In this episode of Zen and the Art of Real Estate Investing, Jonathan welcomes Austin Masket, Chief Investment Officer of Riverly Capital, to talk through the current state of multifamily real estate and why the next 6–12 months may present a rare window for experienced investors. With a background in commercial brokerage and institutional asset management, Austin brings a sharp perspective on distressed debt, asset repositioning, and managing risk in uncertain markets.
Understanding the Rise of Distress
Austin traces the origins of current distress to decisions made during the COVID boom. Low interest rates, high liquidity, and overconfidence led many syndicators to overpay for deals and skimp on due diligence. Now, as loans mature and rates rise, those same properties are falling out of favor or defaulting on their payments.
Austin explains how compressed cap rates and adjustable-rate debt have created cash flow issues for owners, particularly in overbuilt markets such as Denver, Phoenix, and parts of Texas. His firm focuses on acquiring the debt itself, buying non-performing notes at a discount, and working through workouts or foreclosures when necessary.
A Strategic Approach to Acquisitions
At Riverly Capital, Austin and his team prioritize high-quality Class B and C multifamily properties in major metros. Their strategy includes:
- Acquiring debt at 50–80 cents on the dollar
- Targeting unit mixes with mostly 2- and 3-bedrooms (avoiding studios and 1-bedrooms in low-demand areas)
- Underwriting deals for 6.5%+ cap rates based on true property performance
- Avoiding major exterior capex when value can be added through interiors and operations
- Using deal-by-deal capital raises to stay selective and reduce investor pressure
By staying patient and reviewing hundreds of deals to identify a few winners, Austin builds sustainable, risk-adjusted returns without overextending.
The Road Ahead
According to Austin, a major wave of distressed debt is expected to hit the market between now and late 2025. But that window won’t last. New construction is expected to slow sharply by 2026 due to financing constraints, and rent growth is anticipated to resume as supply tightens.
Multifamily still offers a strong long-term opportunity, but only for investors who can weather short-term uncertainty and stick to disciplined underwriting.
Key Takeaways from the Episode
- Poor underwriting—not just high rates—led to many current syndication issues.
- Buying debt can offer better leverage than acquiring the asset directly.
- Entry point and tenant profile matter more than market buzz.
- Supply constraints by 2026 may reignite rent growth.
- Working with local banks and understanding foreclosure timelines is critical when acquiring notes.
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