Common Mistakes New Multifamily Investors Make (And How to Avoid Them)
Think Multifamily | Mark Kenney
You don’t wake up one morning magically knowing how to underwrite, raise capital, and run an apartment deal. That confidence comes from real reps, a few bruises, and—ideally—learning from other people’s mistakes before they become your own.
We’ve watched new investors enter the game fired up… and flame out because they skipped the fundamentals. Our founder, Mark Kenney, has operated through 120+ deals, good cycles and rough ones. Here are the patterns that cost beginners time, money, and trust—and the simple plays that prevent them.
1) Believing the Pro Forma Like It’s the Bible
The mistake: Treating glossy projections as promises.
Reality check: A pro forma is a story. Your job is to test the plot.
How to fix it:
Ask, “What exactly supports this rent growth?” Pull actual comps, concessions, and renewal rates.
Rebuild the underwriting with conservative assumptions (softened rent growth, higher expenses).
Stress test: if the deal still pencils with flat rents or +10% expenses, you’re in safer territory.
Quick tip: If a sponsor can’t articulate the drivers behind their assumptions in plain English, you don’t need fancier spreadsheets—you need a different deal.
2) Underestimating Expenses—Especially the “Silent Risers”
The mistake: Assuming last year’s costs will hold.
What bites beginners: Taxes often reset near purchase price. Insurance has surged in many markets. Repairs and payroll rarely go down on their own.
How to fix it:
Get written insurance quotes and verify replacement-cost assumptions.
Model tax reassessment scenarios.
Add line items for turn costs, admin/tech fees, and marketing that vanish in pretty pro formas.
3) Skipping Operator Due Diligence
The mistake: Choosing a sponsor because you like their brand, podcast, or coaching program.
Translation: You hired a marketer, not a manager.
How to fix it (use this mini-script):
“How often do you review financials and KPIs?” (Weekly or monthly beats quarterly.)
“How many full-cycle deals have you completed?” (Acquisitions ≠ exits.)
“Describe your communication cadence with investors and your PM.”
“Tell me about a deal that struggled. What did you change?
Call references. Ask about capital returned and whether preferred returns were met.
4) Falling for the “No Money Out of Pocket” Myth
The mistake: Believing you can scale without personal liquidity.
Reality from the trenches: When the weather turns, someone writes the check. Often it’s you.
How to fix it:
Keep personal reserves and require deal reserves beyond lender minimums.
Build a CapEx contingency (10–15% is a common sanity check) and protect it.
5) Picking the Wrong Partners
The mistake: Partnering for a shortcut—or for the “cool factor.”
Consequence: Misaligned values and skill gaps show up fast when collections dip.
How to fix it:
Align on vision, roles, and decision rights before you shake hands.
Ensure at least one partner owns operations/asset management.
Vet partners like your retirement depends on it—because it does.
6) Ignoring Loan Terms and Hidden Risk
The mistake: Focusing on getting to close, not surviving the hold.
Where people get hit: Floating-rate debt without an effective cap, DSCR covenants, prepay penalties, “bad-boy” carve-outs, short maturities.
How to fix it:
Read the loan agreement front to back (with a CRE attorney).
Know your rate cap, amortization, and refi options.
Model DSCR at different rate/tax/insurance scenarios before you sign.
7) Letting FOMO Replace Fundamentals
The mistake: “If I don’t do this now, I’ll miss my shot.”
Truth: Rushing the wrong deal is far more expensive than waiting for the right one.
How to fix it:
Set investment criteria in writing and stick to them.
Say no quickly. Keep underwriting. The next deal is coming.
What to Track Weekly (so you catch problems early)
Occupancy & pre-leased %
Collections, delinquency, and concessions
NOI vs. budget
CapEx progress vs. timeline and spend
Renewal rates & economic vacancy
Investor distributions vs. projections
On-site team performance (leads, tours, apps, closes)
If you’re not watching it, it’s already slipping.
The Think Multifamily Way
We don’t just help you buy apartments—we help you operate them. We’ve lived through rate spikes, insurance hikes, capital calls, and choppy exits. We’re still here because we built systems that catch issues early and keep investors informed.
Go deeper:
🐾 Free guide: The Guard Dog’s Guide to Asset Management — the playbook for protecting NOI and value.
🚀 Multifamily Fast-Track: a step-by-step path to buy your first (good) deal without stepping on the landmines above.
Final Thought
Mistakes in multifamily aren’t cute. They compound. But with sound underwriting, the right partners, and disciplined asset management, you can build something that lasts.
Take a breath. Do the work. Build wisely.