The Asset That Beat 2008… and Could Save You in 2026

We are talking about why many are predicting that there's going to be major distress in 2026. We're going to comment on that in just a second. But what asset classes should you be investing in right now and why? Even in 2008, this one asset class still made many people wealthy, if they bought correctly, obviously, and if they stayed through 2008, when most everyone else got pummeled. Today we have Randy and Larry on the show. We together represent about $500 million in assets under management. And the asset we primarily hold and are still buying is multifamily. All right, so it is the only asset class, the only major asset class where demand actually increases in a downturn. Right. And that's why we invest in multifamily. So we're going to cover the topics today. Talk about what happened in 2008 with multi family and what are we thinking in terms of 2026? I think we have several points here for you guys, but number one, multifamily had the most stable and countercyclical demand in 2008. Right. When the economy crashed, people stopped buying homes, they stopped expanding offices, they stopped with, you know, spending money in retail, but they couldn't stop needing a place to live. Right. And so, you know, occupancy generally stayed strong in most markets. Rent softened modestly, millions moved from home ownership back into rentals, and household formation bounced back quickly. So we're going to talk about that. Housing is not discretionary. But let's get some thoughts. Randy. Larry.

Yeah, they definitely hotels during that period, right?

Yeah, right.

Hotels were not a good place to be.

Yep.

I think, you know, what you see too, you know, go going back to that time period is that, you know, definitely a lot of folks, and specifically in, you know, certain areas, Florida for sure, one of them, certain areas of Georgia, other areas of the country where, you know, huge foreclosures just because, you know, the hairdresser owned five houses, you know, and the, the guy that was a plumber owned four. And, you know, it's like everybody just was buying houses on basically no doc loans. And then that, of course, you know, kind of imploded, as we all saw. But then, you know, the consequence of that is people that were, you know, living in homes, they, you know, lost their home. They had to move into something more affordable. A lot of people lost their job, you know, a lot of layoffs and all like that. So as you expressed it, did, you know, put a upward pressure on demand for people coming into rentals. Now, again, there are Some areas that if you dive into a Mac, a micro level, you know, I looked at certain areas here in Florida or even in Georgia where entire neighborhoods almost went into foreclosure, meaning houses. And so subsequent after that, it began to put pressure in that pocket because then all those houses basically came back online, or not all of them, but a big supply of them came back as rentals, you know. And so then again, you know, people who previously maybe couldn't have got a house to rent, able to move into a house, you know, 2009 or that kind of thing. So definitely provided for some mixed, mixed results. But again, ultimately, what you said is accurate. And seeing the strength of multifamily that you go through that period, you get into 9, 10, 11, 12, 13, and that really just, you know, kind of capital flowing into it took off and grew.

That's good. Yeah. So still a lot of people got pummeled.

Oh, yeah.

But even in multifamily, but the reality is it stayed much more consistent than your other asset classes. And you know, and then, and then also the lending environment. Right. So multifamily had, you know, the safest debt and lowest true default rates out of everything. Now, cmbs multifamily loans look rough on paper, but, you know, the Fannie Mae and Freddie Mac actually never stopped lending on multi family. Right. They never actually froze that. Right. So every other lender, you know, froze, but not Fannie Mae and Freddie Mac. Right.

So that's something, you know, they have a government mandate to provide loans for affordable housing. Now they may cut that back a little bit on the amount.

Right.

Just now, this, this year, I think they just now hit the cap for their lending this year based on the volume that they've already done. But even in a downturn, they still have to lend because Congress still, you know, it's a mandate that they fund so much loans to help affordable housing. So that does provide for, you know, like, if you, you kind of look forward to where we're at now, we're already starting to see distress, you know, coming into the market. We've talked about that before where, you know, you had in some areas, like around Atlanta, the eviction stuff that carried for almost four years. You had other areas where, you know, elevated interest rates and purchase prices from 2122 have put pressure on deals. All the inflation and insurance and cost that had gone up, that had put pressure on deals. And you know, again, realistically, some of those properties where they just, they can't refinance and that's just Real, because you know, they bought in the rate environment was 4 and a half and now on the best day it's, you know, right in the quarter six and a half. That was not factored into it. So those deals are, you know, experiencing financial distress and are already surfacing. And you know, we've seen those coming through as potential sales already.

There you go.

And, and a lot of those people I think would be safe to say probably overpaid at, at the time of purchase.

Right, right.

So.

Gotcha.

Yeah, yeah. And here, here's the thing. Let's, let's jump into what, how should you be purchasing these properties? Because that is really the, the whole crux of the issue. Right. Because the, the opportunities we see right now are because of this situation. Right. So the, the opportunities, it's either an opportunity or you're in trouble. Right. And so you need to be the one for taking in the opportunities that, you know, when 2010 came, you know, if you were, if you had bought right, and you stayed through, you were all of a sudden, you know, 10x in your returns or something wild, you.

Know, more than, more than one mentor told me in, in my path that you make your profit or you make your money when you buy, but you also reduce your risk.

Yeah.

When you buy, you know, based on buying run.

That's it. Yeah. And the other thing is multi family and that's the point. It recovered faster and delivered the best long term returns. Right. So you know, multifamily was the only asset class that had with meaningful recovery by 2010. Right.

Yeah, it was a much slower road in the single family arena for sure. And then, you know, again, retail was a slower go as well. And again, you think about it, it's like again the country has not and like I would likely say will not in any near term resolve the affordability of housing crisis. And it's same thing existed then where people needed an affordable place to live. And that continues to be the case today. You know, and so, you know, housing is unaffordable even if house prices in certain areas have already retreated a bit. You know, I don't know, like 2008, some areas in Florida and others, you know, went down by 50%. I don't necessarily subscribe that that's what we're experiencing, you know, here today. But even if it goes down 20%, that still doesn't make it affordable for a vast majority of people. Those people are really going to be renters. And so that rental demand continues to be in place for, you know, affordable Multi family type house. And so that's, you know, when you couple that together and you take a look at the snapshot, you've got distressed properties coming in. Whether it's like Larry said, people either overpaid or even in some instances they, you know, paid market. But Lynn, now it's just again, they can't get out of it or they didn't execute well. And then it's like, you know, in order to refinance, they'd have to cash in $2 million and they can't do that. So the only option is to sell, you know. And so those properties are coming into the market and that presents an opportunity. At the same time, you've got demand that continues to be there. Yes, it's a little softer right now. This, traditionally, this time of year, November, December is not your greatest rental time in different markets. And you know, you see some absorption that's affected rents where specials are being offered, you know, a month free, that kind of thing. But there still is a channel of growing demand for affordable housing. So if you're buying, you know, ahead in 2026, you've got properties that present a distressed purchase price. I mean, we've seen stuff that trades for, call it 100, a door that's being offered at, you know, 60, 65. So that's a 35% discount. And I double checked even too when talking with another broker, like, hey man, have you got anything in the market right now that's closing? And I've got two deals that are closing, meaning sales. One it was at 95 and the other was at 98, meaning. So that price for a stabilized well run property was still there at that 95, 98. So again, buying at a 35% discount to market price presents a great opportunity to you and your investors because like you go in, stabilize the property, do the necessary business plan of renovations, occupancy improvements, delinquency, all those things. And now within another two years, you've got a quality stabilized property that's worth a hundred a door and you were in it for 60, 65 a door. You know, that's a big, that's a big move and a big delta, you know. And then the other piece that, you know, again, I don't know if I would absolutely camp on it, but there's a likelihood that you could also anticipate some interest rate moderation over the next two years as well. Again, we're in a higher for longer environment like we've discussed multiple times before, but it is likely that There is some movement down on interest rates and any movement down on interest rates is also further going to help you in terms of when you go to sell it.

That's good. Yeah. And, and so let's talk about what are the key things because look, we're meeting together, we're talking about big plans for 2026 and I think a lot of people here are wondering, you know, what is the asset class and if it's multi family, how do I make sure I'm protected and I'm buying the right properties for 2026? Because 2026 I believe is gonna, there's going to be opportunities to make a lot of people not only wealthy but build generational wealth. And that's what you saw, you know, people that bought multifamily from 2009, 2012. Right. They were, a lot of people were able to build generational wealth if they bought. Right. So what are those key factors that you're looking for in terms of underwriting, in terms of deals? What are you looking for to make sure you are buying right, Larry, you want to take that?

Yeah. Well, Randy mentioned affordable housing several times and that's why we like B and C class assets. You know, your 10 to 40 year old property, not top of the market rents because that also hedges your risk where you know, if a downturn in the economy and somebody can't afford that high end apartment, they've got to come back down to something more affordable. So I mean it's really just knowing your numbers and underwriting properly to know where those rents can be and how you can operate the property efficiently and, and generate the noi you need to, to where you're, you're all in the property at a discount once you execute that value add plan is just really knowing your numbers.

It's good. I think the other thing too, that what we've been looking at and seeing is, you know, not everything that glitters is gold. Meaning, you know, where the property's located at is important as we've always, you know, all three discussed and talked about. Just because there's some properties we've seen that yet, you know, distressed in foreclosure, whatever the case may be. But the location is really subpar. And so even though you're getting it at a great price, it's subpar, you know, so I mean again, you got to look at the numbers realistically. I think especially in this environment, the location matters. You know, like I was talking to a guy, we bought a property years ago that it was 22% occupied, you know, did the same thing we're talking about here, you know, got at least up to in the 90s and sold it. And it was a C class property. We brought it up to like a C plus, but it was a good location. It was across the street from a school, it was right down the road, maybe a quarter mile from a church, you know what I mean? So it's like. And there's some good single family homes in the area. So it wasn't like a kind of gang banger area, you know what I mean? It was just been mismanaged and not managed well by the current owner. And so that's a similar kind of component that we would want to look for now. Like you've got a property that's gone through distress, the person overpaid, it was mismanaged, it's in foreclosure or it's under financial duress and the lender's working with them. But it's also got some decent characteristics as to where the location is.

Yeah, that's a great point. So I should have said know your numbers and the 911 report.

There you go.

Yeah, that's good. Well, look, if I appreciate you guys checking out this, we're going to be following up next week on some more opportunities and what we're seeing in the market as it unfolds. But we are seeing a lot of deals happening right now in the market. And if you are someone that's wanting to get into real estate and you want to join a community of people that are doing deals in today's market, we love to connect with you and but for those that are serious want to make 20, 26 a year that you stay protected but also can grow, we'd love to chat with you. So we'll drop a link in the description. If you want to book a call with our team, we can chat if. If working with us directly would be a good fit. But. All right, guys, thanks for jumping in. Have a wonderful day.