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 not new, but in a market where Southeast Michigan apartment rents are still climbing, and buyers consistently outnumber sellers, the cost of sitting out is compounding.
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.”
There is a version of caution that protects you from bad investments. Then there is a version that keeps you on the sidelines while properties appreciate without you. The investors who build meaningful portfolios, in Gotcher’s view, are the ones who close more transactions and win a little each time – rather than waiting to win by a landslide on a single deal. “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.”
After more than 30 years in commercial real estate, Gotcher has a sharp read on when a potential buyer is doing real due diligence versus looking for reasons to walk. Two questions in particular have become reliable signals that a transaction is not going anywhere. The first is asking why the seller wants to sell. It seems reasonable on the surface, but in practice, it rarely produces useful information. “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. Gotcher’s position is that this focuses attention on the wrong variable entirely. “What somebody else has done to run their business into the ground doesn’t matter,” Andrea Gotcher says. “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, that is the correct lens. The question should not be what the current owner produced – it should be what you can produce given your operating expertise, your financing, and your management approach.
Gotcher’s acquisition criteria are simple. Properties need to cash flow at or above zero after debt service. Monthly negative cash flow is the floor he will not go below, because below that line, every other assumption in the deal has to be exactly right to avoid losing money. Breaking even monthly is acceptable. 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 says. “If you’re too picky about what you buy, you’re not going to acquire very much real estate.”
If there is a single principle that runs through every piece of advice Gotcher gives, it is this: buy and hold. “Don’t be scared by temporary market conditions that force you to sell,” he says. “Make sure you hold as long as you can.” The market today, with rates still elevated and many buyers waiting for conditions that may never arrive, is another version of the same test. The investors acquiring now, at reasonable prices and with sound assumptions, will likely look back at this as a good entry point.
