"2026 will be an incredible year for rent growth and values if you own real estate."
That's what multifamily master Ken McElroy told the small group of us gathered in Dallas last weekend.
If you don't already know Ken, he's Robert Kiyosaki's advisor for real estate and has transacted $1B+ of property in his career. He also runs the Collective Inner Circle mastermind, with partners George Gammon, Jason Hartman, Robert Helms, and Russell Gray.
I had the privilege of joining this amazing group of investors and entrepreneurs late last year, and we just finished our first 2-day mastermind meeting of 2024.
We covered a myriad of topics over the weekend...goal setting...the power of community in uncertain times...brand building and YouTube growth strategies...structuring your schedule for max productivity...to name a few.
But one of the most valuable was Ken's presentation on the top real estate stories of 2024.
I don't have enough room to share everything he discussed, but here are the highlights:
Interest Rates
From March 2022 to July 2023, the Fed raised interest rates from 0% to 5.25% - the equivalent of 21 increments of .25%
Ken agrees that the Fed is likely to cut rates during 2024, but thinks it will be 4 cuts of .25% (total of ~1%)
Dropping by 4 after raising by 21 will relieve some pressure, but doesn't meaningfully move the needle. Existing deals that are already struggling are not likely to be saved by these small cuts
Beware of Falling Knives
Opportunities are starting to appear, but Ken thinks we haven't seen the very bottom in real estate prices just yet. So investors still need to be careful to not catch a falling knife.
Ken thinks we'll see prices bottom out in the latter half of 2024.
Housing Supply Struggles
The US remains undersupplied in housing, somewhere between 3-5M units
The drop in housing starts (the number of new houses starting construction) from 2005-2009 is the source of today's shortage:
The US population continues to grow. And the "official" numbers don't reflect illegal immigration, meaning the housing shortage is actually larger than it appears:
Since 2022, housing starts have trended lower, reflecting economic uncertainty from both homebuilders and consumers
This drop in starts further exacerbates the housing shortage, creating an incredible buying opportunity over the next couple of years. To quote Ken:
Rent growth and property values will "soar" starting around 2026
"You haven't seen anything yet" if you're in real estate
"This is the most exciting time ever"
Playing This Opportunity Today
The best acquisition opportunities today involve some level of seller distress.
Specifically, Ken is looking at:
Value-add multifamily with an underwater loan (the property is worth less than the loan balance)
Multifamily under construction, but construction has stalled around 80%+ complete
Completed new-construction multifamily, but the lease-up process has stalled
And his strategy is the same for all three:
Purchase now (at below replacement cost)
Finish the original business plan (construction, lease-up, etc.)
Collect cash flow from providing clean, safe, and affordable housing
Wait for the coming shortage to cause rents and property values to take off
Ken has a special combination of property management and construction experience to take advantage of specific opportunities like these.
But the core investment thesis applies to all investors:
- There's a housing shortage
- It's going to get worse
Own real estate