Can You Still Build Wealth in a Flat Real Estate Market

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Michael Zuber (1:01)

All righty, folks, we have started a new series, and that is where Gus goes out and finds great questions about the real estate space, investing space, and brings it to me to react to. And we're going to start with a spicy one. What if the last 15 years, I only got lucky? I happen to catch a great appreciation curve, and that is what made me rich. And what the next 10 years brings is flat.

Does anything change? Do I have different opinions? So Gus, thank you for doing this. I know it's a hassle to go out and get all these great questions, but I appreciate you. The audience appreciates you. So let's roll.

Gus (1:37)

All right. And guys, I got a good question from Zubra at the end, so stay tuned to that.

But yeah, let's get into it. For the last 10 to 15 years, a lot of people built wealth simply by owning assets and allowing appreciation to do the heavy lifting. But what if the next 10 years look completely different? What if appreciation barely keeps up with inflation? Does that expose how many real estate investors never really purchase good property at that time?

Michael Zuber (2:08)

I think that's a wonderful question. And I'm uniquely positioned to answer this, I think, because I've been investing for 30 years. And I'll take this question and we'll kind of break it apart. I think you're seeing a lot of people leave real estate investing, like Ryan Panetta, who got in the last five years and killed it. We're talking multiple seven figures, just crushed it.

And then obviously what happened is the market's gotten hard. The last couple of quarters has gotten really, really hard. And I would argue it's getting harder. And Ryan Panetta quit, he quit last weekend. It was all the rage at Bigger Pockets. So there's absolutely something to this question. You are going to see lots of pretenders, lots of people who came to real estate because it's fast money, it's get rich quick. They're going to bust out.

But if you step back and really evaluate my story, it's never been about getting rich quick. In fact, I started real estate with the simple goal of buying four houses and then retiring at 65 with four free and clear houses. That's a very different mindset.

So part of the answer to this question is what's your mindset? Are you coming into this game betting on appreciation? Let's be clear, there are a bunch of syndicators, some of them from Bigger Pockets fame, who were betting on appreciation. They bought four caps in Katy, Texas, hoping they'd become three caps. And guess what? There are seven caps, and you've lost $15 million of investor capital.

There are plenty of investors that are losing because they were betting on lower cap rates, which means they were betting on appreciation.

I have never been on appreciation. And again, I've been doing this 30 years. This is not my first rough cycle. Right? I was investing in 6 in 2010, in 2018, and there's plenty of other hard markets. But if you've only been around the game three, four, five years, you haven't seen a hard market. It's only been easy. So, you know, I would tell you again, I would go buy my book One Rental At A Time. It talks about starting in 2001 It starts with the first tenets screwing me.

And it takes you to the end of the journey. And it was a 15 year journey. Where not once, I bet on appreciation. We only did cash flow deals day one. We had 30 year fixed rate debt when possible. And, you know, the plan was to hold for 30 years. So it's really based on your mindset. Yes, the next couple of years are going to be tough, but why don't you use that to your advantage? Why don't you be Jacob in our community who just closed this week or last week a deal almost 30% under list price? He's walking into equity. So again, the market is scary. Rates are high. You know, threat of AI killing us and all this other nonsense. There's always a reason to be scared. But if you do the work, you know what a good deal is, you know what a great deal is. You set up your financing correctly, meaning 30-year fixed rate debt when possible. You never bet on appreciation, and you just hold.