🤥 What to trust when cap rates lie

👋 Hello, Best Ever readers!

In today’s newsletter, cap rates are broken, a drug store bites the dust, AI takes hold, cold storage has a moment, and much more.

💵 Tired of competing for mediocre multifamily returns? Discover how triple net investing delivers passive income without the tenant headaches in our brand new Triple Net Fast Track Course, presented by Ash Patel and Matt Faircloth. Learn more today.

Let’s CRE!

🗞️ NO-FLUFF NEWS
CRE HEADLINES

⚠️ Shutdown Fallout: Economists warn the government shutdown could cause a sharper GDP impact than prior closures due to slowing job growth and elevated inflation, with potential permanent federal job cuts affecting 750,000 workers, creating longer-term economic drag.

🏛️ CRE Impact: The shutdown also threatens deeper CRE fallout as retail and hospitality face softer consumer spending, federal property sales stall, construction permits freeze, lending tightens, and key economic data releases are delayed.

🏗️ Labor Paradox: Construction job openings plummeted 115,000 in August to 188,000, yet 91% of firms still struggle to fill positions due to skill gaps and retirements. Large contractors hold 13.5-month backlogs on megaprojects while smaller firms face fewer new starts.

🤖 Rise of AI: Seventy-eight percent of multifamily operators report losing business to AI-enabled competitors, while 68% have integrated AI. Of adopters, 85% see improved lead-to-lease conversion and 77% reduced operating expenses.

💊 Closed for Good: Rite Aid closed its final 89 stores last week, ending 63 years of operations after reaching a peak of 5,000 locations as retail pharmacy struggles continue, with CVS and Walgreens also closing hundreds of stores.

🏆 TOP STORY
CAP RATES ARE BROKEN. THIS METRIC IS REPLACING THEM.

If you're valuing multifamily deals the same way you did three years ago, you might be getting it wrong. In today's market, cap rates — the go-to shortcut for property valuation — are losing their predictive power. The spreads are too wide, the variables are unstable, and nobody seems to agree on what anything is actually worth anymore.

This is where discounted cash flow analysis has emerged, moving from a luxury to a necessity for getting realistic multifamily valuations.

DCF works differently from cap rates in a few ways:

• Cap rates give you a snapshot: Current NOI divided by price, assuming that income stays stable and predictable going forward.

• DCF models the future year by year: It projects cash flows separately for each year, letting you account for insurance spikes in year two, rent growth slowdowns in year three, and refinancing costs in year five.

• DCF lets you stress-test scenarios: What if expenses grow 10% annually instead of 5%, or refinancing costs jump 200 bps? You can model both scenarios.

The problem with cap rates is that they have become more "in the eye of the beholder." For instance, according to Cushman & Wakefield’s Zach Bowyer, properties with similar vintage, management, and market metrics are trading at cap rates 75+ bps apart with no clear explanation as to why.

But the bigger issue is what's happening underneath those cap rates. The once-stable fundamentals — NOI forecasts, expense projections, financing costs — are now moving targets. Insurance premiums have doubled since 2021, operating expenses are up 24.4%, and nearly $1 trillion in commercial mortgages mature in 2025. When expenses can swing 20%+ and debt assumptions vary wildly, a single cap rate tells you almost nothing about risk and return.

THE BOTTOM LINE

Cap rates still matter, but they're no longer enough on their own. DCF analysis was once reserved for complex or large-scale deals. Now it's standard practice for conventional multifamily valuations, because the old shortcuts don't work when nothing is stable.

✍ BEST EVER COURSES
ESCAPE THE MULTIFAMILY RAT RACE

Sick of bidding wars over 5% cap rates? Done with managing repairs, tenant complaints, and unreliable property managers? What if you could invest in assets where tenants actually improve the property?

The Triple Net (NNN) Fast Track delivers 5 video modules of expert training from Ash Patel (who's successfully closed dozens of NNN deals nationwide) alongside Matt Faircloth, a seasoned multifamily investor who brings the operator's perspective. You'll get worksheets and materials to put your learning into action right away.

What's inside:

• 5 comprehensive video modules: Learn directly from Ash and Matt as they walk through the entire NNN process from sourcing to signing.

• Full implementation toolkit: Worksheets, templates, and support materials designed for immediate application.

• Case studies that matter: Walk through FIVE actual deals Ash and his students have done, including one student who discovered a strip mall everyone else overlooked.

• Battle-tested frameworks: Master CAM structures, anchor tenant analysis, and retail pro forma evaluation with clear, step-by-step instruction.

Quit fighting for scraps in oversaturated markets. Discover how to build passive income with complete video instruction and every tool you need to execute.

💰 CRE BY THE NUMBERS
FALLING RENTS, VACANCY TRENDS, AND MORE

📉 $6 Drop 

U.S. multifamily rents fell $6 to $1,750 in September, the sharpest decline since 2009 and the worst monthly drop since late 2022. Over 525,000 units remain in lease-up nationally, with high-supply markets like Denver, Austin, and Phoenix seeing 3-4% annual rent declines amid softening demand.

🏭 7.1% 

Industrial vacancy held flat at 7.1% in Q3 for the first time since 2022 as asking rents reached $10.10 PSF, up 1.7% annually. Leasing volume fell 7.1% to 158M SF while completions dropped 33% YoY to 63.6M SF as the development wave crests.

🏢 105,525 Units 

Multifamily deliveries hit 105,525 units in Q3 2025, according to RealPage, marking the 10th consecutive quarter above 100,000 units despite cooling from 2024's peak. The South led with 53,410 units delivered while Phoenix, New York, and Dallas each topped 6,000 units in the quarter.

❄️ 7.4 Million 

Cold storage vacancies reached a 20-year high as 7.4M SF of new construction comes online amid weak food inventories and elevated rents. E-grocery sales rose 28% YoY in Q2 while older facilities struggle to compete with modern builds.

🏘️ DEAL OF THE WEEK
+42% VALUE, 1.76X EQUITY MULTIPLE IN LESS THAN 2 YEARS

Mike Roeder and the team at Granite Towers Equity Group achieved a 42% increase in property value and a 1.76X equity multiple on this property in less than two years.

Here's how they did it 👇

🏢 Property details: This 84-unit Class B multifamily property, located in St. Cloud, Minnesota, was purchased in February 2020.

💸 Finances: The property was purchased for $4.75 million and the team raised $1,559,000 in capital. They also secured a $3.99 million loan at 4.436% interest with four years interest-only.

💼 Business plan: The team implemented a series of targeted improvements designed to enhance the property’s appeal and operational efficiency, allowing them to achieve pro forma rent premiums. These included installing SAS water-saving toilets throughout the community to reduce utility costs and support sustainability, upgrading stainless steel appliances in all units that had not yet been updated, renovating flooring, kitchen/bathroom hardware, and lighting fixtures, and patching/resealing the parking lot.

💪 Biggest Challenge: Keeping a good onsite manager in place. The property was not big enough to support a full-time onsite manager, so they had a part-time manager in place, which made it tough to retain and attract a great candidate.

🍾 Results: Mike and team sold the property in September 2021 for $6.75 million, which resulted in a 1.76X equity multiple, 10.8% cash-on-cash return, and a 32% IRR for investors.

👉 If you have a deal you’d like to share with us, please email us here.

✅ EXPERT RESOURCES
A TO Z DUE DILIGENCE CHECKLIST

🎯 Introducing Ash Patel's A-to-Z Due Diligence Checklist – your comprehensive roadmap from initial analysis through post-closing success.

This free, battle-tested tool gives you:

• Complete task organization so you always know what's next

• Priority tracking to manage multiple deals without dropping the ball

• Team collaboration features with assignment and note-taking capabilities

• Full-cycle coverage from first look to long-term management

Ash has used this exact system across 30+ properties worth over $50 million in retail, industrial, office, medical, and more.