Real Estate Cash Flow in 2026: Why Deals Don’t Perform Like They Used To
Originally published on October 21, 2026
“Real estate’s a little slower, market’s not bad, it’s just less forgiving.” – Kyle Paxton
In this episode of Your CPA’s Take on Real Estate, Faith sits down with Kyle Paxton to talk about why real estate cash flow has tightened and how investors need to adjust their strategy. Kyle covers rising expenses, interest rates, underwriting mistakes and what separates investors who are surviving from those who are scaling.
Deals bought between 2020 and 2022 often relied on low rates, strong rent growth and easy refinancing. Today, income isn’t keeping up with expenses and debt service, and lenders are applying more scrutiny. That puts more weight on realistic underwriting and more conservative debt.
Kyle also explains where good deals still exist, including motivated sellers, broken capital stacks and inefficiently run properties, and why clear communication and real-time data are what set growing investors apart.
Resources
Transcript
[00:02] Faith: Hi everyone, and welcome to the JMCO channel. Today I am here with Kyle Paxton. Hi Kyle, how are you?
[00:02] Kyle Paxton: Hello. Always a pleasure. Glad to be here.
[00:02] Faith: Let’s talk real estate, shall we?
[00:02] Kyle Paxton: Let’s do it.
[00:02] Faith: So today’s topic is why today’s real estate deals aren’t performing like they used to and how investors need to adjust their strategy.
[00:22] Faith: I have a lot of good questions for you, and I can’t wait to hear what you have to say.
[00:22] Kyle Paxton: Hopefully I have some answers. Here we go.
[00:22] Faith: You will. Okay, the first question is, why are so many real estate deals no longer cash flowing like they did years ago?
[00:22] Kyle Paxton: In talking to clients and navigating transactions of all shapes and sizes (my words may be escaping me today, Faith)…
[00:54] Kyle Paxton: What we’re seeing is that the income side in the deals we’re looking at isn’t growing as fast as the expense and debt service side. That’s been a trend for the last couple of years, and it’s still very prevalent in 2026. Existing deals were bought using low rates, assumptions of strong rent growth, cheap and easy refinancing, manageable expenses. We’re basically seeing all of that get tighter, with less rent growth.
[01:23] Kyle Paxton: A lot of what we do is in the Sun Belt, Florida and the Southeast. We have a high volume of clients with investments in those areas, and the themes are relatively consistent across all of those markets. There’s a lot of supply, a lot of options. That has suppressed rent growth a little bit, and expenses have just continued to expand.
[01:48] Faith: Wow. So what’s the biggest shift in the market that investors are underestimating?
[01:48] Kyle Paxton: My perception on this, and it’s not necessarily a super direct answer, is that everything just feels a little less forgiving. From 2020 through 2022, we had a lot of people enter the real estate market, and typically deals were able to float themselves top to bottom, regardless of asset.
[02:19] Kyle Paxton: Now pretty much everything we’re seeing, the whole environment, is just a little less forgiving. Real estate’s a little slower, market’s not bad, it’s just less forgiving. So you really have to have tight controls around the underwriting process. When you’re entering a deal with refinance goals or exit goals, you have to be thorough on what that plan looks like. Is it realistic, and is it built for this tight, less forgiving environment?
[02:51] Kyle Paxton: That’s the consistent theme I’m seeing across the board. Less forgiving. That’s what I keep gravitating to when I’m having these conversations.
[02:51] Faith: All right. Where are investors overpaying or not understanding the returns right now?
[03:12] Kyle Paxton: I’m seeing a lot of this based on asset class. I already mentioned some high-supply markets in the Sun Belt, so multifamily. We see a lot of high-supply multifamily. James Moore has a strong footprint in a lot of college towns, and a couple of years ago it was bam, bam, bam. They’re everywhere. So that’s a big one.
[03:33] Kyle Paxton: Older office space and value-add deals with thin margins. And I’m located in Florida, where these deals often have high insurance and property taxes attached to them. So where I’m seeing people overpaying and overestimating really just depends on asset class.
[04:02] Kyle Paxton: We talked about the more suppressed rent growth we’re seeing right now. In the quote-unquote old market, and I’m really just talking a couple of years ago, you would still potentially be able to overpay and win because you have the quick rent growth and cap rates were compressed. The recovery is harder in the less forgiving market we have currently.
[04:26] Kyle Paxton: So it varies by asset class, and it gets back to making sure we have the right inputs going into a deal and a good grasp on the current market.
[04:26] Faith: Absolutely. How have interest rates fundamentally changed deal math?
[04:47] Kyle Paxton: That’s a big topic of conversation, one we deal with all the time. With higher interest rates, real estate comes back to cash. It’s very much a cash flow style of business. You’re typically collecting rents, turning around and paying your expenses and distributing cash to the investor. This is kind of an easy answer, but higher rates just reduce cash flow.
[05:15] Kyle Paxton: More of your property’s income is going to the lender. It potentially reduces the loan proceeds available to you, so buyers are having to find more equity or pay a lower price to hit those same returns. In the quote-unquote old market, a deal could support higher leverage and still produce positive cash flow. The same NOI in the current market supports much less debt.
[05:50] Faith: What is the biggest mistake you’re seeing in underwriting deals today?
[05:50] Kyle Paxton: The easy answer here, I think, is just the stale expense assumptions, and then still falling into that rent growth trap. And I mentioned this earlier, but I think this is the big one.
[06:13] Kyle Paxton: A lot of our recent video content has this as a heavy conversation point: relying too heavily on the optimistic refinance or sale you planned when you entered a deal. A lot of the deals I work with are going through the refinancing process right now, and I keep talking about how everything is a little more rigid and less forgiving.
[06:43] Kyle Paxton: The lending process is so much less forgiving. You have to understand that the process takes longer. You’re going to get scrutinized more and squeezed a little bit as you go through these processes. In the old market, those aggressive assumptions I think were often rewarded because the market kept moving upward. You could say, okay, I can make this jump, I’ll be able to exit and it’s going to be great.
[07:17] Kyle Paxton: That optimistic outlook is causing some misses right now. Even small misses in those kind of inputs I talked about around the insurance, taxes, vacancy, cap rates can have a significant impact on your cash on cash return.
[07:40] Faith: Absolutely. How should investors be thinking about leverage in this environment?
[07:40] Kyle Paxton: The way I’m thinking about leverage is much more as a risk management decision and not just a return enhancer. The classic real estate playbook is you generate some equity, you’re heavily leveraged and you get a great return. Rinse and repeat.
[08:11] Kyle Paxton: In today’s market, it’s so much more than that because of the risk. When you have too much debt, you’re taking a good property, a good asset, and turning it into a bad investment. We always thought about leverage as amplifying our returns when debt was cheap and asset values were rising.
[08:35] Kyle Paxton: Now, in a lot of ways, leverage is just amplifying your foundational problems. So to pull this into a more concise answer, investors should be thinking about leverage much more cautiously, as part of the risk stack more than as an optimistic return enhancer.
[09:02] Faith: Absolutely. Are there still good deals right now, or does the strategy need to change?
[09:02] Kyle Paxton: Good deals, Faith? We see them. The strategy does need to change a little bit. Like I said, the market’s not bad, it’s just different. What we’re seeing is that a good deal is grounded in basis discipline.
[09:32] Kyle Paxton: There’s strong current cash flow. Maybe the debt’s a little more conservative, and we’re a little less leveraged than we’ve been in old markets. Then the operational upside and realistic exit assumptions are what’s still driving a good deal. Again, this varies some by asset class.
[09:56] Kyle Paxton: That’s certainly a big part of it, and location, clearly. But there are good deals, and they’re different. There are pockets of motivated sellers, broken capital stacks, assumable debt and properties that are operating inefficiently. If a buyer has a specific advantage, a niche or additional capital, there’s opportunity out there to salvage some of these bad deals we’re talking about.
[10:38] Kyle Paxton: Oftentimes I think the good deals are salvaging some bad deals. So there is opportunity out there. It just looks quite different.
[10:38] Faith: Our last question is, what separates investors who are surviving versus those who are scaling in this market? Today we talked a lot about what’s changed, so I think a good example of who’s doing it right and how they’re doing it would help.
[11:00] Kyle Paxton: I have a lot of insight into the three buckets of not surviving, surviving and scaling. There’s a little bit of all of them that come in and out of my world. When I think about surviving, I think about doing the right things and treading water. Steady. These are the investors who are protecting their liquidity.
[11:32] Kyle Paxton: They do have cash flow, and they manage their expenses a little more aggressively. They get out in front of that. What I want to ground this in, because it’s such a crux of the not surviving bucket, is communication between the real estate operator, lender, other investors and all the stakeholders in the project.
[12:05] Kyle Paxton: The number one source of broken trust is lack of communication, and broken trust can blow up a deal by itself. The ones that are surviving are doing all of those things, because if communication breaks down, we’re no longer surviving. Getting into scaling, the scalers are doing all of that strong communication and building trust with investors as they grow.
[12:36] Kyle Paxton: So they get repeat investors and word of mouth bringing in friends. On top of that, they’re looking for distressed, misplaced opportunities where they might have an operating or capital advantage relative to the seller. Those deals are out there.
[12:58] Kyle Paxton: One more thing I have to harp on, because I talk about it in pretty much every video we do: the availability of data and the ability to distill data down in an understandable way. I talk to you about this every time, Faith, but in 2026 we can get all of our data at our fingertips instantly.
[13:22] Kyle Paxton: Getting our data organized so we can make meaningful real-time decisions, instead of looking two years in the past like we did with static reporting, is huge. The scalers have that down.
[13:39] Kyle Paxton: They can look at how an individual property is performing, or their whole fund at that scale, and distill that data in a way they can communicate to everyone involved.
[13:39] Faith: Absolutely. Solid advice. Thank you so much for sharing, Kyle. You’re going to come back live June 4th, and we’re going to build on today’s topic. It’s going to be “The Great Real Estate Repricing: Why Old Deal Models Are Breaking and What Actually Works in Today’s Market.”
[14:00] Faith: It can be overwhelming with things changing so quickly, and that’s why people hire you, to help them understand and get all of their data in order.
[14:00] Kyle Paxton: That’s right. Absolutely. Dramatic title. I’m excited about it. It’ll be fun. See you in about a month.
[14:22] Faith: I’m actually excited to talk to you about it. Well, it was good talking to you, Kyle. See you next time.
[14:22] Kyle Paxton: Thanks.
Watch the Full Episode
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