How Operators Are Rethinking Multifamily Budgets for 2027

Budget season is in bloom: fluctuating rent growth and volatile economic trends are forcing multifamily owners to dig deeper into creating their 2027 budgets.

“Instead of typical rent growth of 3.5 percent to 4 percent, some markets are up, some are down and some have concessions,” noted Matt Ferrari, founder & managing partner of PXV Multifamily in Miami.

He recommends that owners and operators “be optimistic but also realistic. “Pay attention to known hazards and don’t get ahead of rent growth.”

Balancing revenue and expenses in a complex market

The good news, according to Karen Matkovich, operational vice president at Village Green Cos., is that halfway through 2026, both revenue and expense numbers are more consistent than in 2025, including less volatile rent growth and stabilized insurance costs.

“We focus on actual market rent vs. effective rent in our markets and try to close the gap between those numbers,” Matkovich said.

Another bright spot that helps balance budgets is strong retention rates. “Typically, we target 50 to 55 percent lease renewals, but this year our clients are averaging 60 to 65 percent, with rent increases of 2 to 3 percent,” she added. 

There’s a compression between rent growth and operating expenses, acknowledged Lissette Calderon, founder & CEO of Neology, a Miami-based vertically integrated real estate development firm.

“But the budgeting goal shouldn’t be just to spend less,” Calderon said. “The framework we use is that every dollar should either protect revenue, reduce a future expense or preserve asset value.”

Neology’s priority is to invest in resident experiences that contribute to a sense of community and increased tenant retention. For example, staff at its properties partner with local businesses, such as Pilates studios, to offer co-branded classes, bring in wine vendors for resident-only tastings and organize World Cup watch parties.

“These events make people feel like this is their home and community, not just a temporary rental, which in turn makes them want to stay longer,” Calderon said.

The biggest challenge for Savas Karas, chief technology & transformation officer for CAPREIT, aligning the budget with both investor and owner expectations.

“We look at our budgets through an operational lens based on the reality of the market and expenses, along with an investment lens that looks at the ramifications of our decisions,” said Karas.

Expense priorities

While not all costs are controllable, operators evaluate every category to maximize resident satisfaction and NOI.

• Maintenance. One expenditure no operator wants to cut is maintenance. Karas said consistent maintenance can prevent more expensive repairs while supporting safety, satisfaction and renewals. For example, annual dryer vent and gutter cleaning can prevent fire hazards and water damage.
• Vendors. Vendors are a key part of budgeting, so Matkovich relies on contract trackers for terms and expiration dates. “We have conversations with all vendors a year ahead of their (contract) expiration to ask about increases and to make sure we’re getting the services that are appropriate for our spending,” Matkovich said.
• Payroll. Staff costs have been trending up for the past three years, Karas said, but there are “untold costs” to turnover. “The longevity of employees contributes to institutional knowledge and tenant retention,” he said. Some of Matkovich’s clients own multiple properties in the same submarket, which can offer opportunities for savings and efficiency with shared employees. “A big change for us is leaning on AI and technology, not to replace our team but to take on administrative tasks and allow on-site staff to focus on more valuable activities,” Calderon said. “This is an initial capital expense that can eventually result in lower payroll costs.”
• Insurance. To keep insurance costs in check, multifamily operators invest in preventive maintenance and leak detection and develop partnerships with insurance companies to share knowledge and negotiate lower premiums. “Our insurance partners work with us during the design phase for resilience and safety,” Calderon said.
• Technology. At CAPREIT, Karas said investments in AI speed up the budgeting process with quick comparisons of documents and executive summaries of material. Village Green gets feedback from other companies rather than being “first in line” with implementing new technology. Investing in AI can reduce some marketing expenses, according to Calderon, since AI can be used to answer basic questions. Matkovich prioritizes getting data from sources like Yardi to drive marketing decisions based on submarket conditions and seasonality, which can also generate savings by eliminating unnecessary marketing campaigns.
• Utilities. In some locations, multifamily operators have a choice of vendors and can lock in better rates for longer terms, Ferrari said. “Our area directors work closely with utility providers and review all their options to anticipate any rate increases for the next year,” Matkovich said. Another area to look for savings can be trash contracts, since the level of service—such as daily valet pick-up outside apartment doors or bi-weekly pickups from dumpsters—needed can vary by asset and be adjusted to save money and still match resident expectations, she added.
• Property upgrades. Upgrades that impact health and safety will always be funded, Karas said, but there needs to be a “rational balance” between revenue and property. That balance requires deep knowledge of an asset’s micro-market and often involves a segmented, phased approach for upgrades to reduce their budget impact.

Budgeting advice

Precision and flexibility are both key to budgeting. “Every project is its own micro-market, so we don’t do any broadbrush budgeting,” Karas said. “Listen to your on-site staff and your regional managers: they’re the eyes and ears for each project who will help you understand how to budget.”

Operators also need to understand the long-term goals for each asset.

“You need to start early with a strong ‘re-forecast’ that compares your forecast for 2026 with the actual numbers,” Matkovich said. “We match our budget with our clients’ goals. Some prioritize high occupancy; others want to maintain expenses or reposition a property for a sale.”

Ferrari emphasized the need for a budget process, with a playbook and formula to follow. “Treat every dollar as meaningful, because a budget is always a balancing act,” he said.

Budgeting season often triggers evaluations about more than just revenue and expenses, since each financial decision has an impact on owners, investors, operators, staff, vendors and residents.

“Budgets lead to larger discussions about next operational steps,” Karas said. “First you need to validate your assumptions, then you need to be able to understand and articulate your numbers.”

At CAPREIT, Karas takes an individualized approach to each property throughout the 28 states his firm operates in. “Some organizations see that occupancy is down in one area, so they set their revenue at 90 percent occupancy instead of 95 percent,” he said. “Our approach is to start at 95 percent and do what needs to be done operationally to make the numbers work.”

No matter how well a budget is grounded in accurate data, every financial forecast is always aspirational. Market conditions, which have been volatile in recent years, can always change.

“If you go back to 2021’s budget season, no one predicted what would happen in 2022 and 2023 with the big inflation on the expense side,” Ferrari said. “And then the deceleration in rent growth has lasted longer than anyone thought.”

“You can’t look to rent growth to cover operating deficiencies,” Calderon said. “You have to be surgically precise with your budget and practical with your spending priorities.”