Purchasing Real Estate During a Recession (And Looking Ahead to 2026)

Let’s face it, when the press begins crying recession, most people go into freeze mode. Fear rules the day. But if you’re ready, this is your time. Some of the top investors know that purchasing real estate during a recession is a gold mine.  In other words, prices are lower, debt comes due, and a motivated seller must make a quick transaction. Fewer people will be in your market. With 2026 right around the corner, this is a wide-open door.

Here’s the thing: I am going to show you why this market is a winner’s market, precisely what’s happening in this moment, and how you can put yourself in a position to seize this moment rather than witnessing it from the sidelines.

What’s Coming in 2026: A Perfect Storm for Opportunity

Several major transitions are underway, including:

• Refi volume is piling up. A lot of commercial real estate debt, particularly from the low-interest-rate years of 2020-2022, is due to be refinanced in today’s higher interest-rate environment. The multifamily sector will see peak refi volume over the next two years, through 2026 & 2027.
• The cap rate is increasing, and property prices are declining. As interest rates have increased over the past years, cap rates have increased, leading to a decline in prices. Demand for rentals continues to be strong, especially in established neighborhoods.
• Rental growth is decelerating but remains primarily positive. Following massive increases in 2021-2022, rent growth decelerated, with some Sun Belt cities even witnessing stable or falling rents because of new supply entering the market. Markets in Midwestern and Northeastern cities, however, remain largely stable.
• Loans are loosening a tad. Banks and government agencies are adjusting their lending criteria positively, and Fannie and Freddie are increasing their multifamily lending limits in 2026. What this means is that more money is available—but not necessarily for a whole bunch of iffy investments.

In simple language: Lots of homeowners will need to refinance, sell, or cash out. Banks aren’t closing doors on good opportunities entirely. Although prices aren’t at their peak, fundamentals in local markets remain sound or are improving.

“This is it—the moment when tough times produce massive opportunities. But this can only happen if you are ready to take action.”

Why Recessions Create Bargains

The following are the primary reasons why a downturn can bring discounts:

• Most other buyers become paralyzed with fear. The media screams crisis, and everybody else presses pause. They stop making offers, stop spending money, and just wait for the perfect moment that never arrives. That’s your competitive advantage.
• Owners have nowhere to go. In a high-rate environment, some owners can’t refinance or their revenue declines because of vacancies and tenant concessions. The alternatives? Discount sales, high-priced partners, or returns to lenders, which leads to distressed sales.
• There are price expectations mismatches. Vendors focused on high prices must change their approach. Buyers now have more standard expectations. This shift is due to higher interest rates, lower rent increases, and larger reserves. Soon, motivated vendors and buyers begin to meet at a price midway.
• Here’s the thing: you don’t need to time your purchase of properties at the bottom. Your role is simply to be ready when motivated sellers cross paths with buyers with a plan. That’s when you make your move.

What Kinds of Deals to Watch For in 2026

Not all bargains are winners. Here are the qualities to look for:

A. Strong Asset, Weak Financing

Think about properties in good locations with stable demand: jobs, population, and infrastructure. The building quality can be good or at least in need of an improvement plan. Then look for opportunities in which the capital is troubled: short-term debt with higher interest rates due soon, floating-rate debt without any interest-rate ceilings, or overly aggressive leverage multiples.

Pursue good properties from the owner under duress. Do not go for rubbish simply because it is cheap.

B. Definition of Replacement Cost

In other markets, it may cost more to construct an apartment building than the existing market rate of existing apartment properties. This strongly suggests that buying and renovating is cheaper than building a new apartment. It will also attract fewer competitors later. Investing in an area below replacement cost will provide a buffer.

C. Under-Managed, Not Poor

Great recessions tend to have messy M&A operations:

• Poor rent collection or high delinquencies.
• Rents below market with weak lease renewal programs.
• Deferred maintenance by owners just trying to survive.

“If you know how to manage them or have people with such knowledge properly, these problematic projects can be turned into a constant money-making machine. No need to have a huge renovation budget.”

How to Get Ready Before the Deals Roll In

Waiting for news sources to tell you when a recession is underway is already too late. Use the next one/two years to prepare quietly but relentlessly.

• Create your capital stack. Have money available for earnest money payments and inspections. Network with equity investors you can trust and with whom you have a good understanding of real estate. Develop relationships with local banks, credit unions, and lending agencies so they know you before you need funds.
• Refine your buy box. Create a list of the markets and submarkets you like. Include the property types you want to focus on and their sizes. Also, note your minimum returns and the amount of risk you can tolerate. This will help brokers, lenders, and others understand what you want. It will also make it easier to say “no” to opportunities that don’t fit.
• Improve your skill set. Learn to read T-12 statements and rent rolls. Originate deals at today’s numbers, not yesterday’s. Become facile with loan docs—familiarize yourself with their covenants and prepayment terms. The more proficient you become, the quicker you’ll be able to identify a potential problem before you invest.

How to Underwrite Deals in this Cycle

“Your underwriting has to relate to what’s really happening right now. No wishful thinking.”

• Rent revenue: Be cautious, especially in oversupplied or slowing-demand markets.
• Vacancy: Assume slightly higher vacancy than ideal.
• Expenses: Create margins in case insurance, taxes, and repairs remain high.
• Cost of debt: Set interest rates slightly higher than current market quotes.

Stress-test all your deals. Run them with a base case, a downside, and an upside. “If the numbers work when everything is going badly, you got a deal. Otherwise, you don’t need it.”

Financing: Keep It Simple and Solid

Money lenders in 2025-26 are more receptive than in the previous years, immediately after the interest rate jump.

Experienced borrowers with a solid business plan can borrow money. They check your performance record, debt service coverage ratio, and business plan. As a beginner, you can start by learning from seasoned investors.
Make your borrowing simple. Fixed or fixed-cap interest rates, reasonable leverage, and meaningful reserves for repair and interest. Who got burned in previous recessions? Those with excessive leverage and insufficient reserves.

How to Find These Deals

Do not waste time playing the numbers game with brokers or joining every available list. Focus your efforts. Create a strategy.

• Involunteer with lenders and special assets teams; they get notice when a problem arises with a loan.
• Build relationships with brokers dealing in class B and C properties with aggressive leverage.
• Compass your distress signals: loan defaults, debt maturity waves, and sales below previous prices in your markets.
• “Show up as the real deal. Have your criteria and your financing in place. Remember, deals go to people who get things done.”
  “Deals go to people who get things done.”

Manage Risks

First and foremost, recessions can make or break you. Here’s how you can protect yourself:

• Steer clear of investments if they appear low-cost for a reason—for instance, a poor site or old structures.
• Do not “pray and refinance,” hoping cap rates and interest rates plummet.
• Thorough underwriting of the management team; operational blunders can sink good properties.

“Rule number one: don’t lose money. I mean it,”

Your 12-Month Plan to Turn a Recession into Opportunity

Months 1–3

Dial in your finances and get crystal clear on your buy box asset type, markets, deal size, and risk profile. Start building relationships with key brokers and lenders in your target markets so they know who you are and what you’re looking for.

Months 4–6

Underwrite real deals every week so you build pattern recognition and confidence with the numbers. Have direct conversations with potential equity partners so you know who’s ready to move when a good opportunity shows up. Decide whether you’re going to be a hands-on operator or a passive investor partnering with experienced sponsors.

Months 7–12

Start writing offers on deals that pass your stress tests and still work under conservative assumptions. Negotiate hard on both price and terms, remembering that many sellers are under pressure too. Close on the right deal, then pour your energy into executing the business plan and proving—to yourself and your partners—that you can perform.

The Big Picture: Purchasing Real Esate During a Recession

In 2026, you’re likely to see:

• An increase in loan maturities.

• More distress in pockets of commercial real estate.

• Multifamily fundamentals are softer than the peak but still supported by strong rental demand.

Most people will retreat from this and wait for “certainty.” Savvy investors will lean in carefully, relying on discipline and data rather than emotion. You don’t need to be fearless; you need to be informed, well-capitalized, and ready. When the next bear market hits, this period could end up being the year you look back on as your best buying window.