More than a third of investors plan to buy zero properties this year, even as market conditions improve, according to a recent sentiment survey. Larry Gotcher, owner and broker of Resource Realty Group in Ann Arbor, Michigan, who has closed deals through every cycle since 1991, says excessive selectivity is the single biggest mistake he sees in the current market.
"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."
The gap between optimism and action is costing investors in markets like Southeast Michigan, where apartment rents are still climbing and buyers consistently outnumber sellers. Gotcher argues that being selective and being paralyzed are not the same thing. The investors who build meaningful portfolios are those who close more transactions and win a little each time, rather than waiting for a landslide victory on a single deal.
"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."
After more than three decades 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," 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."
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 and long-term appreciation does the rest. "The key is owning as much real estate as you can," he said. "If you're too picky about what you buy, you're not going to acquire very much real estate."
His overarching advice is to buy and hold, even when it's uncomfortable. "Don't be scared by temporary market conditions that force you to sell," he 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. The current market, with elevated rates and many buyers waiting for conditions that may never arrive, presents a similar test. Those 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 later.
