Distressed multifamily assets are hitting the market in growing numbers as lenders run out of patience with extend-and-pretend strategies. For buyers, the opportunity is real. So is the risk of getting it wrong.

Frank Gervasio, Principal and Director of Finance at OneWall Communities, has evaluated dozens of these situations. His view: the buyers who get burned are usually the ones who skip a critical layer of investigation that never makes it onto the standard checklist.

“These things are distressed for a reason,” Gervasio says. “So you want to do research not just on the property, but on the people from before you took over.”

That means digging into prior ownership, prior management, any outstanding liens, and potential legal complications attached to the asset before a deal moves forward.

Start With the Financial Structure, Before You Walk the Property

Gervasio’s team applies an early filter before anyone sets foot on site. If the debt load, the interest rate environment in which the deal was underwritten, or the assumptions behind the original business plan don’t hold up under scrutiny, that’s the signal to walk away.

He points to the wave of highly leveraged deals that originated during the post-COVID market surge as a cautionary example. Syndicators projected rents would climb indefinitely, secured loans at low rates, and built models that couldn’t survive a market shift.

“It was a fantasy. It was not a real story that could ever be true,” Gervasio says. “Even if I tried to turn things around, they would not be salvageable.”

Doing that math early, before committing resources to physical inspection, is where serious buyers separate from speculative ones.

100% Unit Walks and Day-One Capex Planning

For assets that pass the financial structure test, OneWall conducts 100% unit walks, not a sample, and catalogs the age and condition of HVACs, appliances, roofing, and other major capital items.

The goal is an accurate capex plan from day one, because deferred maintenance doesn’t pause while a new owner gets organized.

“Every day that those problems go unaddressed, it’s compounding,” Gervasio explains. “You need capital ready to deploy, and you need to start addressing those problems immediately.”

Gervasio also stresses due diligence regarding vendors, prior managers, and any legal history associated with the asset. Liens, lawsuits, and unresolved disputes don’t disappear at closing; they transfer.

What the Books Often Don’t Show You

The financial handoff from prior management is its own risk category. Gervasio has encountered incoming financials in which expense categories were effectively invented, payroll was misclassified, bad debt was moved around on the balance sheet rather than written off, and chart-of-accounts structures followed no industry standard.

“I’ve been generally surprised at the lack of accounting sophistication that is used within the industry,” he says. “There are certain expense categories that are universally standard. What I’ve found is companies that just made up their own chart of accounts.”

When data isn’t forthcoming, Gervasio’s team reverse-engineers it. Having worked extensively with property management software platforms, they can often reconstruct how a prior manager configured charges in the system, even without direct access.

But there is a floor. Rent rolls and trailing financials are non-negotiable. Without them, there is no deal.

The Upside Others Miss

For buyers willing to do the work, distressed assets in today’s market offer something that hasn’t been widely available in years: genuine room to create value through operational improvement, not just rent growth.

OneWall’s 3rd-party management services are built around an owner-operator mindset, meaning the same financial discipline applied to the firm’s own portfolio gets applied to assets under management. That includes granular expense oversight, transparent pricing for the tech stack with no markups, and an accounting infrastructure that Gervasio describes as the backbone of everything else.

“If accounting works really well, that supports a lot of different business functions,” he says. “You know information is accurate. You know invoices are being entered and paid.”

In a market where lenders are increasingly decisive and a wave of under-capitalized operators is being forced to sell or recapitalize, that foundation may be the clearest separator between firms that capture the distressed opportunity and those that simply inherit someone else’s problems.

Property management is complex, and the best solutions come from shared incentives. Whether you’re exploring new approaches or facing specific challenges, we’re here to talk. Visit us at onewallcommunities.com or call us at (646) 596-7068.

Disclaimer: The information provided is for informational purposes only and should not be construed as financial, legal, or investment advice. The views expressed in this article are those of the author, Frank Gervasio, Principal and Director of Finance at OneWall Communities. Always consult with a professional advisor before making any investment decisions.