Dave:
We are halfway through 2026 and this felt like the right time to bring back Brian Burke for a bigger picture check-in on the housing market. He is an expert on all things real estate from single family to multifamily to larger commercial assets. We want to know how this market looks to someone who has lived through multiple cycles and who has accurately predicted a lot of the market’s twists and turns over the years. I’m Dave Meyer and today we’re talking about how Brian’s outlook has changed since the start of the year, which asset classes look more or less attractive now, what risks he thinks investors are underestimating and how he’s positioning himself for the second half of the year. This is On the Market. Let’s get to it. Brian, welcome back to On The Market. Thanks for joining us.

Brian:
Great to be here.

Dave:
I’m excited to have you. Hopefully you can help us make sense of the market and where opportunities are lying. It’s a weird year right now, 2026. What is your take on it? How are you feeling generally speaking about the direction of let’s say the residential housing market and how it’s performing and how the economic climate is sort of weighing on the housing market?

Brian:
Overall, it hasn’t been all that healthy, quite frankly. New home inventory is up dramatically. In other words, the inventory that builders are carrying on their books right now is a lot higher than it’s been in the recent past. I think transaction velocities are down. Pricing power has weakened somewhat some of that perhaps driven by affordability, some perhaps driven by interest rate and where interest rates are. And as of late, they’ve been creeping up a little bit and I think maybe that’s making some buyers nervous. So I think overall in a lot of markets, the residential market has been somewhat on the weaker side. There’s a few markets I think that would be an exception to that, but I think by and large, that’s where we are right now.

Dave:
What do you make of the fact that home prices, despite everything you just said, which I agree with, are still up 1%, 2% year over year. Do you buy that? Are concessions masking that? Or what’s really going on there?

Brian:
Again, there’s another scenario where you’ve got all these different things happening at the same time. I think what I’ve noticed here in Northern California where I live, higher end, the upper price bracket is really weak, but yet the median and lower price bracket is relatively strong. So I think there’s a little bit of bifurcation, maybe a K-shaped market where the upper end has one thing going on, the lower end has another thing going on. That kind of tends to skew the statistics a little bit. I think there is still enough buyers for the limited product that’s out there to support prices. And there’s nothing that’s really a catalyst for prices to tank. I mean, if somebody’s out there waiting like, “Hey, I want to see prices tumble 30%. Good luck.” I mean, when that happened in 08, 07, 08, and prices really tanked, there was a situation going on where no one had any equity.
A lot of people were turning negative equity, foreclosures were going through the roof and there was all kinds of chaos in the residential sector. And right now you’re not seeing that. I mean, if you look at positive equity ratios, if you look at mortgage-free homes and typical loan-to-value ratios right now, they’re all quite favorable. They’re

Dave:
Good.

Brian:
They’re really good. So I think that supports pricing. The demand, I don’t think is there to support price increases, at least at any meaningful rate. But I don’t think there’s anything to support the thesis that prices are in great jeopardy either.

Dave:
But people want drama, Brian. They want it up or down. They don’t like hearing that it’s just going to stay boring and flat, even though that is, at least in my view, the most likely thing to expect for the foreseeable future.

Brian:
But you know what? The best time to be in the market is during boring times because when things are exciting, everybody’s piling in and you can’t get anything unless you’re overpaying. So this is the time to take advantage of boringness. Don’t shun it, embrace it.

Dave:
I agree. And it feels to me that the market is becoming a little bit more predictable in that I just feel confident that it’s kind of just going to stay stuck. And that’s not a fun, sexy thing, but at least it’s a basis from which you can make decisions. At least you kind of know what’s going on and that helps with underwriting. You can understand what you have to pay for assets, what performance you can expect. And as an investor, is there much more you can ask for? Of course, we all want predictability and that we have a high degree of confidence that everything’s going to be amazing, but that’s probably not going to happen anytime soon. And hopefully people are just starting to accept that this is where we’re at and make decisions based on this information. And although you have to be disciplined and patient and find good deals that there are things out there.

Brian:
Well, what happens when there is uncertainty and there is a bunch of chaos, people are like, “Ooh, it’s too scary. It’s too risky. I can’t get in right now. I’m going to wait for prices to tank.” You get that whole scenario, right? So the predictability kind of gives you the confidence to make an entry. And I think I’m not one that’s always been gung ho, buy, buy, buy real estate. You’ve had me on this show a number of times where I’m the one that says, “Don’t even bother right now.” But if you’re a newer investor trying to buy single family home rentals as your first, second, or 10th investment, this is a really good time to be in that asset gathering stage where you’re building up a base of assets. The important thing is that you’re buying stuff that’s cash flowing and it’s good properties that are going to last a long time, not ready to fall over at the next gust win.
You’ll build a nice base of assets so that when things do get kind of crazy and out of control and prices start skyrocketing, you’ll already own them. That’s not the time to buy them and try to get in. Exactly. You already want to have them when that happens.

Dave:
That’s exactly right. I try and explain this that if you look at real home prices, not nominal, not the price you see on Zillow, but actual inflation adjusted home prices, it goes up over time, but it’s kind of a stair step. It’s not really this linear progression and no one knows when the stair’s going to go up, but you want to own it when it does because you look like a fricking genius and those increases are often pretty quick. And so to Brian’s point, you can’t do it retroactively. And for the people who are waiting around, you probably have the kind of personality where you want a year or so of data to say, “Okay, it’s been going up for a while and now we’ll get in. ” It might be over by that point. So it’s just how do you find stuff that’s good right now and it’s going to positively impact your portfolio and your financial picture and then wait to look like a genius when things go in your favor.

Brian:
Well, I mean, what happens, right? A great earnings report for a company comes out and their stock goes up 30% and the people are like, “Dang, I should have bought that when it was boring.” Yeah. And it’s like, well, too late, you missed the move. The same thing does happen in real estate. When there’s a switch that gets flipped from something, then prices have a tendency to start to run and you want to be in when it’s boring and before all that happens.

Dave:
What about this year, just broader economy or just broader investing conditions, what has surprised you in 2026?

Brian:
What surprises me the most, I think, is all of the negativity that hasn’t materialized. And what I say is everybody’s saying there’s going to be a recession, we’re going to have a debt crisis. The US is in big trouble. We’re losing our world dominance. There’s just all kinds of bad news stories in terms of just general economy. Yet at the same time, the stock market has continued to climb day after day after day and there’s really no better ballot mechanism in this country than the stock market because here every minute when the market is open, people are voting on whether they’re bullish or bearish on the future and people have been clearly voting bullish because they are buying and buying and buying. And you’ll have a couple days where there’s a setback, but then it’s right back to positive again. So it’s just interesting how there’s this dislocation between the common belief that we’re in big trouble and yet the market belief that’s kind of saying nothing bad is really happening.
So it creates in my mind some confusion because you kind of don’t really know which one’s true. Is the stock market about to crash because all the negative theories were correct or all the negative theories incorrect and they’re going to catch up to the fact that things aren’t as bad as may first appear. So that kind of ambiguity and I would say Jekyll and hideness has been probably the biggest surprise.

Dave:
That’s a good way of summarizing. I feel it. Half the time I’m like, “I should sell all my stock.” And then the next day I’m like, “I should probably invest more in the stock market.” It’s so confusing, but the stock market is a vote specifically on the growth and the future of corporate performance and earnings. And it does feel like the negative sentiment is more on a personal finance level. I don’t know how to reconcile those two things, but I guess both can be true and maybe they are related to each other and one causes the other. I don’t really know, but I’m just speculating here that corporate profits are super high, but people are not doing well in their personal financial situation. So both things theoretically can be true, but it is hard to read as an analyst or an investor what that actually means for the general direction of the economy and investing conditions.

Brian:
Well, you say that individual finances may be in peril. However, it is the individuals that support corporate profits through their spending and daily activity. So if people aren’t traveling and staying in hotels and buying products and goods and services, then those corporate profits aren’t doing well. So really it does somehow trickle down to where people may feel like or say that they aren’t doing so well, yet they’re spending money like things are just fine and that’s translating into corporate profits that are doing pretty well. And you look at corporate, corporations are really just a legal structure of a group of people. I mean, that’s really what… There’s workers and they’re doing things for a common purpose. And if the corporations are not doing well, then the workers won’t be doing well either because they’re going to get laid off and pay cuts and all that other stuff.
So it’s true. Both things can be true, but are they? It’s a little bit harder to sort that out.

Dave:
I agree with you. It does feel like every day someone’s making a claim that some shoe is about to drop and it doesn’t drop, or at least it hasn’t. And I’ve had pessimistic thoughts for sure about the stock market in particular, but I’m surprised by it. It continues to exceed my expectation. So that one has caught me by surprise as well. This is great stuff with Brian, but we got to take a quick break to hear from our sponsors. We’ll be right back Welcome back to On The Market. I’m here with Brian Burke going over the state of the market, let’s get back to it. What do you think is maybe not getting enough attention right now? Are there any good or bad stories that you think aren’t making into the media that investors should be thinking about more?

Brian:
Well, the media’s pretty good at trying to find bad news, that’s for sure.

Dave:
That is for damn sure, yes.

Brian:
That I think is their specialty. So if there’s even a hint of something – It’s basically the business model. Yeah, it is the business model. So if something’s even a little bit bad, they probably picked up on it, made it seem even worse than it is. So I don’t know if there’s any bad news that they’re missing out on. Maybe there’s some good news that they’re missing out on, and maybe we just talked a little bit about some of that.

Dave:
Yeah,

Brian:
That’s true. But I think if there’s anything that’s still kind of bad that’s going on out there, and we’ve talked about this before, is there’s some sectors of commercial real estate that’s been in trouble for a while. Apartments is on, office is another, just as really good examples of some asset classes that have been on the struggle bus here for the last few years That’s still going on, although I don’t think it’s ignored. I think it’s been well covered, but that’s still underway and there hasn’t really been a complete end in sight just yet.

Dave:
So how do you assess that market?Because we talked about the residential market. You’ve come on, you’ve had some very good rhymes and I will encourage you to repeat your rhymes because I like them, but are you sticking with your, I think it was fixed in 26, heaven in 27 assessment of multifamily

Brian:
Yeah, I’m sticking with it although we may even see a litle bit of a delay. So a couple of years ago is when I came up with these, it was to combat the Survive Tell 25 mantra and I said end the dive in 25, meaning that prices first before they could go up, first had to stop coming down. Maybe that kind of happened. I said it’d be fixed in 26, which meant that this year would be the year when things kind of got sorted out and figured out. Did it happen? It’s starting to, but I don’t know. It’s taking longer than even I thought and people thought I was the pessimist and then it was buyer heaven in 27 thinking like in 2027 there’s going to be all kinds of deals out there that we can vacuum up and it’s going to be a great time to be a buyer.
And maybe I’ll still prove right on that. But I said if you wait until 28, it’ll be too late, maybe not. Maybe 28’s going to be okay. I don’t know. I might have to come up with some new sayings.

Dave:
Well, maybe 28’s going to be great because that rhymes at least.

Brian:
There you go. 28 is great.

Dave:
Yeah, things are great in 28.

Brian:
Buyers are great in 28. I

Dave:
Always ask you this question because it confuses me. I thought we would see distress in multifamily and asset sales sooner than this. I thought 25, at least this year from what I hear from you and other GPs and operators, still not really happening. There’s not some amazing deal flow all of a sudden coming into the market. Is it still what’s happening that lenders are not coming down hard and they’re kicking the can down the road or is there something else going on?

Brian:
Look, if there’s a fender bender in the parking lot, as soon as the two cars collide, everybody jumps out of the vehicle and starts yelling at each other and exchanges information and moves on, right? But in a serious collision, what we had was we had a massive pile up in the middle of a four-way intersection where all the lights were green. Rent growth was green, occupancy was green, interest rates were green. I mean, all the lights were green, everybody piled up in the middle of the intersection. The harder the impact, the more likely it is that the victims are going to be trapped in the vehicle. It’s going to take specialized equipment and knowledge to extricate these people and it’s going to take a long time to get them out and get them put in the ambulance and cart it off to the hospital. And that’s what happened here.
This was a bad crash and it takes a long time for all these things to kind of start working their way through more so than if it’s just a minor incident. I think that is a big part of it. Another part of it is that lenders were just kind of in this self-preservation mode. Some owners thought, “Oh, look, lenders are working with us. They’re giving us extra time.” Well, no, really what lenders are doing is they’re covering their own problems and they don’t want to foreclose on the property and now they’ve got this thing on their books when it’s negative cashflow and it’s worth only half the loan amount and all that stuff. No, they’d much rather have you manage it for them for free thinking you’re still the owner.

Dave:
Right. Yeah. And they could take it anytime.

Brian:
Yeah. And they can take it anytime they want. And then as soon as the value comes back and they’re like, “Oh, we can sell this for the loan amount.” They’re like, “Great, now’s the time. Let’s pull the trigger.”

Dave:
Thanks

Brian:
For

Dave:
Managing

Brian:
It. All they’re doing is they’re just waiting for things to get better enough where they can fire you as the manager foreclose on the property and then they can sell it and get their money back. That’s all that’s happening.

Dave:
And so that’s when you think the deals will come because the lender for the most part does not really care that the value recovers to anything more than the loan balance, right?

Brian:
And even that, maybe they’ll even take a small loss. Yes, that’s correct. They don’t care about the owner’s equity or the investors or anybody else. They

Dave:
Do not.

Brian:
No, they don’t work for you. They are responsible to their investors and making sure that their investors get their money back. They don’t care about your investors or you. No. So as soon as those values come back, they’re going to pull the trigger out. Now, when you say that’s when the deals will be there, yeah, okay, I think that that’s true, but the question is, is where do those deals go? And people tend to think like, oh, all of a sudden there’s going to be all these REO listings on the market and I can just go sweep up all this stuff and it’s going to be great. A lot of this stuff is, I don’t want to say backdoor dealing or whatever because it’s not underhanded or anything like that, but a lot of these are insider transactions where a lender that’s got, “Look, we’ve got 50 troubled loans out there.
We’re going to sell this whole package of 50 loans to so – and-so REIT or so – and-so private equity.” They’ll come in, they’ll figure all this stuff out and take over and take over management and then they’ll be selling them as non-distressed assets one at a time later on. There will be some opportunities for investors to get their hands on some of this stuff. Back in 2009 and 10, I bought several apartment complexes REOs from banks and those deals do come up, but a lot of them never make it that far to where they’re listed by brokers on the open market.

Dave:
That’s from all the operators I talk to what everyone’s saying. There’s no deals on the market right now. The few people who are transacting recently have said, “I just got a great deal. I got it for 40, 50 cents on the dollar because a lender called me and they need to dispo this quickly and I’m the person with capital who they know can pull it off.” And that’s how deals are being done right now. And that has made me think as an investor because I own residential real estate. I also do a lot of syndication in what’s called LP investing, limited partner. I invest with other people who are operating deals. You’ve probably heard this as a syndication, basically pooling money with other investors. And it’s made me think that syndications are going to be a very good way to invest for someone like me in the next few years because I don’t have those relationships.
I don’t know the lenders. I don’t know the broker who’s going to get tasked with dispositioning these things, but I want access to those deals. So I’m curious if you think that’s a… I haven’t seen good deals yet, but if you think that that is a good way for people like me and for the audience here listening to this to get a part of what I do feel like is going to be considerable opportunity in the multifamily space

Brian:
Yeah, without question. I mean, part of the thing is if you’re an individual investor and you’re going to buy one property, you’re not going to get that one property that’s out there that’s like that super smoke and screaming deal from the bank that needs to sell right away, right? Yeah. You’re going to get the one that gets picked over by everybody else that nobody wanted and then comes out to the open market, is made available to anybody that will pay the price. That’s a whole different thing. The access through syndicates that you’re talking about is really that relationship based buying and there’s truth to what you’re speaking, but it really depends on what sponsor you’re investing with and does that sponsor have those relationships because there’s a lot of people out there that’ll be peddling real estate investment opportunities that were just the highest bidder at the last quote unquote auction when brokers took it to market.
And that’s not really the deal you’re looking for. You’re looking for the one that was bought through that relationship that you just described.

Dave:
Right. I’ve continued to invest in syndications despite all the negative things being said about syndications in general in the media right now. But the ones I’ve bought bought into are relationship business where people are picking these up at 40 or 50 cents on a dollar because there was a fire or there was something and no one wanted to deal with it. And the deals are actually really good. They’re not happening at scale like people were doing in 2009, 2010 where there was probably better deal flow, but they’re still out there and I think there’s going to be more. But I wanted to get your take, Brian, about the negative sentiment around syndications because there’s been a lot of high profile deals that have blown up frankly across the whole industry. And to me, it’s created this narrative that syndications are the problem, which makes no sense.
A syndication is just a deal structure. It’s not the problem. The problem is either the deal or the operator and you could argue that a deal being bad is the operator’s fault. But to me, I worry that our industry is going to shy away and people are going to be like, “Oh, syndications are bad. They’re really risky.” When really it was just bad deals bought at bad times or am I missing something there?

Brian:
No, you’re right. In fact, I recently updated the hands-off investor, I think about a year and a half ago or whatever and added to one of the chapters speaking to syndicate failures. And I talked in there about there’s really three different failure modes that I found to be common in syndicates. And the three failure modes are market failures, sponsor failures, and structural failures. Market failures means the market just went bad and it affected everyone. And it doesn’t matter if you’re a syndicate owner or bought the property on your own. You can go buy an apartment complex and the market can turn against you and your rents are declining and then you have unexpected repairs and all kinds of things happen. Next thing you know, the property’s negatively cash flowing. I remember this happened back in 2009. I used to joke that half the units were empty and the other half weren’t paying and it was almost like that.
Yeah, it was great and it didn’t start out that way, but that’s what the market gave us back then. So it was really difficult and it doesn’t matter if you’re a syndicate investor, a syndicate sponsor, an individual owner, it doesn’t matter. It affects everybody in the same way. So that’s not a fault of syndication. And we’ve definitely seen a market failure here as we’ve witnessed prices declining 40 to 50%. We’ve noticed year over year negative rent growth. We’ve noticed increasing vacancies, increasing concessions, challenges with just demographic story, population growth tapering off, all of the things, right, not a fault of syndicates. The other two failure modes, both you can attribute to problems with syndicates and that’s sponsor failures and structural failures. Sponsor failure is things like partnership disputes and breakups, just lack of experience, lack of track record. Some of it is things that investors may have been able to find and detect and avoid going into the investment so they could have maybe invested in something different and not been subjected to the sponsor failure.
And other things are things that no one could have predicted that could happen like death of a sponsor could be something like that, right? And then the third failure mode is a structural failure and a structural failure are things like the wrong financing was used like short-term loans that have a three-year maturity, high leverage – Hear that a lot these

Dave:
Days.

Brian:
Yeah. A lot of those. Yeah. High leverage is another one. Paying too high a purchase price is another one. Those are classic examples of structural failures. And what tends to happen oftentimes, especially with syndicates, is that a market failure simply exposes the other two things. That’s

Dave:
Right.

Brian:
Yes. So you had a sponsor failure from the beginning where you had an inexperienced sponsor with lack of track record and you had a structural failure from the beginning, meaning you had short-term debt that was going to mature in like two or three years and it was too high a leverage and they paid too high a price. All those things were there. If the market went absolutely perfectly, they might have been able to execute their plan and sell before anything went wrong and made everybody a profit and made themselves look brilliant. And that happened dozens and dozens and hundreds of times –

Dave:
Yes, it does.

Brian:
From 2011 all the way to 2021. But if the market goes bad, now all of a sudden all that stuff is exposed. Their lack of experience, they don’t know how to navigate the market failure. Their lack of track record, again, they don’t know how to navigate. Their short-term loan comes due at the middle of the trough of pricing so they have to sell at the bottom. Their high leverage caused them to go into negative cash flow. So all of those other failures become exposed and the whole thing implodes in a very public way. And that’s what we’re seeing happening out there. And it’s not necessarily syndicates only, but it is syndicates partially. And this just comes right back down to making sure you’re selecting your syndicate investments carefully investing with the right syndicators and the right deals that are structured the right way.

Dave:
100%. That’s so well said. I really encourage people who are interested in this kind of investing to read Brian’s book, not just saying this because you’re here, Brian, partially, but I do recommend this book to everyone when people ask it to me. I’ve read it multiple times. I sent Brian pictures of my handwriting scribbling in it before I made my first syndication investment, read it many times, but you really just do learn to understand that it is a bigger deal, but it’s still on you to do your due diligence. It is not the problem of a syndication. It is you who didn’t understand that the operator didn’t have enough experience. I don’t take the blame totally off inexperienced operators who do have these structural problems. They should do better. But also don’t get discouraged by syndications because you see high profile, big name people not succeeding at this because if you underwrote those deals correctly, you probably would’ve seen some of those structural issues with those deals ahead of time.
Brian’s a great resource for learning how to actually do that underwriting correctly.

Brian:
And you really want to choose to invest with someone that’s really bringing some value to the relationship. Do they have relationships you don’t have? Do they have access to deal flow you don’t have? Do they have skills, knowledge, and experience that you don’t have? All of those things are very, very important. If all they’re doing is just going out and being the highest bidder of all the listed properties that are on the listed for sale, maybe they’re not adding as much value. If they’ve got no experience, this is their first deal, what are they really bringing to the table? So it’s really a selection failure and it’s sponsors who are growing before they really should.

Dave:
Exactly. And that is something you can avoid if you take time learning how to do this well. We have a whole resource for this called PassivePockets. You can check out the podcast, PassivePockets or Passivepockets.com. It’s a whole resource and community around this type of investing. You should absolutely check it out. It’s extremely valuable. I vet deals and talk to people on the forums there about deals and it’s great because syndication investing has kind of been a black box for a really long time. It’s like who you know, but using tools like the passive pockets community allow you to sort of discuss deals more openly, learn about people’s track records where that kind of stuff normally was in the dark. All right everyone, Brian is obviously on a roll right now, but we do have to take a quick break, stick with us. We’ll be right back Welcome back to On The Market.
I’m Dave Meyer and today I’m talking to Brian Burke and getting his take on the broader real estate climate. Let’s get back into our conversation. Now, Brian, you had mentioned we might see better deal flow, not necessarily on market, but might see transaction volume pickup or even syndication deal flow get better when values recover. What’s that going to take? Because that’s a tall order.

Brian:
Well, if you’re talking about apartments and you know A commercial real estate in general, I think what that’s going to take is it’s going to take more rental demand. When you think about single family homes and what stimulates single family home transactions, it’s people buying houses. Well, what stimulates values in commercial real estate and in multifamily specifically is people renting units. And so what you need to see is increases in occupancy rates, decreases in concessions, which is like two weeks free rent for a new move in, that kind of stuff. You want to secreases in that. That eventually will end up leading to rent growth. So another big one, less construction. Right now there’s massive new construction of apartment units. When there’s less construction, there’s less units to compete with each of those renters. So you see a decline in construction. Eventually that translates into an increase in rent growth.
Increase in rent growth means that the income stream generated by that property is growing. When the income stream grows, the property is worth more because really what buyers of income property are buying isn’t really the real estate. I mean, technically, yeah, you’re getting a deed to the real estate, but what you’re buying is the income stream. And when that income stream gets bigger, it becomes worth more. And so that really it all bakes down all the way back to the consumer and them renting units and paying more for them because there’s more demand and less supply.

Dave:
And is that going to happen anytime soon? You think occupant… I mean, it’s obviously regional.

Brian:
Define soon.

Dave:
Well, let’s call it, how about 27?

Brian:
Yeah, maybe 27. The construction deliveries are tapering slightly. They’re not tapering as much as people expected them to have tapered. And a large reason for that is that projects are taking longer to get to completion than a lot of the builders had predicted. So

Dave:
It’s just

Brian:
Dragging

Dave:
Out.

Brian:
Yeah, it’s just dragging out. It’s just taking a long time to get these projects built. So as these things get built, deliveries are tapering slightly, but what has tapered significantly our new construction starts That’s already begun to taper. Another thing that we’re seeing tapering is the architectural billing index. I saw it. This is an index where it ties back to architectural billings for multifamily properties. That’s the design phase which comes before the permitting phase even. So that’s really an advanced look on construction and deliveries and that’s declined some. So all of those things are pointing to less new apartment deliveries, maybe 2027, probably 2028 and 2029. And then you get into the opposite problem where like by 2030, there’s been so little building that now there’s a shortage again. And then you get rent growth and all those things happen.

Dave:
So it could be a while. So I think that’s the takeaway for me at least, is that the windows might not even be open yet, but when it opens, it will hopefully be open for a while.This isn’t necessarily going to be a blip where you have to act quickly to get into the market.

Brian:
I think there’s no rush. I mean, first of all, we don’t even know if we hit the bottom yet. So wait until there’s evidence that we have. Wait until you’re getting positive rent growth and declining concessions to see that the signal for the bottom is firmly in play. And then the next thing to consider is this. This is the third time in the last 50 years that we’ve had a double digit correction in commercial real estate. The last time was in the great financial collapse 2009 and the time before that was in the 1980s after the tax law changes went into effect. And both of those times where there was a double digit correction in commercial real estate prices, there was a bull run that lasted more than a decade. And so if your typical hold time of a multifamily syndication is three to five years, let’s say, or maybe even five to seven years, you don’t have to buy right at the bottom.
In order to ride that bull run, you could get in after the bottom is firmly in place. You’ve got this nice decade long bull run ahead of us. I think that’s what’s going to happen is we’re going to have a decade or longer bull run that’ll happen once it gets a foothold. And so there’s plenty of time to get in and invest and participate in the upside. You don’t have to rush. You don’t have to time the bottom. You don’t have to be the first guy in. It’s okay to be a week late. And I’d say it’s probably even okay to be a day late and that’s better than being a week early.

Dave:
And just to bring this back to the beginning of our conversation where we almost said the opposite thing about residential, the difference here being that residential prices haven’t gone down. And so it’s a very different scenario when you have assets in commercial that are down so much and have stayed down the upside just gets bigger and bigger over that time. Residential doesn’t have that right now, which is why you have to be very disciplined about what you buy and trying to find cash flow and doing all the things that we talk about regularly on the show. But I think you’re dead on with commercial real estate. You know more about this than I do, but I assess this the same way. I look around the economy right now and think about where do I want to put my money? I’ve told you my fears about the stock market.
I still invest pretty heavily in the stock market, don’t get me wrong. And although I have an itchy finger, I’ve held off on pulling the trigger on selling anything, thankfully for doing that. I look at residential. I still like buying residential for a lot of reasons. I think there’s still great risk adjusted returns. I think for long-term investing, it makes so much sense. But where the value going to come over the next decade or so, find something better than commercial. I don’t really see any other asset class that has had this big of a hit that to me feels like is inevitably going to recover. It is hard to imagine commercial real estate value staying this low. And I think that it screams opportunity to me.

Brian:
There is opportunity. And again, if there’s a nice long bull run, that’s an opportunity you want to capture. And there’s also a lot of different types of commercial real estate and a lot of different types of residential real estate, and you got to consider that as well. We started buying senior housing a year ago and right now MetLife Investment Management just came out with a report showing senior housing is the number one asset class across all types of commercial real estate. Why? Because it’s on its whole own different cycle and it’s got this whole different demographic story than other types of real estate and that’s filtering and trickling down into things like mobile home parks where that’s kind of another play on senior housing because they tend to have a high senior demographic in mobile home parks. There’s things like data centers if you can figure out how to invest in them.
There’s industrial. There’s some types of commercial real estate right now that are absolutely on fire. I mean, the senior housing sector right now is absolutely a blaze and it’s a great place to invest at times when some other asset classes are not. And I think kind of the comparison between commercial and residential has to also dial back to the story that there usually are different goals and objectives at play when you compare these two types of asset classes. And people who are buying single family homes as rentals tend to be newer in their real estate investment career. They’re trying to build a base of assets. They’re trying to use leverage and BUR method and all these other different things to try to build wealth, whereas a lot of investors in commercial real estate are people who are trying to preserve wealth and get a return from the wealth that they already have.
And that requires a different set of rules when you’re playing. So it’s okay in my mind to be able to encourage people to say, “This is a great time to buy single family homes. It’s a great time to buy small apartment complexes that you’re going to hold onto for 10 or 20 years, but maybe it’s not the best time to invest in a large 200 unit multifamily syndication.” Those things can be true at the same time because it relates to two different investors with two different goals.

Dave:
And both can work in one portfolio too. It doesn’t necessarily have to be either or I look at myself, I try and balance them, right? Take some bigger swings, have some that are safe, some are cashflow, some are appreciation or equity plays. That’s what you get to later in your investing career. Obviously early, you have to be a little bit more focused, but it does not have to be either or you can build a portfolio with a sort of balanced composition among all of these different asset classes.

Brian:
That’s right. Smart portfolio construction. You’ve got different buckets of capital for different purposes with different goals in mind. Any smart investor should have that. I do. I have single family homes, duplexes, fourplexes, stocks, investments in startup companies, multifamily, senior housing, a wide spectrum of different things because you want to have all this exposure and diversification and eliminate single points of failure where you’re not just all in only one thing. That’s how a successful portfolio gets constructed and wealth is truly built and preserved.

Dave:
Well, what a perfect way to end this episode, Brian. Thank you so much for being here. We always appreciate having you. This was a lot of fun.

Brian:
Fun as always. Thanks for having me.

Dave:
And thank you all so much for watching this episode of On The Market. I’m Dave Meyer. He’s Brian Burke. We’ll see you all next time.