More than a third of investors plan to buy zero properties this year, despite improving market conditions, according to a recent sentiment survey. Larry Gotcher, owner and broker of Resource Realty Group in Ann Arbor, Michigan, has watched this pattern repeat through every major cycle of the last three decades. His read is direct: “Investors are way too picky about what they’re buying. 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.”
Being selective and being paralyzed are not the same thing, Gotcher notes. The investors who build meaningful portfolios are those who 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 says. “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 rents are still climbing and buyers consistently outnumber sellers, the cost of sitting out is compounding.
After more than 30 years 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,” says 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. Andrea Gotcher explains, “What somebody else has done to run their business into the ground doesn’t matter. 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,” Gotcher says. “If you’re too picky about what you buy, you’re not going to acquire very much real estate.”
The veteran operator emphasizes a buy-and-hold strategy, even when it’s uncomfortable. “Don’t be scared by temporary market conditions that force you to sell,” he says. “Make sure you hold as long as you can.” Time corrects most underwriting errors in real estate, and 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, the current market presents another test: 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.
