Real estate investors betting on 2-3 year exits get crushed by unpredictable rate hikes and rising costs. Instead, plan for 5-10 years and position yourself to sell when cap rates compress and rents grow from supply constraints, like the conditions that existed in 2022.
The reality is you can't control what the market does, right? No one expected the interest rate increases that we saw. No one also expected, you know, the expenses to increase the way they have across the board. If everything in your business plan is relying on achieving a perfect outcome in a 2 to 3 year timeframe, you shouldn't do that deal regardless, because you don't know what you don't know. You don't know what the future holds. And there's always something unexpected that happens. But what can happen if you can have a longer timeframe, and I'm not talking about just 3 to 5 years, I'm talking 5, 7, 10 year timeframe of investing in real estate. This is how you really win. Because we all know, like we said, all these rules are rules and they happen over the long haul, but it's not every single year and every single part of the cycle. So you got to be coming in. I think right now is a great time to come into the beginning of a new cycle. But we also don't know what we don't know. We don't know when the cap rates are going to compress again. We don't know when we're going to see that rent growth exactly, although I have a pretty good hunch it's going to be in the next 24 months because of supply. But I don't know for sure, right? There's a lot of factors I don't know. But I do know that I want to be positioned with those tailwinds behind me so that when the market does all recognize it— that's what kind of happened 2022, right? It's like the inflation was crazy. Capital markets were still very, very aggressive. Interest rates were still very, very low. And it was this perfect storm of all these things happened where values were just crazy high. That's going to happen again. And I don't know when, maybe that won't get that exuberant, but all these things are going to line up and I want to be positioned because if you see it, it's too late if you're going to be a buyer, right? You want to be the one selling at that time. So to me, it's, it's the right mindset. It's a good reframe for a lot of investors that got burned in the last cycle and this kind of short-term mindset. You gotta have a longer timeframe to achieve the result. Balanced-reflection.
