CF Capital: Multifamily Investment Requires Connecting the Right Dots for Each Deal, Not Riding Market Waves

The multifamily sector has spent the last several years navigating shifting interest rates, changing migration patterns, elevated operating costs and uneven supply dynamics. In that environment, broad market narratives have often dominated investment conversations — whether around Sun Belt growth, newer vintage product or value-add strategies.

According to CF Capital, however, successful multifamily investing rarely comes from trying to bet market timing or following the same generalized story as others. Instead, the firm believes the best outcomes are driven by disciplined underwriting values and execution, governance and investor transparency.

The Louisville-based multifamily investment firm has a portfolio of 1,500 units across two states (with two more states in focus for immediate growth) and has seen its revenue nearly double over the last two years. While focused on reaching 20,000 units under management in 10 years, the firm remains resolute in sticking to its underwriting standards, willing to go a quarter reviewing over three dozen deals and closing zero rather than agreeing to a single transaction or property they do not believe in.

While many are still recovering from four years of market distress that wiped out undercapitalized and overleveraged owners, CF Capital is positioned for growth, having navigated volatility, broadened investor partnerships and streamlined operations in recent years.

In the following Q&A, CF Capital’s Acquisitions Principal Alex Terauds discusses how the team evaluates opportunities in today’s market, operational issues investors often overlook and where the firm sees opportunity emerging through the second half of 2026.

Q: There has been significant upheaval in the multifamily market and broader economy over the last half decade. How do you balance leveraging short-term cyclical opportunities against long-term underwriting strategy?

A: Understanding the investment cycle, investor sentiment, and capital flows is important. However, identifying apartment communities with long-term advantages is most important— the characteristics that create downside protection and appreciation potential across cycles.

The variables we evaluate remain relatively consistent across cycles — submarket, micro-location, floorplan layout, amenities, unit finishes, effective age, insulation from future competition, community size, and several others. We generate a score based on these inputs, which we use to help determine how aggressively we pursue a property. So, lower-scoring opportunities require meaningfully higher return expectations compared to higher-scoring opportunities. This creates discipline in how we pursue deals and keeps us grounded in our long-term underwriting strategy.

A good example of this discipline is how we handle property effective age across cycles compared to the market. Today we currently see investors assigning too much value to the age of the asset itself without adequately considering other key variables such as future competitive supply and basis. If a property is located in an area where similar or better product can be easily replicated at a cost near the acquisition basis, we see meaningful risk that the long-term return profile is less durable than current pricing implies..

Conversely, when value-add was in vogue at the peak of the cycle, the market assigned almost no weight to the property’s age, while we stayed disciplined in properly accounting for the higher ongoing capital requirements and realistic long-term return expectations.

The key is understanding how the various property characteristics interact and weighting them appropriately regardless of market sentiment. It is not really about going with or against cyclical opportunities but staying disciplined to what remains true across cycles.

Q: What are some of the most common ways multifamily investors misprice risk?

A: One common mistake I see today is rover simplifying distressed deals. Investors love the story of a distressed deal, and it frankly makes raising equity easier.

However, these distressed deals are often priced with a value-add execution. And most often, the pricing can look fair on paper – there is a renovated rent comparable that justifies the price on the surface. . But in practice, many of these projects require repositioning the resident profile of the property, not simply upgrading interiors.

If a community has historically served as a lower-rent option within its submarket, materially increasing rents can create meaningful operational friction during the transition. That becomes especially more difficult at larger properties where you are introducing newly renovated supply to the submarket that needs absorbed. And if the actual floorplan layouts lack key features that the renter requires at the new price point, achieving projected rents becomes even more difficult.

These types of dynamics are often understated or missed in underwriting, but they have a meaningful impact on economic occupancy and rents, which ultimately impacts returns.

Q: If an investor is not actively managing a property, what operational and governance procedures should be evaluated before partnering with a sponsor?

A: Investors should spend significant time understanding how a sponsor makes decisions when circumstances deviate from the original underwriting.

Most business plans look attractive when modeled under stable assumptions. What matters operationally is how a team responds when lease-up slows, renovation pacing changes, expenses rise or market conditions shift unexpectedly.

We believe investors should evaluate whether a sponsor has a clearly defined framework for reviewing asset performance, adjusting strategy and allocating capital throughout the hold period. Transparency around reporting and operational oversight is critical in volatile environments.

It is also important to understand what types of opportunities a sponsor is willing to pass on. In many cases, a disciplined investment process results in eliminating far more deals than it produces. That selectivity can be frustrating in active markets, but it often becomes an advantage during more difficult periods.

Q: What markets have proven to be ripe with the most opportunity over the last year under the criteria your team sets?

A: Columbus and Indianapolis have generated the most activity for us, but only a small number aligned with our criteria strongly enough for us to pursue aggressively. The best deal we saw recently was in Lexington, KY – it was one of the most difficult-to-replicate multifamily properties we evaluated this year, because it sits in the heart of Lexington’s only true walkable lifestyle center. You cannot go to another large apartment community in Lexington and experience the same thing. In larger markets, there are usually multiple walkable lifestyle corridors and more ability to build around them. Along that theme of walkable lifestyle centered communities, we are one of two final contenders for a downtown Indianapolis community at the gateway of Mass Ave – the most desirable walkable urban lifestyle location in the market. Downtown receives a lot less investor attention than the high growth northern suburbs, and we believe the pricing did not fully reflect the quality and durability of this particular location. While there are times that certain markets feel over or underpriced, the best opportunities are usually much more deal-specific and nuanced than a market being hot or cold.

Q: What is your outlook for the multifamily market through the second half of 2026?

A: In the Midwest, the marketed sale pipeline is slower in 2026 compared to 2025 and I believe it will continue at that slower pace through 2026 unless the war in Iran has some resolution. Investor appetite remains very strong for well-located deals that have been built in the last 30 years – with several marketed properties meeting or exceeding pricing guidance even in the face of the volatility. And there are thoughtful sellers that I believe will continue to go to market recognizing that there is a lot of capital pursuing a small amount of quality deals.

However, older deals, especially those that that are in B locations or lower, are struggling to attract investors at seller pricing. Typically, when these deals trade, they are significantly short of pricing guidance and usually the buyer is on an island related to pricing. Pricing discovery is still occurring in this segment. And there is not as much distress in the Midwest forcing sales, so I expect very low volume in this area of the market for the rest of 2026.

With refinancing pressure, elevated interest rates, slower rent growth than planned in many cases, and mounting capital needs, I believe an increasing number of these owners will start to face reality and sell in the coming years. Investors with patient capital and the ability to evaluate deals on a more individualized basis will be rewarded.

Ultimately, every market favors a thoughtful and disciplined approach to acquisition underwriting, with success often determined by knowing which opportunities deserve conviction and which require added caution.