Earlier this week, I was talking with a local investor friend who’s been sitting on the sidelines for months, not even considering any new investments.
His reason? He’s convinced real estate prices are still too high, so he’s waiting for “the crash.”
Sound familiar?
This got me thinking about a disconnect I keep seeing. Many investors think they have to choose: either the market is overpriced (so wait), or there are good deals (so invest). But that’s not how it actually works.
The reality is more nuanced, and missing that nuance means watching from the sidelines while others build wealth…even in what might look like an “overpriced” market.
The Blood-in-the-Streets Myth
My investor friend seems to be waiting for foreclosure notices in every paper, properties selling for pennies on courthouse steps, and general chaos reminiscent of the 2008 Financial Crisis and its fallout.
But that’s not happening. I’ve been saying for nearly two years now that I thought it was unlikely. And I still don’t see a realistic situation that would lead to it in the near future.
But…just because a GFC-style panic hasn’t gripped the nation doesn’t mean that distress isn’t happening right now.
In multifamily specifically, a common theme has started playing out: an increasing number of deals purchased 2-3 years ago have had their equity completely wiped out.
Think about it. Someone (likely brand new to the business) bought an apartment building in 2022 with a variable rate loan, put down 25% equity, and assumed rents would keep climbing forever. Fast forward to today: expenses have skyrocketed, their interest rate has doubled, and the property is now worth less than the loan balance.
That 25% equity (i.e., all the passive investor’s money)? Gone. Completely vaporized.
The Invisible Distress Market
But here’s the twist: these properties aren’t going to foreclosure.
Instead, banks are quietly reaching out to sponsors they trust. The conversation goes something like: ”Hey, we’ve got a problem property and are forcing a sale. Are you interested in it?”
It’s a private marketplace most investors never see. No courthouse steps. No newspaper headlines. Just banks trying to minimize their losses by selling to operators who they know and trust can actually run these properties profitably.
I know two sponsor groups in completely different markets who’ve told me they can’t keep up with the volume of deals being shopped to them by lenders.
And some of these deals? They’re going to be absolute home runs for the new passive investors coming in at significantly better prices.
The Institutional Approach
The bigger point in all this is something I’ve written about before: trying to time the real estate market is a fool’s errand.
Institutions don’t sit around waiting for the “perfect” market conditions. They take a portfolio approach – buying deals that make sense across all market cycles. Some years offer more opportunities, some fewer. But there are always deals in every cycle that work.
The key is being willing to adapt your approach and staying open to different opportunities.
That might mean expanding your network of sponsors to work with those who have the track record to access the off-market distressed deals, or it might mean expanding beyond your usual asset and investment preferences.
Maybe you’ve only invested in multifamily before, and could benefit from considering deals in another asset type. Or maybe you need to spread your investments across more deals with smaller amounts to manage overall risk better.
Regardless of the specifics, just remember: you can’t stay stagnant. Markets evolve, opportunities shift, and what worked perfectly three years ago might not be optimal today.
The Bottom Line
If you’re sitting on cash waiting for some dramatic market crash to signal the “all clear,” you’re missing opportunities that are happening right now.
Yes, you need to be selective. And yes, you should probably diversify more than you did in 2021. But waiting indefinitely for “perfect” conditions? That’s not an investment strategy – it’s paralysis.
Good opportunities are here. They’re just not wearing the costume you expected.
The distressed sales are happening in the bank boardroom, not at the courthouse steps. And the best deals right now may be in an entirely different asset type.
So if you’re waiting for a dramatic, headline-inducing crash to give you the all-clear signal, stop. It’s probably not coming.
Instead, start evaluating deals on their individual merits instead of trying to time an entire asset class.
The right move isn’t waiting for perfect timing. It’s adapting to what's actually available today.