A recent sentiment survey found that 38% of investors expect market conditions to improve, but more than a third plan to purchase nothing this year. That gap between optimism and action is not new, but in a market where Southeast Michigan apartment rents are still climbing and buyers consistently outnumber sellers, the cost of sitting out is compounding, according to Larry Gotcher, owner and broker of Resource Realty Group in Ann Arbor, Michigan.
Gotcher, who has watched this pattern repeat through every major cycle of the last three decades, says: “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.”
There is a version of caution that protects investors from bad investments, and another that keeps them on the sidelines while properties appreciate without them. The investors who build meaningful portfolios, in Gotcher’s view, are those who close more transactions and win a little each time, rather than waiting for a landslide win on a single 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 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 to focus on what they can produce given their operating expertise, financing, and management approach, not what the current owner produced.
Gotcher’s acquisition criteria are simple: properties need to 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 like a solid decision 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.”
If there is a single principle that runs through every piece of advice Gotcher gives, it is this: 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 a high-rate environment, in a flat market, and in a downturn. The 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 sitting on the sidelines.
The market today, with rates still elevated and many buyers waiting for conditions that may never arrive, is another version of the same test. The investors acquiring now, at reasonable prices and with sound assumptions, will likely look back at this as a good entry point. The ones waiting for certainty will be looking at higher prices by then.
