More than a third of investors plan to purchase no properties this year, even as 38% expect market conditions to improve, according to a recent sentiment survey. This gap between optimism and action is costing investors, particularly in markets like Southeast Michigan where apartment rents continue to climb and buyers outnumber sellers.
Larry Gotcher, owner and broker of Resource Realty Group in Ann Arbor, Michigan, has observed this pattern through every major cycle over the past three decades. His assessment is direct: “Investors are way too picky about what they’re buying. Purchasing real estate in America is one of the most lucrative things you can do. It’s hard to go wrong, even if you make a mistake, because you get your appreciation back over time.”
Being selective and being paralyzed are not the same, Gotcher emphasizes. Caution can protect against bad investments, but when it leads to sitting on the sidelines while properties appreciate, it becomes a liability. The investors who build meaningful portfolios, in his view, are those who close more transactions and win a little each time, rather than waiting for a single blockbuster deal. “You don’t have to win the lottery on every deal,” he says. “I would rather close more transactions and win a little bit every time. In the end, you’re going to win bigger because you own more property.”
In a market like Southeast Michigan, where apartment inventory has been chronically short for decades and rents have increased consistently, holding out for perfect conditions means watching entry prices climb while the ideal moment keeps moving further away.
After more than 30 years in commercial real estate, Gotcher has identified two questions that often signal a buyer who won’t close. The first is asking why the seller wants to sell. “Why does anybody get into real estate? Buy low and sell high,” says Andrea Gotcher, who handles residential transactions and analytics at the firm. “They’re just wanting to move on to a different project, or they want their money.” The second is asking to see the seller’s financials to assess past performance. “What somebody else has done to run their business into the ground doesn’t matter,” Andrea Gotcher says. “We know our area. We know what we can do with the property. We base our numbers on that.” For investors with genuine market knowledge, the correct lens is what you can produce given your operating expertise, financing, and management approach.
Gotcher’s acquisition criteria are straightforward: properties must cash flow at or above zero after debt service. Monthly negative cash flow is the floor he will not go below, because below that line, every other assumption in the deal has to be exactly right to avoid losing money. Breaking even monthly is acceptable, as tax depreciation generates a real return on top of that, and long-term appreciation does the rest. A deal that looks unremarkable on paper today tends to look solid five or ten years out. “The key is owning as much real estate as you can,” Gotcher says. “If you’re too picky about what you buy, you’re not going to acquire very much real estate.”
The overarching principle in Gotcher’s advice is to buy and hold. “Don’t be scared by temporary market conditions that force you to sell,” he says. “Make sure you hold as long as you can.” That applies in high-rate environments, flat markets, and downturns. Investors who sold into fear during the 2008 cycle—particularly in resilient markets like Ann Arbor—came out significantly behind those who stayed in. Time corrects most underwriting errors in real estate in ways that are almost impossible to recover from if you are on the sidelines. Today, with rates still elevated and many buyers waiting for conditions that may never arrive, the investors acquiring now at reasonable prices will likely look back at this as a good entry point. The ones waiting for certainty will be looking at higher prices by then.
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