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FEBRUARY 13, 2025

Written by John Makarewicz

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Canada is a major exporter of lumber, steel, and aluminum, key materials used in new developments and renovations. If these tariffs go into effect, we could see sharply rising costs for multifamily construction and value-add improvements in the U.S. market. For investors focused on value-add strategies—where renovations are a key driver of increased rents and appreciation—rising material costs could compress margins and push capex budgets higher.

Will this Fuel Inflation?

While tariffs are intended to bring jobs back to the U.S., they often lead to higher prices for consumers and businesses. Developers facing increased costs may pass them on through higher rents and home prices, potentially keeping inflation elevated despite the Federal Reserve’s recent rate cuts. Additionally, tighter supply chains could slow new development, further constraining the housing supply and pushing demand higher for existing rental units.

Multifamily Investments Could Benefit

For investors in multifamily real estate, these tariffs could have two potential outcomes:

A slowdown in new apartment construction, which would keep rental demand strong and support rent growth in existing properties.
Higher costs for value-add renovations, requiring investors to be more selective in deal underwriting and renovation strategies. At FCP, we always add a 10% contingency budget to our cap-ex and underwrite our cap-ex projections conservatively. For example, on our most recent deal, Strawberry Station, we are already under budget by 70k not including our 10% contingency.

At Faris Capital Partners, we’re closely monitoring these policy shifts and adjusting our strategies to ensure our investors are well-positioned. If new tariffs push construction costs higher, existing multifamily assets could become even more valuable, as fewer new units come online.

But for every project that pencils out, there are many that don’t.

Final Takeaway

While uncertainty remains, the key for investors is staying ahead of market changes. With a well-planned investment strategy and a focus on long-term fundamentals, multifamily real estate remains one of the best ways to hedge against inflation and shifting economic policies.

If you’re looking to diversify your portfolio and position yourself for the evolving market, let’s talk. Faris Capital Partners specializes in value-add multifamily investments designed to thrive in any economic environment.

👉 Schedule a call with our team today to discuss your 2025 investment strategy.

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