The model proved extremely profitable during the pandemic housing boom as home prices and rents soared amid severe supply shortages. But it has quickly unraveled as the Federal Reserve’s aggressive rate hikes make those leveraged bets unaffordable.
“When you’re at a casino, you know what you’re doing is gambling,” said Aleksey Chernobelskiy of Centrio Capital Partners, which helps retail investors try to salvage their investments in struggling multifamily deals. “Here, people were gambling but they didn’t know it.”
One of the largest syndicators, Western Wealth Capital, has seen the valuations of multiple properties in its portfolio crumble, according to CEO Janet LePage. Some investor equity has been essentially wiped out due to “devastating devaluation” at complexes like Heather Ridge in Arlington, Texas.
Casual investor Lynn Nathe said she’s suffered seven-figure losses on Western Wealth apartment investments that proved far riskier than advertised.
“I feel guilty,” she told Bloomberg. “It was my own stupidity.”
