After more than three decades in multifamily real estate, Mark Kenney has seen every phase of the market cycle — expansion, contraction, recovery, and reinvention. As a co-founder of Think Multifamily, he has scaled a portfolio to more than 18,000 units across 15 states, navigating both historic booms and one of the most challenging downturns the industry has experienced.
On a recent episode of Ritter on Real Estate, Mark shared candid insights from the past few years — including selling over 30 properties amid rising interest rates, collapsing valuations, insurance shocks, and increasing lender pressure.
What emerged from the conversation was not a story about timing the market. It was a lesson in risk management, capital preservation, and the realities that only surface when conditions turn against you.
How a Downturn Redefined Success
Early in his career, Mark measured success the way many investors do — by income replacement and portfolio growth. After years of working eighty to one hundred hours a week running an IT company, financial freedom was the goal.
And he achieved it.
But the recent downturn forced a deeper recalibration.
When properties lost value, debt costs surged, and legal and operational stress mounted, Mark realized that financial performance alone is an incomplete definition of wealth. Health, relationships, perspective, and gratitude became the anchors that carried him through the most difficult moments.
Markets can take capital. They cannot take character. That mindset shift proved as important as any financial decision.
The Debt Strategy That Defined This Cycle
Perhaps the most consequential mistake across the multifamily industry was the widespread reliance on floating-rate bridge debt. During years of low interest rates and rapid appreciation, variable financing appeared efficient. It allowed investors to acquire aggressively, renovate quickly, and refinance into permanent debt within a short window.
Then interest rates rose — rapidly and aggressively.
Mark watched some loans climb from roughly 4.5 percent to more than 11 percent. At those levels, cash flow vanished. Refinancing became mathematically impossible. Asset values compressed simultaneously.
The issue was not that bridge debt is inherently flawed. The issue was concentration risk. Deals were underwritten on the assumption that favorable market conditions would continue indefinitely. Fixed-rate, long-term financing may have seemed conservative during the boom. In the downturn, it became the difference between stability and distress.
Why Lender Relationships Matter More Than Ever
Another overlooked factor exposed by this cycle was lender behavior. Some institutions worked collaboratively — modifying loan terms, extending maturities, and seeking solutions that preserved value. Others were also property operators.
For them, distressed assets represented acquisition opportunities. In those situations, foreclosure was not a last resort — it was a strategic move.
Mark also emphasized that many investors misunderstand non-recourse debt. Bad-boy carveouts, joint liability provisions, and personal guarantees can still create exposure even when loans are marketed as limited-risk. Without a full understanding of loan documents, many sponsors unknowingly accepted far more risk than anticipated.
Market Selection Was a Hidden Risk Multiplier
All real estate markets softened. But the severity varied dramatically. High-growth, high-profile markets experienced valuation declines of forty to fifty percent in some cases. Meanwhile, many Midwest and secondary markets saw reductions closer to five to ten percent.
The difference lies in volatility. Boom markets accelerate appreciation during expansion — but magnify losses when sentiment shifts. Stable markets may never make headlines, but they preserve capital.
Insurance costs underscored this reality. One coastal property in Mark’s portfolio saw premiums rise from six hundred thousand dollars to three point six million dollars in a single year. No amount of operational efficiency can overcome that type of expense shock.
The Tax Consequences Few Investors Anticipate
A particularly painful lesson involved depreciation recapture. Many investors enjoyed substantial tax benefits during early ownership years, only to discover that those deductions created liabilities upon sale — even when deals produced no profit.
Mark personally faced a $260,000 tax bill on a transaction that generated no positive return.
The takeaway is clear: capital accounts and tax exposure must be reviewed regularly, especially in volatile markets. Losses do not always mean zero tax impact.
What Actually Helped During the Crisis
Not every outcome was negative. Several actions made a meaningful difference:
– Maintaining proactive communication with lenders rather than delaying difficult conversations
– Being transparent with investors early about performance challenges
Evaluating when capital injections were warranted — and when they would only prolong losses
– Making disciplined exit decisions instead of hoping markets would reverse
Above all, adaptability proved essential. Rigid strategies failed. Responsive strategies survived.
A New Standard for Passive Investors
Mark was direct about what this downturn revealed. Simply trusting an experienced operator is no longer sufficient. Strong sponsors can still be overwhelmed by leverage, market shifts, and macroeconomic forces. Investors must now understand four core components of every deal:
– Debt Structure — fixed versus floating rates, interest rate caps, refinance timelines, and maturity risk
– Market Fundamentals — insurance exposure, regulatory environment, and historical volatility
– Underwriting Assumptions — rent growth, expense inflation, and exit capitalization rates
– Asset Condition — age, infrastructure, and long-term capital expenditure risk
Debt, in particular, determines whether a property can endure adversity.
The Partnership Risks That Undermine Deals
One of the most common structural failures Mark highlighted was evenly split partnerships with no decision authority. When disagreements arise — over selling, refinancing, or reinvestment — progress stalls.
Other common vulnerabilities include:
– Joint-and-several liability exposure
– Undefined decision-making processes
– No contingency planning for death, disability, or exit
– Uncontrolled access to operating accounts
Trust is essential. Governance is what sustains partnerships under pressure.
How Strategy Has Evolved
After navigating this cycle, Mark’s approach is now significantly more conservative:
– Greater emphasis on stabilized cash-flowing assets
– Long-term fixed financing as a priority
– More realistic underwriting assumptions
– Stronger downside protection over speculative upside
Not because growth is undesirable — but because longevity in investing requires capital preservation. Returns compound only when investors remain solvent.
Final Perspective
Market cycles do more than adjust prices.
– They expose leverage.
– They reveal weak assumptions.
– They test partnership structures.
– They separate optimism from durability.
The recent multifamily downturn was not simply a correction. It was a stress test of how deals were structured. And the investors who emerge strongest will be those who prioritize resilience as much as returns.
Real estate success is not built by avoiding downturns. It is built by preparing for them.