units × 30% × $1,800 = $108,000 annually

So, for a 200-unit property, reducing turnover from 50% to 30% saves approximately $72,000 annually — a 40% reduction in turnover-related costs.

Key factors fueling decreased renter turnover, according to rental housing economist Jay Parsons, include:

• Tech-Enhanced Resident Experience: The pandemic shifted tenant preferences toward digital communication. Property managers adopted technologies streamlining maintenance requests while allowing staff to focus on high-value tasks, creating a more efficient resident experience.

• Return to Operational Fundamentals: As supply increased, managers refocused on service basics through faster maintenance, improved metrics, and enhanced aesthetics. This renewed commitment to measurable KPIs delivered significant improvements in satisfaction and retention.

• Centralized, Frictionless Renewals: Renewal processes evolved from paper packets to digital offers via apps and text. With specialist-managed communications and electronic signatures, residents renew without visiting leasing offices, significantly reducing friction in decision-making.

WHAT IT ALL MEANS

With transfers to other rentals being the primary reason for move-outs historically, Parsons highlights property managers as the unsung heroes behind this trend of increased tenant retention. As property managers continue refining their processes using technology and AI while maintaining a focus on resident experience, as long as mortgage rates and home prices remain elevated and new supply continues to moderate, lower turnover may become the new normal.

💰 CAPITAL GAINS TAX SOLUTIONS
A BETTER WAY TO SAVE ON CAPITAL GAINS TAXES

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• Multiple clients rescued failing 1031 exchanges with Capital Gains Tax Solutions’ specialized exit plans

Don't settle for outdated strategies. The Deferred Sales Trust advantage gives you flexibility, time, and control while allowing your wealth to compound as you slowly pay taxes over time.

But don’t wait! You must act before closing escrow. So, if you have an upcoming sale with at least $1M in proceeds or gains, let Capital Gains Tax Solutions create your personalized exit plan and calculate your savings today.

💰 CRE BY THE NUMBERS
BTR EXPENSES, AFFORDABILITY, OFFICE VISITS, AND MORE

+3.2%

Build-to-rent operating expenses increased 3.2% YoY in Q1 2025, outpacing rent growth of just 1.3%. The Midwest led regional performance as renters gained more housing options.

$80,000

A Zillow report reveals renters now need $80,000 in annual income to comfortably afford rent nationally, up 34.5% since April 2020, as rents have gone up 28.7% while median household income has only risen 22.5%. In eight major markets, households need over $100,000 for rent. 

30.7%

April 2025 was the third-busiest in-office month since COVID, with visits down just 30.7% compared to April 2019, an improvement over April 2024. This suggests the office recovery is regaining momentum after January and February setbacks.

23,000

Washington, D.C., leads major cities with nearly 23,000 downtown apartments completed since 2020 despite a national slowdown in downtown construction. Core areas now account for only 34.7% of new apartment completions — down 4.5% from pre-pandemic levels — with adaptive reuse dropping from 10% to 6%.

73.2%

Student housing pre-leasing averaged 73.2% across 200 schools in April, up 140 bps from 2024 and matching 2023 levels, though operators reported increased competition in lease-ups. A total of 21 universities were over 90% preleased in April, though many operators reported having to lower rents or offer incentives to attract tenants.

4.1% and 3.6%

Hotel operating costs rose faster than revenue in 2024, reducing profit margins with further declines expected in 2025. Expenses above and below gross operating profit grew 4.1% and 3.6%, respectively, outpacing revenue growth of just 2.3%.

🏘️ DEAL OF THE WEEK
$1.3 MILLION IN ADDED VALUE IN LESS THAN A YEAR

Derek Vickers added $1.3 million of value to this mobile home park property in less than a year.

Here's how he did it. 👇

🏢 Property Details: This 22-unit mobile home park was purchased in September 2020 in Cocoa, FL, with only 10 units occupied at the time of acquisition.

💸 Finances: Purchase price was $425,000 with $500,000 in capital raised.

💼 Business Plan: Exterior upgrades included new vinyl siding and skirting on existing homes, tree removal, paved roads, new solar lights, and new fencing and signage.

🍾 Results: The property achieved a 3.5 e in just 10 months. Rents increased from $600/month (all park-owned homes) at purchase to $695/month (all tenant-owned homes). The property valuation jumped to $1,750,000 at refinance in August 2021.

💪 Key to the Strategy: “After we switched over the tenants, we actually sold the vacant mobile homes, which were in terrible shape, for next to nothing — like $500, $1,000 — to people as handyman specials,” Vickers said on the Best Ever CRE Show. “The object was to get the buyer to come in and fix up the home, and we wouldn't charge them lot rent for three or four months while they were doing that. We also required them to put new vinyl siding and skirting on the mobile homes. So we were able to bring in new, great people that needed affordable housing … we were able to bring them in at market lot rent … and we had a fully occupied park.” 

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🎓 EXPERT RESOURCES
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DUE DILIGENCE CHECKLISTS

In a complicated CRE landscape, conducting thorough due diligence is more important than ever. And since we look at due diligence as a process and as a flow of getting tasks done, we’ve split due diligence into three categories — physical, financial, and legal — and developed a checklist for each, making them easier to follow and keep track of.