More than a third of investors plan to buy zero properties this year, according to a recent sentiment survey, even as 38% expect market conditions to improve. That gap between optimism and action is costing them, says Larry Gotcher, owner and broker of Resource Realty Group in Ann Arbor, Michigan, who has closed deals through every major cycle since 1991.
“Investors are way too picky about what they’re buying,” Gotcher said. “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.”
In markets like Southeast Michigan, where apartment rents are still climbing and buyers consistently outnumber sellers, the cost of sitting out compounds. Gotcher argues that the investors who build meaningful portfolios close more transactions and win a little each time, rather than waiting for a single home run. “You don’t have to win the lottery on every deal,” he said. “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.”
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,” said 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. “What somebody else has done to run their business into the ground doesn’t matter,” Andrea Gotcher said. “We know our area. We know what we can do with the property. We base our numbers on that.”
Gotcher’s acquisition criteria are simple: properties must cash flow at or above zero after debt service. Monthly negative cash flow is non-negotiable. Breaking even is acceptable because tax depreciation generates a real return, and long-term appreciation does the rest. “The key is owning as much real estate as you can,” Gotcher said. “If you’re too picky about what you buy, you’re not going to acquire very much real estate.”
The core principle is buy and hold. “Don’t be scared by temporary market conditions that force you to sell,” Gotcher said. “Make sure you hold as long as you can.” Investors who sold into fear during the 2008 cycle in resilient markets like Ann Arbor came out significantly behind those who stayed in. With rates still elevated and many buyers waiting for ideal conditions, Gotcher warns that the investors acquiring now at reasonable prices will likely look back at this as a good entry point, while those waiting for certainty will face higher prices.
