Investors' Over-Selectivity Is Costing Them Deals, Says 30-Year Veteran
A 30-year real estate veteran warns that excessive selectivity is causing investors to miss profitable opportunities, as a recent survey shows over a third plan to buy no properties this year despite optimistic market conditions.
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 costing investors in markets like Southeast Michigan, where apartment rents are still climbing and buyers consistently outnumber sellers, according to Larry Gotcher, owner and broker of Resource Realty Group in Ann Arbor, Michigan.
Gotcher, who has closed deals through every major cycle since 1991, says the single biggest mistake he sees is investors being too picky. “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,” he said.
Being selective and being paralyzed are not the same thing, Gotcher argues. 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.”
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. The ideal moment keeps moving further away.
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 to assess past performance. “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.”
For investors with genuine market knowledge, the correct lens is what you can produce given your 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. Breaking even monthly is acceptable, as tax depreciation generates a real return on top of that, 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 overarching principle: 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.” Time corrects most underwriting errors in real estate. The investors who sold into fear during the 2008 cycle in resilient markets like Ann Arbor came out significantly behind those who stayed in. The market today, with rates still elevated, is another version of the same test. 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.