The commercial real estate lending landscape is shifting in ways I haven’t seen since before the pandemic, and if you’re a multifamily investor, you need to understand what’s happening right now. Banks are suddenly writing new loans again while simultaneously sitting on a mountain of problem debt that could reshape the entire market.
After watching the lending market freeze up for nearly two years, we’re seeing banks issue $227 billion in commercial real estate debt through the first nine months of 2025. That’s an 85% jump from last year and puts us right back to 2019 levels. For multifamily investors who have been struggling to find financing, this represents a fundamental shift that creates both opportunities and challenges.
The Banking Paradox Creating Market Opportunities
Here’s what strikes me as fascinating about the current moment: banks are aggressively writing new loans while delinquencies sit at decade highs. It’s like watching someone buy a new car while their garage is already full of broken vehicles. This contradiction isn’t just a banking curiosity though. It’s creating real opportunities for savvy multifamily investors who understand what’s happening.
Banks want these distressed loans off their books, but they’re also eager to deploy capital into new, safer deals. This creates a two-tier market where high-quality multifamily properties with strong fundamentals can access competitive financing, while distressed properties might become available at significant discounts.
I’ve been tracking this trend in my own local market, and the appetite for well-underwritten multifamily loans is clearly back, especially for properties with stable cash flows and conservative leverage.
Why Multifamily Remains the Sweet Spot
While banks are dealing with problems across all commercial real estate sectors, multifamily continues to demonstrate relative resilience. People need places to live regardless of economic conditions, and rental demand has remained strong even as other commercial sectors struggle with vacancies and changing usage patterns.
This fundamental strength is why I believe multifamily investors are positioned to benefit most from the current banking environment. Lenders view residential rental properties as lower-risk compared to office buildings or retail centers, making it easier to secure financing for the right deals.
The key is understanding what banks consider “the right deals” in today’s environment. They want to see strong rent rolls, stable occupancy rates, and conservative debt-to-income ratios. Properties that check these boxes are finding financing available at rates that would have seemed impossible just a year ago. Our most recent deal is a reposition into sub 5% fixed rate agency debt. Given the last couple of years, this is an exceptional improvement.
The Distressed Opportunity Wave Coming in 2026
Industry experts are predicting that 2026 will bring a wave of “final resolution” deals as banks finally address their backlog of problem loans. For multifamily investors with capital and patience, this could represent the buying opportunity of the decade.
The properties that come to market through this process won’t wait around for lengthy due diligence periods or complicated financing arrangements.
The challenge will be distinguishing between properties that are genuinely distressed due to overleveraging or poor management versus those facing fundamental market problems. A well-located multifamily property that’s distressed due to high leverage can be an excellent opportunity. The same property in a declining market with structural vacancy issues is a different story entirely.
Financing Strategies for Today’s Market
Given the current environment, the window of favorable lending conditions could close quickly if economic conditions deteriorate or if banks become overwhelmed with their existing problem loans.
Second, you still want to be conservative with leverage ratios. Banks are clearly gun-shy about repeating the mistakes that created their current problem loan portfolios. Properties that can support 70-75% loan-to-value ratios are much more likely to secure favorable financing than those requiring higher leverage.
Diversifying lender relationships is key right now. The banks that are most aggressive about new lending today might become the most conservative tomorrow as they work through their existing issues. Having multiple financing options becomes crucial in this environment.
Reading the Market Signals
The contradiction between new lending and existing problems tells me we’re in a transitional moment that won’t last forever. Banks are essentially betting that they can work through their old problems while building new, better portfolios. This strategy works if economic conditions remain stable and property values continue recovering.
However, if economic conditions deteriorate significantly, that “slow burn” of distressed deals could become a “fire sale” that reshapes property values across the board. For multifamily investors, this creates both opportunity and risk that requires careful navigation.
I’m watching several key indicators to gauge how this plays out. Bank earnings reports, delinquency rates, and the pace of distressed asset sales will tell us whether banks can successfully manage this transition or if we’re heading for a more dramatic market correction.
Practical Steps for Investors Now
If you’re actively investing in multifamily properties, this environment requires a balanced approach of opportunity and caution. Build relationships with multiple lenders now while they’re eager to write new loans. Understand their current underwriting standards and position your deals accordingly.
At the same time, prepare for the potential distressed opportunities that may emerge in 2026. This means maintaining liquidity, developing expertise in distressed asset evaluation, and building the professional relationships that will give you access to off-market opportunities.
The multifamily investors who thrive in this environment will be those who can move quickly on good financing while remaining patient for great acquisition opportunities. It’s a delicate balance, but the potential rewards make it worth the effort.
The banking revival of 2025 represents a unique moment in commercial real estate. For multifamily investors who understand both the opportunities and risks, it could define the next phase of their investment success.
By Mike Krieg
About the Author
Mike is co-founder of Leadoutinvest. He earned his degree in Finance from the University of Montana. His real estate career began in the early 2000s as an expatriate in Samara, Russia, where he raised capital to purchase homes and helped other expats do the same. Since then, Mike has co-sponsored projects totaling over 7,000 apartment and self-storage units, been featured on the BiggerPockets Real Estate Podcast, and taught multifamily syndication to university finance students.
Mike is also the Founder of Storyline, an organization providing leadership training for local leaders worldwide. He lives with his wife Kristen and their three children.
Disclaimer: This article is for educational purposes only and does not constitute investment advice. All investments carry risk, including potential loss of principal. Past performance does not guarantee future results. Investors should consult with qualified financial and legal advisors before making investment decisions.
