Distressed Multifamily & Retail Investing in 2025

How Do Experienced Real Estate Investors Profit from Distressed Multifamily and Neighborhood Retail in 2025?

Most real estate investors follow the crowd. They chase the asset class everyone’s talking about—self-storage, short-term rentals, large multifamily syndications—and then wonder why they can’t find deals at prices that make sense. Brian Ferguson of Fergmar Capital took the opposite path.

Starting with a $10,000 house in 2005, Brian built an $80+ million real estate portfolio in Victoria, Texas—primarily through multifamily and, more recently, neighborhood retail shopping centers. In this episode of The Real Estate Investing Club, he joins host Gabe Petersen to break down exactly how he finds distressed deals, what makes retail so compelling right now, and why smaller investors keep making the same costly mistakes.

Whether you’re transitioning from single-family to commercial or looking for your next niche, this conversation is packed with hard-earned, boots-on-the-ground insight.

Quick Answer: How Do You Profit from Distressed Multifamily and Neighborhood Retail?

Experienced investors like Brian Ferguson profit from distressed multifamily by targeting properties with expiring or defaulted debt—often at $50,000–$60,000 per door—and from neighborhood retail by acquiring underleased, value-add shopping centers in high-traffic, rooftop-dense suburban corridors. The key is identifying low competition niches, building deep broker relationships, and using AI tools to automate deal screening.

Why Did a Seasoned Multifamily Investor Pivot to Retail?

Short answer: Multifamily got overpriced, retail got overlooked. Brian found a lane where his competition was virtually nonexistent—and the cash flow math was impossible to ignore.

Brian’s transition into retail wasn’t planned. Like many investors who reach a certain portfolio size, he simply bought what made sense in his local market. He accumulated mobile home parks, triple-net buildings, medical offices, restaurant buildings, and bars—”anything that pencils out and makes money and cash flows,” as he puts it.

Over time, smaller strip centers kept standing out. The conversations with tenants, watching businesses open and thrive, the simplicity of management at scale—it energized him in a way multifamily no longer did.

“Sometimes I’m spending five minutes a month on a $10 million asset,” Brian told Gabe. “That will never be the case on a multifamily, but they both have their place.”

The bigger structural reason for the pivot? Everyone was overpaying for multifamily. Brian watched syndicators and institutional buyers pile in with agency debt, inflated pro formas, and loose underwriting. Meanwhile, a 30,000-to-50,000-square-foot neighborhood shopping center from the early 2000s? That deal sits in a gap the REITs are too big to want and most syndicators are too focused on multifamily to notice.

“My competition—like your big national REITs—aren’t going after a 35,000-square-foot 2004 shopping center. And syndicators aren’t coming after it either. It’s just a smaller competition pool.”

If you’re curious about how different asset classes stack up for passive and active investors alike, check out our guide on diversifying across asset classes and the capital stack.

What Makes Neighborhood Retail Centers a Compelling Investment in 2025?

Short answer: Neighborhood retail centers anchored by necessity-based tenants—dentists, nail salons, tutoring schools, financial services—are recession-resistant, management-light at scale, and largely ignored by both institutional and small-investor capital right now.

Brian’s buy box is specific, and it’s worth understanding why every filter exists:

Size: 30,000–50,000 square feet, with a minimum of 10,000–12,000 sq ft. Small three- or four-tenant strips don’t offer enough diversification or leasing leverage.
Age: Built between 2000 and 2014 is the sweet spot. Anything from the 1970s or 1980s brings too many structural and mechanical unknowns.
Location: Dense residential corridors—”surrounded by a bunch of rooftops”—where parents and working adults are passing by daily. Think suburbs of growing metros.
Tenant mix: Necessity-based businesses that can’t be replaced by Amazon or AI. Dentists, behavioral health clinics, tutoring centers, financial advisors, nail salons, donut shops.
Anchor flexibility: If there’s a large anchor (like a Planet Fitness), Brian ensures the floorplan can be divided and re-tenanted if they leave.

One of his current acquisitions includes an Edward Jones, a donut shop, a nail salon, a monastery school, and several dental and behavioral health offices. “Think of things that mom, dad, and kids are gonna drive by to and from work every day.”

On recession resistance: “You’re not going to throw your kid in front of an AI bot and get them better. You’re not replacing a dentist.”

This community-first lens makes these centers far more durable than retail concepts that depend on consumer discretionary spending or in-person dining trends. For more on why retail shopping centers are surging as an investment, read our deep dive on why shopping centers may be the best investment of 2025 and our strip center retail investing guide.

How Do You Find Distressed Multifamily Deals Before the Competition?

Short answer: Brian’s team focuses on the status of existing debt—specifically loans that are expiring, in default, or nearing foreclosure—rather than listing prices. They cross-reference broker emails, expiring loan lists, and AI-powered deal screening to find motivated sellers before assets hit the market officially.

The distressed multifamily opportunity in 2025 is real, and it’s being driven by a wave of poorly structured bridge loans that were originated in 2021–2022 at the peak of the market. Brian explained the mechanics to Gabe:

“We look at where’s that loan set and that’s where we research before we make offers. So we’re just looking for trouble.”

His process has three main components:

Expiring loan lists: Brian’s team monitors lists of debt that’s coming due—none of them are perfectly accurate, but cross-referencing multiple sources yields actionable leads. If a broker sends a deal that lines up with an expiring loan in nine months, that’s the signal to move fast.
Thin broker packages: When a deal comes in with a T12 and a rent roll but no offering memorandum—and five different brokers are shopping it simultaneously—that’s a sign of motivated seller energy. “There’s no OM, they’ve put no work into it, and five brokers are shopping this to me. Okay.”
AI-assisted deal screening: Brian built a custom bot inside Asana that receives forwarded broker emails, scrubs the deal details, cross-references against the team’s buy box and expiring loan lists, and auto-assigns the lead through the internal pipeline. This keeps the team focused only on deals that actually qualify.

One of his recent acquisitions was a 288-unit complex purchased for roughly $57,000 per door—a deeply distressed property that required a heavy lift but will ultimately be positioned to sell to an institutional buyer or REIT. The key was being willing to do the work that large out-of-state groups wouldn’t touch. “A lot of people hit it back even harder because they’re not boots on the ground,” Brian noted.

Another deal came from a complex that had gone into default—not for failing to service the debt, but for deferred maintenance. A snow-related carport collapse drew headlines, and the lender’s existing inspection reports documented rotting stairwells that the owner had ignored. “The lenders are just done. They were letting it go, and now they’re pushing for it.”

For more strategies on finding underpriced deals, see our guide on finding underpriced multifamily deals in 2026 and our overview of how to find off-market properties.

What Are the Red Flags to Watch for When Buying Retail Properties?

Short answer: Avoid heavy restaurant concentration, poor household income demographics, buildings from the 1970s–1980s, and anchor tenants whose footprint can’t be reconfigured if they leave. The right center has flexible floor plans, middle-income demographics, and tenants who aren’t competing with Amazon or AI.

Brian was direct about what sends him running from a retail deal:

Demographics First, Always

Before Brian’s team even looks at a floorplan or rent roll, they pull household income maps. “If we’re in a red zone, we’re out. I don’t care if it was built last year.” He targets B-class centers in B-class markets—the same asset quality philosophy he’s always applied to multifamily.

Heavy Restaurant Exposure

“If it’s 90% restaurant, we try to stay away from that. Just kind of PTSD from the COVID days.” Restaurants are high-failure businesses with expensive build-outs and highly customized spaces that are difficult to re-tenant. A failed restaurant space can sit dark for years.

Inflexible Anchor Spaces

Brian specifically evaluates whether a large anchor tenant’s space can be subdivided if they vacate. He’s currently acquiring a center where a Dollar Tree occupies 16,000–18,000 square feet—but the original construction clearly anticipated that space being divided. “Those guys are gone, I can go put $100,000–$200,000, wall this off.” If you can’t reconfigure a large vacancy, you’ve got a problem that money alone won’t solve.

Buildings Too Old or Too Specialized

1970s and 1980s construction brings too many mechanicals, environmental, and structural risks. And spaces that were heavily built out for a specific medical or office use (“pill bottles still in the back”) need to be white-boxed before you can attract a new tenant—a cost that needs to be underwritten carefully.

Understanding red flags is equally important in multifamily. Our piece on common limited partner real estate investing mistakes covers many of the same blind spots that also apply on the active side.

What Do Tenant Improvements (TI) Really Cost—and Why Do They Matter?

Short answer: Tenant improvements (TI) are cash allowances paid to incoming tenants to build out their space. In today’s market, TI is non-negotiable, typically $20–$30+ per square foot, and must be underwritten into every retail acquisition alongside leasing commissions of 6% of the full lease value.

This was one of the most practical parts of Brian’s conversation with Gabe—and one of the most important for new retail investors to understand.

TI works like this: A new tenant agrees to take a 10,000-square-foot space. But before they move in, they need to build it out to suit their business—whether that’s a dental office, a tutoring center, or a nail salon. Rather than the landlord doing the buildout themselves, the landlord pays the tenant a per-square-foot allowance, typically released after the tenant occupies the space and pays their first month’s rent and receives a certificate of occupancy.

At $20 per square foot on a 10,000-square-foot space, that’s $200,000 out of your pocket at lease execution.

Then there are leasing commissions. “Leasing commissions are normally 6% of that lease amount. So if someone’s paying a thousand bucks a month, that’s $12,000 a year. It’s a five-year lease—you’re paying on that total.” That’s $3,600 in commissions on a modest lease. On larger national deals, it can be much more.

The mistake many buyers make? They model the property based on in-place leases without accounting for what happens when those leases expire. “I got to pony up another 50 grand,” Brian said, recalling his own early lesson. If you’re buying a center and three leases expire in two years, you need to have TI capital reserved and factored into your returns from day one.

The value-add play in retail today often comes from older owners who built their portfolio when concessions weren’t needed. “They’re like, ‘I’m not gonna pony up $100,000. They can rent it or not.’ And that used to work—just like multifamily. But we’re not in that space anymore.” Aggressive TI dollars and full 6% commission payments are the cost of doing business in 2025.

How Do You Find Deals Through Broker Relationships?

Short answer: Brian’s most reliable lead source isn’t off-market cold calling or direct mail—it’s systematic, disciplined broker relationship building. He auto-responds to every inbound email with his buy box, attends conferences to meet brokers (not investors), and has built a pipeline where brokers text and call him directly.

Gabe admitted on the show that he used to believe off-market was the only real path to good deals—and that focusing on brokers felt too ordinary. Brian pushed back with a story that illustrated exactly why brokers matter.

His acquisitions team had been following up with a distressed property owner for three years. Every time the owner said “call me in three months,” they called. The next follow-up was scheduled for February 28th. Then a broker listed the deal two days before—and sold it without ever calling Brian’s team. “He sold it to the guy and they just feel more comfortable dealing with someone they think is a professional in that space.”

Brian’s broker outreach system is methodical:

He signs up for every deal distribution list he can find.
He set up an auto-reply email template: “Thank you for sending this one—doesn’t work for us at Fergmar Capital. Here’s my buy box, please keep me in mind. Would love to schedule a call. Here’s my calendar link.”
He ran that template for two years straight until brokers started texting and calling him directly.
He attends real estate conferences specifically to build broker relationships—not to find passive investors. “I don’t think that’s the way to find investors at all.”

“You got to put in the work and people have to know who you are,” Brian said. “If not, the general email is not worth buying.”

For more on generating deal flow without relying on cold calling, see our article on raising real estate capital without cold calling and our guide on off-market real estate success strategies.

What Did a $80M Portfolio Investor Learn the Hard Way?

Short answer: Unit count alone doesn’t determine whether a multifamily property needs on-site staffing—community design does. A 56-unit complex with a pool and common areas can require full-time staff even when a 200-unit townhome community might not. Always verify the debt history and never trust unverified lease rolls.

Brian’s first syndicated deal—a 56-unit complex—became one of his most instructive failures. His team had successfully managed standalone townhouse portfolios up to 42 units, and they assumed the 56-unit complex would operate the same way. It didn’t.

“A complex has a pool and common areas, and it has to be staffed. Well, guess what? You cannot afford a staff at 56 units.”

The problem was compounded by a fraudulent seller who had provided ghost leases—fabricated tenancy records that inflated the apparent occupancy and income of the property. “We learned our lesson on not trusting people there. We just, we don’t trust anyone now.”

Brian’s team eventually stabilized the deal by packaging it with their other nearby holdings so they could justify and afford on-site staffing across the combined portfolio. Today the property performs well—but the early months were painful and expensive.

His key insight from the experience: “It doesn’t matter the unit count. It matters—is it set up as a community? I don’t care if it’s 20 units or 200 units. You could have 200 townhouses next to each other and there’s no amenities—you probably don’t need anybody on site. But you had to have it for this 56.”

This is a lesson that applies across asset classes. Gabe noted the parallel with self-storage: “If you buy something too small and you don’t have somebody on site, it can really tank the deal. Buying bigger is actually safer than buying smaller—people think the risk is smaller with small assets, but really it’s bigger because you can’t staff it.”

For investors thinking through how to structure their first or next syndication, our guide on legal structures for real estate syndications and our piece on scaling a multifamily syndication portfolio are worth reading before you commit capital.

How Is AI Changing Deal Screening and Daily Operations for Real Estate Investors?

Short answer: AI is already saving serious time for active investors like Brian Ferguson—primarily through automated deal screening bots tied to project management platforms, and through AI assistants (like Claude) integrated with email, calendar, and task management tools.

Brian was candid about his AI stack: he’s a Claude user, and he’s integrated it directly into his Gmail, calendar, and Asana workflow. His use case isn’t writing code or building complex models—it’s using AI as a tireless personal assistant.

“I’m like, ‘Hey, search this email thread, look at this Asana task, cross-reference this, draft this.’ And then just let it go and work by itself while I jump into something else.”

On the deal-screening side, his team built a custom bot that receives forwarded broker emails, automatically scrubs the deal details against their buy box criteria, cross-references expiring loan lists, and routes the lead to the right person in the pipeline. The bot doesn’t replace human judgment—it just ensures that human judgment gets applied only to deals that already meet the baseline criteria.

“Now the new Claude can literally build comprehensive spreadsheets, work inside of Excel. And if you’re still manually doing stuff like that, it’s just, it’s crazy.”

Gabe echoed this enthusiasm from the host’s chair: “I have a subscription to literally every single one of them—Perplexity, ChatGPT, Gemini, Claude. I’m starting to go toward Claude. The responses that come back, I just like them best. They seem more comprehensive. And it is better with Excel.”

If you want to explore how AI is reshaping real estate investing more broadly, read our guide on AI real estate investing tools in 2025 and our follow-up on AI tools and strategies for real estate investors.

Key Takeaways: Brian Ferguson’s Framework for Building Wealth in Commercial Real Estate

After 20 years of building a portfolio from a $10,000 house to over $80 million in assets, Brian’s advice to newer investors distills down to a few core principles:

Principle	What It Means in Practice
Partner sooner	Brian’s #1 advice to his younger self. He passed on deals worth hundreds of units because he refused to take outside capital. Don’t let ego cost you generational wealth.
Own your market	His entire portfolio started in Victoria, Texas—a two-hour drive from three major metros. Being the biggest operator in a secondary market gives you information, relationships, and deal flow no outside buyer can match.
Find your gap	The 30,000–50,000 sq ft neighborhood retail center is too small for REITs, too commercial for most syndicators. Finding the asset class that falls in an institutional gap is where real wealth is built.
Focus on debt, not price	For distressed multifamily, the listing price is almost irrelevant. Understanding the loan structure, its expiration date, and the lender’s patience is the actual signal for deal quality.
Automate screening, not judgment	Use AI and systems to filter down to the right deals—then apply your real expertise to underwriting and negotiating those deals.
Be patient with brokers	Two years of consistent follow-up and auto-responses built a pipeline where brokers now reach out to Brian proactively. This does not happen overnight.

You can also hear Brian discuss his market focus on the Real Estate Investing Club Podcast—one of the top shows for active investors looking to level up.

And if you’re early in your journey—making the shift from single-family to commercial—our guide on transitioning from single-family to multifamily and our piece on moving from residential to commercial real estate are both excellent starting points.

Connect with Brian Ferguson

Brian Ferguson is the founder of Fergmar Capital, based in Victoria, Texas. He is active on LinkedIn and welcomes calls from investors, operators, and real estate professionals. Whether you’re looking to invest passively, partner on a deal, or just ask questions, Brian takes calls freely and is one of the most accessible operators in the game.

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