535: Apartment Buildings Are Having a Holiday Type Sale

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It’s that time of the year again—Black Friday, Cyber Monday. Everyone loves a deal.

If you’ve been investing long enough, you know one important fact: there is always something on sale.

The problem is the herd never sees it. They’re too busy chasing whatever feels safe because it’s setting new records.

And right now? That’s the stock market. That’s gold. Everyone’s piling into the most expensive things they can find and patting themselves on the back for being “prudent.”

But smart investors don’t chase what’s already expensive.
They look for the thing sitting quietly on the clearance rack, the thing nobody wants yet.

And today, that thing is real estate—particularly apartments.

We’ve seen this movie before.

Think back to the early 2000s. After the dot-com crash, everybody ran to gold and Treasuries. Meanwhile, the very companies that would define the next two decades—Amazon, Apple, Microsoft—were sitting there marked down 75%. You didn’t need to be a genius to buy them. You just needed the stomach.

Then there was 2009–2011. Real estate was radioactive. The media made it sound like apartment buildings were going to fall into sinkholes. But if you bought during that window?

Values didn’t take ten years to recover. They snapped back within three. And then they kept running for another decade.

And remember 2020—oil going negative? That’s the kind of insanity that only happens once in a generation. People were literally joking that Exxon would pay you to take barrels off their hands.

It was absurd… and it was the greatest energy buying opportunity in modern history. But most people sat on the sidelines in fear.

Different cycles, different assets, same principle:
If you want outsized returns, you have to be willing to buy what everyone else is mispricing.

And right now, the only major asset class not making all-time highs is real estate. In fact, our Investor Club is still finding deals discounted 30–40 percent from just a few years ago.

Apartments, specifically, are in this bizarre sweet spot where pricing is still beaten up from the rate shock, yet the fundamentals underneath are quietly strengthening.

Sellers who bought with floating debt are fatigued.
Buyers with dry powder are getting real discounts.
Construction has collapsed—meaning supply will be razor-thin in 18–24 months.

And the interest-rate environment is shifting in exactly the direction apartments benefit from.

This is why rates matter.
This is why liquidity matters.
This is why cycles matter.

When financing costs come down and supply is constrained, prices don’t grind higher—they launch.

This Is Exactly What the Bottom Feels Like

Bottoms never feel like bottoms. They feel confusing. Uneasy. Contradictory.

And that is precisely why it’s the opportunity.

Every big wealth-building moment looks like this in real time. Everyone’s distracted by what’s hot while the discount sits in plain sight.

Make no mistake—if the Fed keeps cutting and liquidity continues loosening, apartments aren’t going to stay discounted. They’ll do what they did after 2009. They’ll do what oil did after 2020. They’ll do what tech did after the dot-com crash.

They’ll reprice fast.

And years from now, people will look back at this exact moment and say the thing they always say after missing the obvious:

“It was right there. Why didn’t I buy more?”

Well… it is right here. Apartments are on sale.

No one has been beating the drum more on this than my guest on Wealth Formula Podcast this week.

Transcript

Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at [email protected].

 Those smart investors don’t chase what’s already expensive. They look for the thing that’s sitting quietly on the clearance rack, the thing nobody wants yet. And today I firmly believe that thing on the clearance rack that people are ignoring is real estate, particularly apartments.

Welcome everybody. This is Buck Joffrey with the Wealth Formula Podcast. Hope you had a nice holiday week, festivities and all that. Um, and uh, before we begin, I do wanna remind you that there’s a website associated with this podcast, and it’s called wealth formula.com. Why do I bring that up every time?

Because that’s where you go if you really wanna get involved with this. Community. Um, specifically if you are an accredited investor, uh, you should go to wealth formula.com simply to sign up for the free accredited investor club because that’s where you’re gonna see potential deal flow. You don’t have to pay anything.

All you’re doing is giving yourself permission to see potential deal flow that you may be interested in. That is only available to a credit investor. Now, what is an accredit investor and a credit investor? It’s not something you’ll apply for. You either are one or you’re not. Sort of like pregnancy. It just simply means you make at least $200,000 per year with a reasonable expectation of continuing to do so in the future.

You’ve done so in the last two years. That’s $300,000 if you file jointly or you have a net worth of $1 million outside of your personal residence. If. You meet those criteria, which you probably do, you aren’t a credit investor, and all you need to do is go to wealth formula.com, sign up for investor club, get onboarded, and hey, it’s another source of education.

’cause the way we do this stuff, it’s not just throwing out deals. What we’re doing is we’re having educational webinars where people can learn. And if you want to invest, then great, but you don’t have to. Nobody ever has to do anything. It’s just a, a way to see deal flow and continue to build your financial sophistication.

Okay. Now one of the things that we do a lot of in investor club is apartment buildings. It’s, uh, it’s my favorite asset class. I mean, it is, uh, something you need, people need to live somewhere. I mean, fundamentally, that is. A, uh, that’s the kind of thing that generally speaking, drives me towards the spacing.

Frankly, this has been a family thing. My father was an apartment guy, is an apartment guy, and residential real estate has just made sense to me my entire life. But, uh, anyway, getting back to the holidays, it is that time of the year again. Black Friday, cyber Monday, everyone loves a deal, right? And if you’ve been investing long enough.

I will say this. You know, one important fact, there’s always something on sale. The problem is that the herd never sees it, right? Otherwise it wouldn’t be on sale. You’re too busy chasing whatever feels safe. And what feels safe is the things that’s setting new record highs, right? And right now, that’s the stock market.

That’s gold. Everyone’s piling into the most expensive things that they can find and patting themselves on the back for being prudent. Okay? But smart investors, you know. The ones that over time you say, well, gosh, how’d he make that call? Or you know, how did he figure that one out? He made a killing. Those smart investors don’t chase what’s already expensive.

They look for the thing that’s sitting quietly on the clearance rack, the thing nobody wants. Yet, and today I firmly believe that thing on the clearance rack that people are ignoring is real estate, particularly apartments. We’ve seen this movie before. Okay. Things that are on sale, people don’t. You know, don’t pay attention.

Like, okay, let, let’s go back to the early two thousands after the.com crash. Everybody ran to Gold Treasuries. Meanwhile, the very companies that would define the next two decades, Amazon, apple, Microsoft, they were sitting there marked down 75, 80, 80 5%, and you, you didn’t need to be a genius to buy them.

You just needed a stomach. If you understood. That this was something that was gonna continue, like something like Apple was going to continue, uh, to be around for a long time. And then there was 2009 through 2011, and this is probably more relevant to many of you. This was sort of my, you know, first, uh, real time with money where I saw something like this happen, which was that real estate was radioactive.

The media made it sound like apartment buildings were going to fall into sinks. Guess what? If you bought during that window, the values didn’t take 10 years to recover, they snapped back within three and they kept running for another decade. Okay? So again, you don’t have, I mean, it’s not just stocks, it’s not just, uh, real estate.

Uh, 2020 oil going negative. I mean that’s, that’s the kind of insanity that only happens once in a generation. And people were literally joking that Exxon would pay you to take barrels off their hands. It was absurd, and it was the greatest energy buying opportunity in modern history. But most people sat on the sidelines in fear, not looking at the big picture and saying, you know, I think probably we’re gonna need oil.

We’re gonna probably need oil after this. Pandemic’s over after, you know. The dust clears. The point I’m trying to make is different cycles, different assets. Same principle. If you want outsized returns, you’ve gotta be willing to buy what everyone else is mispricing. And right now the only major asset that’s not making all time highs is real estate.

In fact. I mentioned our, uh, credit investor club. I mean, we’re still, we’re finding deals, right? We’re still finding deals that are discounted 30 to 40% from just a few years ago. I, it’s, it’s even enormous, the kinds of discounts that are available, you know, in the right hands to, to, to sit on for the next couple years as, you know, a a as prices completely change.

Um, and you know, I’ve talked about that before. You know, apartments specifically are in this bizarre, sweet spot. Where pricing is still beaten up from the rate shock, yet the fundamentals underneath are strengthening. So what’s happening? Sellers who bought with floating debt are fatigued. A lot of us know that because a lot of us actually were hurt by this.

Right. And listen, you, you have to be able to take a little bit of the downside to focus in on and, and take advantage of the upside because buyers with real dry powder are now getting real discounts. Guess what? Construction is collapsed too. Meaning supply will be razor thin and about 18 to 24 months, that’s what is being projected.

The interest rate environment we’re, we’ve talked about this before and I’ll mention it again. Uh, it’s the direction departs benefit from right rates are going down right now. Uh, the December rate cut is kind of a no brainer. I mean, people thought it was a 50 50 chance last week and this week, uh, basically 85, 90% chance that the December rate cut is gonna happen another 25 basis points end.

Rates matter. Um, you know, this is why rates matter. It’s, it’s, uh, it’s why liquidity matters. This is why cycles matter. When financing costs come down and supply is constrained, like I just described, prices don’t grind higher. They launch and just think about the way people are behaving right now. Right?

When it comes to real estate, this is exactly what the bottom feels like. Bottoms never feel like bottoms. Right if, if people knew that they felt like, like what a bottom felt like, they’d just be like, okay, I better buy now. They feel confusing. They feel uneasy, they feel contradictory, and that is precisely why.

It’s the opportunity. Every big wealth building moment looks like this in real time. See what’s happening. Everyone’s distracted by what’s hot while the discount sits right there. Plain sight. Make no mistake, if the Fed keeps cutting and liquidity continues, loosening apartments aren’t going to stay discounted, though.

They are going to do what they did after 2009. They’ll do what, you know, oil did after 2020 and they’ll, they’ll, they’ll do what Tech did after the.com crash. They’ll reprice fast and before you know it, you’re gonna go from a. Highly discounted market to a frothy market, and that could just take two or three years, right?

So you wanna be in a position, in my opinion, that when that time comes, you’ve got something to sell. You know, years from now, people will look back at this moment and say the thing they always say, after missing these obvious type scenarios, it was right there. Why didn’t I buy more? Well, it is right here.

Apartments are on sale and. This is your opportunity if you want to do it now. No one has been beating the drum More on this, uh, than my guest, uh, this week on Wealth Formula Podcast at Zach Haptonstall, and we will talk to him right after these messages. Wealth formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments.

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Visit Wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show, everyone. Today my guest on Wealth Formula podcast. Well, he’s a repeat guy. He’s a, a friend of the show and of our investor, uh, club. His name’s Zach Haptonstall. He is a CEO and a co-founder of a company called Rise 48, which, uh, which is one of the most, uh, one of the largest, most successful and fast growing real estate companies in the country.

Uh, Zach, how you doing buddy?

Hey, what’s up Buck? Glad to be here. Thanks for having me. Doing well. Just, uh, we’re wrapping up some year end acquisitions. Yeah. Trying to take advantage of the new depreciation, so it’s, it’s good. We’re finishing strong.

Yeah. Hey, you know, I was thinking about you, uh, last week.

You know, I don’t know if you happen to, you probably don’t have time to listen to my show, but last, uh, last week, or actually this’ll be, this’ll be next week for you because when we’re recording, but I, I recorded a, um. A show with a guy on sports economics and it was all about like, you know what drives values and professional.

Football teams and we, we talked a ton about all sorts of stuff and I, I was thinking about you, ’cause I understand that you spend some time in the sports space yourself, didn’t you?

Yeah. Yeah. So I played college football, then I went and I got a journalism degree. So I was actually a sports reporter, um, on, uh, Arizona PBS and a news anchor.

And, and I That’s so cool. That’s so cool, man. What, where, where did you pay play college football? It was just some de some small division two school in Colorado called, uh. Colorado Mesa University. So I wasn’t good enough or big enough to go to the NFL book. Yeah. And that’s why I wanted to go be a sports reporter and so.

I did that for a little bit, and then I realized that you don’t make as much money as you thought. I wanted to make money, so I went to, I went to real estate after that. So,

yeah, I mean, I guess a few of those guys probably, you know, they do yeah. Do pretty well, you know what I mean? But that, that’s, that’s more rare than an actual professional athlete because there’s far less of them.

Yeah, you’re right. It’s a, it’s a small sector. And it’s funny, I went to the top journalism school in the country. And I graduated top of the class, so like I could have gone that route. It’s funny, just this morning, no BS. This morning I saw an article, this guy I went to school with, his name’s Bill Udin.

He was in my class and he just became like the Chief Cong, congressional correspondent for Fox News. He’s like a rising start. I, and I also went to class with the guy who’s like the top guy at M-S-N-B-C now. So it’s kind of funny seeing the people I went to school with in, in journalism. A

guy like you’s probably been successful in anything, but fortunately for us, he chose real estate.

So yeah, I’m grateful. Yeah. So, you know, just as a reminder, uh, why don’t, why don’t you just kind of, yeah. Tell us, tell us a little bit about your company just before, so we can set the stage and then we’ll kind of talk about what’s going on in real estate. Yeah,

thanks, buck. Yeah, so Rise 48 equity. We’re an owner operator of multi-family apartment buildings and so.

We, uh, have purchased 62 assets, about 12,000 units over two and a half billion of real estate. So we’re basically buying existing apartment buildings going in there and improving operations, renovating them to increase the value to get that profit margin for our investors. So we are an in invest, an investment company at our core.

We’re also vertically integrated, meaning that we have our own property management company, our own construction company, so that we have full control. So we are in Phoenix, Dallas, and North Carolina. We have about 350 full-time W2 employees. You know, we’ve sold several properties. We sold over a thousand units, but we currently own and manage over 10,000 units.

And so that’s kind of what this is. All we do is just focus on buying good real estate investment opportunities to, to serve our investors, is what we do.

You have a pretty, uh, impressive track record in terms of, uh, dispositions. Um, just a little review on, on on that performance if you

Yeah, so we’ve, we have, we have effectively purchased, executed the plan, meaning we renovated the properties to what we had planned to do and sold 11 different apartment buildings, which is over a thousand units, over $200 million worth of real estate.

And we’ve, we’ve more than doubled investor money, um, on average across those deals. And so, um, that’s something we’re really proud of. And, uh, and, and we think, I mean, honestly, buck, I mean, I’m sure we’ll get into it, but we think right now is, is really the bottom of the market, um, for everything that’s going on.

So we’re excited to buy some opportunities right now.

Yeah. And part of why you’re able to do that is, I mean, you know, it’s not like, it’s not like it wasn’t hard for you guys. It was hard for everybody the last few years. Yeah. Um, but you managed to get through it and you know, I mean that, get through it and, and, and really not, uh, you know, lose any, lose any capital.

You never missed a debt payment, all that, that actually is a big deal because as you mentioned, there has to be, there has to be, you know, buyers out there and you guys are one of the most active buyers out there, and it’s helping you to get to these situations where. Um, you know, every, every deal that I see from you guys is like a 30%, 40% distressed asset discount that you’re basically able to do because you’re getting ’em off market.

You’re, you’re, you’re finding the sellers who are, you know, need to get out quickly and they know you can close. So that is, uh, that has been like a, a, the ironic nature of sort of. A really down market is the strong, uh, operators come out even stronger. Do you think that’s fair? Yeah.

Yeah. You’re exactly right, buck.

I mean, there’s, there’s no denying. The last three to four years have been a absolute grind as interest rates shot up all this new supply, it’s honestly been like survival of the fittest. You know, in the space. Yeah. And, and, yeah. And there’s been a ton of groups that they’re just done. Like they’ve, they’ve been foreclosed on.

I just found out yesterday a property that we sold in, in the first half of 22, and we, we more than doubled the investor money. It was a big, well-known private equity firm. They just got foreclosed on that asset. We sold them, um, a month ago, and so it’s, it’s very common. Unfortunately for the industry it’s happening, but, you know, we’ve been able to weather that storm mostly just because of our operational expertise and, and ability to renovate these units and get through it.

To your point, never missed a monthly debt payment on any asset. Never lost investor capital. We’ve been able to weather that storm. And now what’s happened is that because so many groups have faced this adversity and, and been wiped out losing properties, losing investor capital, very few groups can actually lose money.

Yeah. So, so like the sellers and the buyers, I’m sorry, the sellers and the brokers, when there is another distress opportunity, there’s such a limited buyer pool that can raise that money. And so, you know, because we’ve been able to get through that, our investors have really, you know, I think. Respected that and trusted that.

And now these sellers, when they have to sell a deal because maybe they have a loan maturity coming or their fund is ending, whatever, we’ve kind of developed that, you know, that track record just in the last 24 months as one of the few groups that can perform. So we’re actually seeing a lot of deals right now that most groups are not seeing at all just because they have to close by a certain timeline.

Um, and, and they can’t have any. Execution issues and we can execute. So knock on wood buck, we are, we’re 62 for 62. Every time we’ve gotten to deal on contract, we’ve been able to close. And I think that’s just become even more rare the last 12 months, you know, for a lot of our industry.

Yeah, for sure. And the other thing, uh, you know, from the lending side, I think you’ve, you’ve sort of been able to prove your, prove your value to the lenders, which is another big deal.

Um, from my understanding there, they’re actually some of the properties that. They’ve taken in basically as, uh, you know, uh, basically foreclosed on. They’re having you guys manage those?

That’s correct. Yeah. So we’re actually now managing, in Dallas, we are managing over a thousand units, third party for our lenders who have taken those properties back.

From other borrowers because they came to us and they said, Hey, you guys are doing great on the properties that we have with you. We need some help here from a property management asset management perspective. So yeah, we’re now doing third party for several groups. Um, and then, I mean, just a few weeks ago we actually just bought a deal directly from one of our lenders.

They foreclosed on a different borrower last year. Um, and they came to us and, and we were able to buy that at a huge discount. And so, yeah, I think that that is the silver lining is that, you know, the last few years. We’ve showed a lot of these big institutional lenders our ability to perform, and it’s actually strengthened those relationships.

And, you know, we’re able to get loans on new acquisitions right now that most other groups, they simply will not, these lenders will not finance them. Um, and so that’s been, you know, a, a advantage as well in terms of the

success. Right. And you know, I think about like, what I know about you guys and, and obviously operational ability is number one, right?

It’s, I mean, these, these properties, um. I’m involved with. I mean, they’re all, they’re all kicking ass like, you know, there’s no issues with vacancy. They’re distributing every month, that kind of thing. What else were the keys like in terms of how you guys were able to navigate, you know, the distress in the marketplace?

Yeah, it’s a good question. So I think. You know, the, the, it starts with having that vertical integration. I think the fact that we own our own property management company and the construction company, that gave us a lot of control. I know a lot of groups using third party management companies, you know, they’ve just kind of fallen apart because the, the incentives are not aligned.

That’s given us a lot of flexibility to really quickly change our strategy for certain properties on a month by month basis to do what’s best to kind of navigate this market cycle. And then it sounds cliche buck, but when we have that infrastructure and we have the control, then the next step is, okay, what about like your people and your culture and your standards?

Right. And I, and I would tell you that the last three to four years, our company has evolved where when we first started, the market was strong. As A-C-E-O-I was really focused on like, I wanted to be a people pleaser and I wanted everybody to be happy and, and a really happy place to work, which we still want.

But what we’ve realized the last few years is that, you know, we, we need to develop, you know, accountability and a very high standard of expectations. And the people that don’t meet that standard, we tell ’em, you’re gone. Okay, you, you can leave. And we want really high performers. What we found is the more a players and high performers we put on the team.

You know, they’re just gonna work much better together. And I’ve seen other groups, like I have friends, that they have basically turned on their business partners because when times get really tough, you’re going through adversity, it’s easy to turn each other and you can point the finger. I think the one thing that I can point to.

Is that we’ve in internally, we’ve had each other’s backs. And even though there’s been, you know, we’ve had our fair share of screaming sessions. ’cause you, it was like, let’s get, let’s get through this. Let’s figure this out. But we’ve stayed united and we have a core team at our company that has kind of been through the fire.

You know what I mean? And, and we’ve developed a lot of trust and respect internally for that. And so it sounds cliche, but it’s so true, is the culture, the comradery, the trust and communication within, I think we’ve become even stronger because then that permeates throughout your organization to different layers of, of leadership in management, um, down to the onsite level.

And, and just earlier this year, uh, buck, we, we built out an executive leadership team at our company, so it’s. Myself, my partner, Biron, and then four of our top level employees, you know, vp, director level staff. We developed core values for the entire company and we told, you know, I do these quarterly all staff meetings where I talk to everybody in every market.

I fly to Phoenix, Dallas, North Carolina, and I go over the core values and I say. These are the people, these are the, these are the standards you need to hold people accountable to when you’re hiring somebody. If they don’t meet these standards, do not hire them. And I’ve even said, buck, if you are an existing team member and you don’t think that you can improve to meet these standards, then maybe this isn’t the place for you.

You know what I mean? So we’ve kind of shifted where like, let’s make everybody happy to. We want people who wanna be here, we want to be a championship level team, and this we have to do and, and kind of being more selective. And I think that that’s really given us an advantage. Yeah. It’s funny,

you know, it is a little, a little cliche, but you know, it it, you know, you go back to the sports analogy, right?

Yeah. You know, these, you, you can have all, you can have a few stars on the team, but if, if they’re not gelling together and not working together, you’re not gonna get a good outcome.

It’s, and it’s so true. And in the early years, buck, real quick on this thought. Yeah. ’cause I am happy about this, honestly.

Yeah. And we were like a hundred, 150 people. I always thought core values were cliche bs. And I was just like, no. Like, we just need high performers. But as we get bigger and bigger, I, I can’t touch. All those front frontline employees, I don’t even know a lot of them in different markets. And it’s like, how do we communicate the standards and the messages throughout an organization across the country?

And we’ve had to build out, you know, those, those standards and that infrastructure, um, so that you have a uniform standard. And so I’ve really, I’ve realized just in the last 12, 24 months how important that is. And I think we’ve done a good job finding people that meet that standard. Yeah. Well, the

good thing, uh, well, there’s lots of good things there, but, um, just to say that you’re, you’re now very strong, uh, company with a, you know, very stable portfolio.

Certainly, at least from my perspective on the things that we’ve been doing. It’s been, it’s been great, um, approaching this real estate market right now. What’s going on? What do you, how do you, how do you view the macro on. This real estate market right now and, and, you know, you are talking to some of the biggest other biggest owner operators out there.

Like, what, what is, what are people thinking?

Good. Good question. So there’s a couple different dynamics I think to focus on when we’re talking about, you know, macro, um, economics of real estate right now. Obviously the first one is interest rates, right? And so, as many people know, I think by the time you’ve released this, this episode in the Fed in September of 24, cut rates for the first time in several years, they cut again in December of 24.

We all thought 25 was gonna be a big interest rate relief year. Then in January of 25, um, the Fed, Jerome Powell comes out and says, basically everything turns 180 said, oh, we’re not gonna really change much this year. There was a lot of tariff rhetoric and concerns of that driving up inflation. And so I think most of the year it’s just kind of been, you know, a lot of uncertainty.

Well then, you know, by the time we get to, you know, late Q3, Q4, it looks like these tariffs actually have not had the impact on inflation that most people thought. Right. And so, yeah. Um, the Fed cuts, they do their first 25 basis point cut in October of 25. They just cut again in November, or, or, I’m sorry.

They did the first one in September of 25. Then in October of 25. Now it’s looking like they’re gonna cut again, most likely here in December. And you know, the current Fed chair, Powell, his term will expire in May. So I think President Trump is supposed to announce by the end of this year who that next, um, chair will be.

And it’s widely expected that we’re gonna have consistent interest rate cuts going to 2026. And so, you know, as many of your listeners who I know are investors in these types of assets, know as these interest rates come down. The values of these large apartment buildings will go up, right? And so, um, we truly believe at Rise 48, that we are at the bottom of the market right now where we can still find these opportunities, where there’s distress and we’re buying ’em at what we think is the bottom of the market.

We don’t think the market’s gonna go any lower than it is now, and that will have tailwinds. So the interest rates are a big, a big factor of why we think now’s a good time to buy. Um, but that window is closing, and when I say closing maybe six to 12 months or so, uh, it could be less, um, where we can still buy these 30% plus discounts, like you said, from peak pricing just a couple years ago.

Interest rates is a huge driver of that. The second big variable buck is supply. Okay, so we talk about like the macroeconomics, you know, economics 1 0 1 is supply and demand for any business. And so in this case, we’re talking about. The supply of housing. So what happened was really from like 2019 through 2022.

All the Sunbelt markets across the United States started booming. Okay, so you, I’m talking about Vegas, Arizona, Texas, uh, Florida, Atlanta, the Carolinas. Because this started pre COVID, by the way, people started leaving these other markets and going to these strong Sunbelt markets. But COVID just. Pour jet fuel on it.

So especially post COVID, you have all this new in-migration of people leaving other markets, coastal cities, um, and going to these Sunbelt markets. And then you had all these companies moving there and there’s all these new jobs popping up. And so then there was a huge need for housing. So all these multifamily developers start building apartments like crazy and you know, as you know, buck, it takes, you know, three years or so to actually deliver an apartment building, meaning it’s now built and ready to be leased up from when.

It begins being developed well during that three year. Window, a bunch of crazy stuff happened, right? I mean, we saw inflation skyrocket up to nearly 9%, which caused the Fed to start increasing interest rates. They started increasing interest rates in 2022, at the most aggressive rate since the 1980s and over 40 years.

Um, and because the inflation was so high, a lot of these people, you know, these tenants, they could not afford their groceries, their gas, whatever. Um, and so you had actual demand of housing. Went down significantly over that three year span. So by the time you hit, you know, 23, 24, and especially 25, all this new supply of housing is flooding the market.

So you now have more supply than you have demand. And what that did is it created negative organic rent growth across the Sunbelt, right? You have a lot of concessions where people are offering specials, they’re trying to undercut each other, fighting for occupancy. Some of these Class A apartments are giving three months free rent while at the same time.

What happened was that when the Fed started increasing interest rates in the summer of 2022, what that did is it, it virtually paused all new development of apartment buildings. So since the second half of 22, there’s been little to no new development or starts of apartment buildings. Interest rates blew up all those construction loans.

And again, it takes a few years to see the residual impact of that. But heading into 2026, when we look at the supply charts for all these major Sunbelt markets, and again, we’re focused in Phoenix, Dallas, North Carolina, we are attempting to enter Florida, actually be in Florida for a full week and a couple weeks being with all the brokers out there.

’cause we want to enter Florida for the same reason that we’re actually gonna have absorption increased significantly. Meaning that demand is going to. Catch up to supply or outpace supply by end of 26 going into 27. Once that happens, you’ll see concessions or the specials start to burn off, which increases the revenue and the net operating income of these properties, which increases their value.

And all these Sunbelt markets that have had negative organic rent growth the last two to three years in the next 1224 months are gonna have positive. Organic runco. So the, those headwinds the last few years buck are gonna, are gonna transition to tailwinds. That’s why we think now is the best time to buy because rates are gonna start getting cut, which drives values.

Supply is gonna be getting absorbed. We’re actually gonna have a shortage of housing the next 36 months across these major growth markets. ’cause nobody’s been building the last few years. And so if we can buy these deals. As, you know, buck, we’re, we’re typically, we’re, we’re on a five year horizon, you know, for these.

And we’re, we’re conservatively projecting to double investor money over five years. If we can do it sooner, we will then. If we can buy now, we think the next, you know, two to four years, two to five years, we’re gonna have a lot of appreciation. Um, and if you look at, let’s look at the stock market buck. I mean, it’s, it’s at near all time highs.

Um, I think everybody realizes that the s and p 500 is being propped up by AI companies, right. Uh, Nvidia and these other companies. And it’s like, you know, that’s great, but is there, is there an AI bubble, kinda like in the.com era? Um, you look at how much it’s grown, you look at gold. I mean, gold has been hitting all time highs, the last, you know, four to eight weeks.

And that’s kind of an indicator that investors are fleeing to hard assets because maybe they’re worried about a bubble. Real estate, in our opinion, is the best hard asset you can invest in, right? Because you’re getting cash flow, you’re gonna get that appreciation, you’re gonna get the tax benefits. We haven’t even talked about the new Trump bill, which we can go into, but that’s kind of where we’re at, like macro wise, is we think now’s a good time to be buying these, these apartment buildings.

You

know, you mentioned, uh uh, that you think that we’re sort of at the bottom. What other indications are there that were at the bottom that you can just sort of name? I mean, obviously you named a, a, a bunch of variables that make it a good time to buy, but why the bottom?

We haven’t seen pricing or cap rates really change the last 12 to 18 months.

Right? So like 22, 23 as interest rates started going up. Um, cap rates, there’s a pretty direct correlation there, right? At a certain point, it’s not gonna be the one-to-one ratio, but as interest rates go up, cap rates go up, and, and those of you aren’t familiar, you know, cap rate I tell people is basically a fraction, you know, it’s like the net operating income.

How much money is that property producing divided by the purchase price? Divided by what, what price are you paying for it, right? So it’s a measure of how good of a deal you’re getting, so to speak. Interest rates go up. Cap rates go up, which means that when cap rates go up, values go down. So when you’re a buyer, you wanna be buying higher cap rates.

When you’re a seller, you’d rather sell a lower cap rate. Well, we haven’t seen cap rates or values really change the last 12 to 18 months. They’ve kind of just, you know, bottomed out, so to speak. Um, and so that’s the biggest indication. We’ve, we’ve been buying a lot of distressed deals the last 36 months.

We’ve bought over a dozen deals. Where we’re, we have a seller who has a loan maturity coming up, and because interest rates skyrocketed, they cannot qualify to refinance the asset. And they have two options. One is you get foreclosed on by the lender and you lose all the money. Um, and then you have all these legal ramifications, or you can sell the deal if it’s worth that.

Sell it before the loan maturity to at least get enough proceeds to pay off the loan. A lot of these deals we’ve been buying Buck, we’re buying ’em for the loan amount. So like they’re wiping out all their investors unfortunately, but we’re getting massive discounts on them ’cause they have no other option.

Um, but to sell the deal now we think with where interest rates are gonna do, as interest rates start to cut, you will start to see cap rates also compress and go down, which will drive up values and as cap rates compress and as interest rates compress. That makes your cost of debt cheaper. Right. And so, you know, with these properties, these are 20 to a hundred million dollars properties that the space that we’re playing in.

Um, and so. Every time the Fed starts to cut interest rates, your cost of debt gets cheaper. You know it’s gonna spur more transaction activity, more competition. And so, you know, we just think that there’s this window the next six to 12 months where we can still get in and buy. It’s twofold. One is we need to get in and buy opportunities before all that competition does flood back into the market.

’cause the institutional space, it’s very like a, you know, it’s a herd mentality and it moves slow, right? But once the big dogs start coming in. It’ll all start flooding in, right? So we want to get in before the competition comes in. Um, but we also, you know, want to get in before the distressed opportunities are gone.

Right. Because, yeah. Uh, a lot of those deals are getting foreclosed or being sold.

You know, you, you mentioned the big dogs coming back in, right? Um, one of the, uh, one of the issues in the market has been that sort of lack of liquidity. Not as many properties moving because sellers. You don’t wanna sell when it’s not a good time to sell unless you have to.

And then buyers, there’s a lot of buyers as you mentioned, uh, are not participating in this market. So how does that dynamic change?

Yeah, it’s funny Buck. So like 2018 through 2021, it was the complete opposite of now. It was. Extremely competitive. There were a ton of deals available. There was a lot of deal flow, but it was very competitive.

Right. And so it’s like to find deals that actually made sense. You really had to find off market deals where there wasn’t competition otherwise it was getting bid up. Well the dynamic has shifted now where, to your point, not a lot of groups are selling right now. We, we have not sold the deal, for example, at Rise 48 since July of 2022.

We haven’t sold a deal for three and a half years, and we haven’t even thought about it because it doesn’t make any sense with where values are at. We’re giving somebody a discount. Um, so the only groups that are selling have to sell, you know, they have no option. They’ve got some type of deadline looming, um, and they have to sell that deal.

So, but there’s very few of those, but there’s also much fewer buyers. Um, and so it’s kind of funny, it’s, it’s, it’s completely inverted from before, is that now when we get off market deals, most of them aren’t real. They are sellers who are out there fishing to try to see what is their property worth. And then once they get feedback, they’re like, oh, I’m not gonna sell, it’s way lower than I thought.

Well, the marketed deals that are on the market, those are groups that they’re under the gun. They’re like, we gotta get this thing sold and get it and get it moved. And so I think that, you know. One thing that has been consistent is that the groups who can actually execute are getting the upper hand. And so, you know, right now there’s a bunch of groups making offers, but they don’t actually have equity lined up, and they’re just kind of fishing around.

And so we’re seeing these good opportunities where we’re getting the first call if it’s a real seller that needs to sell, um, because they’re distressed, we can come in there and, and swoop that up. But they’re, they’re really hard to find. I mean, since 2022 buck. We have this data in our Excel model. We’ve underwritten over a thousand deals now, nearly 1100 deals, and about 28 of them have actually worked in our model.

So it’s literally a 2% hit rate. So it’s like a needle in a haystack. We get a full team of analysts here at the office, underwriting deals every single day. Um, and so, you know, it’s tough to find the deals, but when we do find them, we feel like we’re stealing them and buying ’em at a 30, 40% discount.

Yeah, sure.

And then on the flip side of, you know, the sellers is a buyer. So, uh, you know, I had a guy on recently, uh, was a professor of, of, um, of real estate actually in, uh, he was talking about sort of one of the other things that happens as those, as a rates tick down, which is, um, people who’ve got, you know, huge amounts of money, institutions, whatever in money markets, and just start to look for yield.

And so there, there is this idea that, you know, that’s gonna be another part of, you know, the real estate recovery and potentially a pretty rapid flip from being a a, a market in which, you know, we’re in right now, where it’s, you know, fantastic to buy, flip into a situation where it becomes a frothy market.

That period of time could happen very, very quickly. Once that money starts coming into real estate, is that kind of what you’re hearing?

Yes. It’s a, it’s a great point. You brought up Buck, and there’s two tiers to that, right? So when interest rates were low, okay, money market. It was like 1%, right? So it’s extremely conservative.

If you wanna do money market or treasury bills, it’s 1%. You know, really low risk. Low, low return. At that same time, in the first Trump administration, you had that a hundred percent bonus depreciation. Which started to step down during the Biden administration. Well, when interest rates skyrocket like they did, now you can get a four to 5% yield on money market for like virtually no risk.

And so, you know, if an investor is trying to compare, okay, I can get four to 5% cash on cash with this apartment building in year one, or I can get four to 5% money market, but the money market is liquid, then I’m gonna go with the money market. Right? And, and. At the same time as the depreciation has been stepping down this second tier, I’m talking about if the depreciation benefits are not as as significant as they were, then more of that capital is gonna go to the money market.

Right. And, and treasury bills, things like that. Well, to your point, the guy that you just interviewed. You know, as interest rates start to cut, the yield on the money market and and t-bills is gonna decline, you know, pretty quickly it’s correlated to that. So now you’re not gonna get that four to 5% yield.

That’ll start getting inching back down to three, two, 1% as rates cut. Well, these apartment buildings are still producing four to 5% cash on cash in year one. Right? And we’re giving the investors a seven, 8% preferred cash on cash, which they’ll get caught up on. They were getting that immediate four to 5%.

And now with this big beautiful bill that the Trump administration passed in July of this year, they’ve brought the bonus depreciation back to 100%, 100% bonus depreciation. So now we’ve just seen just even the last 30, 60 days, really strong sentiment from investors because they can now get better yield or they’re gonna get better yield in 26.

By investing in apartments then in the money market or treasury bills, and you had that additional tax benefit of that depreciation getting restored to a much higher level. So yeah, that’s gonna basically incentivize all this extra competition to come into real estate, which will drive up those values.

Yeah.

You know, it’s, it’s, it’s like best investors I think, sometimes look and say. Where is the discount right now? Right. Um, and, and maybe at, at times that’s gold. Maybe, uh, times that is the stock market, although it usually isn’t right. Um, the discount right now is in real estate. Right now. The discount is in real estate.

If you look at markets where you want to potentially, you know, ride for the next five years, the goal here is. You’re not buying or investing in real estate for a year out, that’s not what you’re doing. Right. You’re, but if you look at where markets are right now, and you say, where will these markets be in five years?

If you look at the s and p 500? Yeah. I’m sure it’ll be up, but I, I don’t, you know, the, the issue is that you’ve got some corrections and we don’t know how much, you know, how big those corrections are. We just don’t know. Right. Um, gold. I don’t know. I, I, I wouldn’t personally right now be buying gold when it’s at all time highs.

You’re paying a premium, right? Yeah. Or, or you’re paying a premium, right? Absolutely. And so, so it just, I, that’s, for me, that’s one of the big signals here. Where is the discount? The discount is in real estate right now, and the discount is in real estate. And then beyond that, you’ve got all of these.

Confluence of variables, descending rates, um, supply, uh, demand, uh, issues. Uh, and then, you know, you’ve got tax benefits. You’ve got all these sort of winds that are, uh, behind you that are, are, are pushing you. And then on top of that, of course, you’re not buying properties and just hoping you’re actually creating value on top of that.

Right. Yep. Exactly. Yeah. Forcing the appreciation rather than relying on the organic appreciation to your point.

Yeah. Yeah. So, um, interesting. Uh, so let’s talk a little bit, you know, one of the things, uh, that, you know, our investor group or investor club is looking at is a lot of times the things that we’re seeing.

Uh, you’re pounding North Carolina or the Carolinas in general. Yeah, right. Tell us about the North Carolina story or the Carolina story.

Yeah, so I mean, it’s, it’s a pretty, pretty simple thesis that we follow Buck. I tell investors it’s not rocket science. When the, the markets that we evaluate, the first thing we’re looking for is we want to have very strong population growth.

We want people moving to that market, okay? So that there is a need for housing. So we want really strong in migration. I mean, there’s much more people moving there. Then there are leaving there. North Carolina is top five in the entire country amongst states for new in migration. And I just, last week I saw data from U-Haul, the moving company Buck, and they just released their 2024 data and it was kind of funny.

And this benefits, this sounds like very uh. Self-promotional, it benefits what we do. But the real data was they listed like their top 10 cities for most new PE mo moving into with U-Haul. And number one was Dallas, which we’re in number two, city in the country, Charlotte, North Carolina, for 2024. New in migration of U-Haul.

And the number three was Phoenix. Okay. And those are the markets that we’re in. And then as far as states go, North Carolina was the third state. Behind Texas and Arizona, and so there are just a ton of people moving into North Carolina. So that’s the, that’s the first thing is population. We want people moving there.

The second thing is job growth. We want companies that are strong, diversified companies moving into the markets that we’re focused on so that there are good jobs. Which are diversified across different sectors. Right. So we don’t really like, to be honest, not to pick on certain markets, but this is just our honest, subjective criteria.

Like we don’t like Las Vegas because it’s heavily concentrated in, um, hospitality and tourism. We won’t really like Houston because it’s heavily concentrated in oil and gas. So like the, the jobs that are coming into North Carolina and Charlotte specifically, which is the biggest market in North Carolina, are very well diversified.

I mean, I don’t think you have any one sector making up more than, you know, 15, 20%. And so, ’cause these tenants, you know, our clients are our tenants and residents, so we want them to go to work. Make good money. They pay their rent. That rent goes to pay operating expenses, the mortgage at the property and, and everything that’s left goes through to our investors as cash flow, right?

So we want strong, uh, population growth, strong job growth. North Carolina’s top five for both of those in the country. So those are the two biggest things. It’s in a very affordable market, so like the cost of, of housing, the rents have, have not, you know, just escalated through the roof like a lot of these other big cities and buck, it’s landlord friendly.

Which means that if somebody does not pay their rent, we can evict them in 30 to 45 days and get them out. Because at the end of the day, we are an investment company. We fiduciary responsibility to our investors to be the steward of this asset. And so when, when I’ve got friends that have properties in Denver.

And in California right now, and they literally cannot evict people for six months who don’t pay their rent. That destroys the property, destroys the investment. So that’s always a very big factor. So, you know, we’ve owned in North Carolina now for over 18 months, especially in Charlotte. Um, and it’s just, it’s performing really well also.

In Charlotte, it doesn’t have nearly the supply of new housing as these other large markets. And we’ve been really focused on these micro submarkets really focused on purchasing, like in east and Southeast Charlotte, where there’s not as much new supply. Um, so you don’t have to get hit with those concessions.

And so it’s just, it’s a booming market, you know, it’s growing very quickly. We love North Carolina in general. You know, we’re focused on Charlotte Greensboro and then that Raleigh Durham Chapel Hill Triangle area. But for us it’s, it’s a no brainer. And we also look at data forward looking, and you look at like the next five to 10 years.

And US Bureau of Labor Statistics is projecting, you know, it’s a top five market in the entire country, the next five years for job growth. Um, US Census Bureau is projecting really strong population growth. Um, and so we wanna be in the markets that, you know, we’re, we think we’re getting in kind of early, you know what I mean?

Like, it’s, it’s, it’s booming right now. It’s already top five, but it hasn’t already peaked where all the pricing is really expensive and the cost of housing, things like that. And so, um, we’re really bullish on that market. Um, I mean, you know, there’s, there’s not much. I think I, I think that in this current media environment we live in, there’s just always a new headline, right?

Like the, the, the sky is always falling. And I think if we look at the beginning of the year, the tariffs really have not had an impact. Um, they haven’t Dr. Driven up inflation like people thought they would. Um, you know, at the time, this recording, buck, you and I are recording this the week before Thanksgiving and just yesterday.

The government, it was shut down, you know, for 45 days or whatever. A couple months nearly, they just released their September jobs. Data unemployment came in at 4.4%, which is the highest since October of 21. How’s, how’s that doing in, in Carolina in the Carolinas? In, in the Carolinas, we’ve been performing really strong, and so we’ve had strong occupancy, strong collections.

Low delinquency. So we haven’t really seen, you know, any impact. But I think the fact that that unemployment number is ticking up, that’s gonna motivate the Fed to start cutting rates fast.

And you know, when it comes to the Fed too, like honestly the December cut probably should happen, but there’s been signals that maybe they won’t cut and stuff like that.

Yeah. But I think if you put into perspective, as you mentioned, Powell’s out in May, I think. And I think Waller’s probably gonna be, you know, uh, Trump’s guy, Waller, uh, is probably gonna be the new Fed chair. Yeah. And he is, you know, they wanna drive rates way down, you know? Yep. And so, again, looking at this, not as, I’m investing in something right now for December, you know what I mean?

Um, you, you put the big, you, you get that big picture. And, uh, and I think that, that, that’s where you kind of have to think about it. So one of the things I, uh, I, I like about, you know, we had this conversation, Zach, about, um, when, when we first, you know, when we first met and about potentially, you know, getting exposure to, uh, you know, my investor group here, wealth formula.

Uh, one of the things that I really liked about what you told me was you’re, you know. You wanna be very practical, right, and flexible. And you want to take the wins when you have the wins. Yeah. Talk about that. Because I think it, one of, one of the things that happened, uh, to me personally is with a company that I, um, was working with is they didn’t sell anything, knew they should have probably sold because I think they were planning something bigger.

And I think that hurt ’em. You know, sometimes you gotta take the chips off the table. What’s your philosophy on that?

Yeah, no, a hundred percent. I, I agree. Um, I think that our philosophy has always been, I mean, we’re a conservative group in general. Like we’ve always taken low leverage loans. I tell people too, we’re very boring on, we’re very vanilla company.

Like, we literally just stick to our box and we rinse and repeat the same type of properties and the same type of business plan because we’ve built the entire company around that structure. So we try not to chase shiny objects, and part of that philosophy is structuring our debt so that we have flexibility so that if.

The market cycle heats up and we’re like, Hey, we wanna sell this deal early. Yeah. Or we wanna refinance. We want to have the flexibility to do that. And I think a big difference that we saw, I mean, I told you at the beginning of the, the podcast here, uh, buck, that we just sold a deal in the early 2022. It was like a two x multiple for our investors.

It was a home run. Um, at the time a lot of groups were not selling right, because we think the market was gonna keep running up. Right. And um, even like internally, my business partner was like, Hey, maybe we should hold these deals. Like it’s gonna keep going up. And, you know, I, I was telling ’em, you know what, if we can hit that protection return, let’s just pull the trigger and sell the deal.

And, and like I say, the group that we just sold that to a few years ago, they just got foreclosed on a month ago. Right. And so I think that we pulled the trigger on a lot of sales at the end of 21. Like we sold five heels in the first half of 22 buck. Um, that could be

great timing there.

Exactly. Yeah. We, that was the peak of the market in hindsight.

Yeah. And so we had 11 full cycle exits. And so for us, you know, we don’t wanna quote unquote get greedy or try to pump it up too much. If we can hit that return, we’ll sell and, and lock in that profit. Um, and, and just kind of keep an eye on the overall market cycle. So yeah, we, we do like to exit early if we can.

And, uh, and, and. Because we also realize that that’s just gonna benefit your track record as well. Yeah, yeah. Like if you’re, if you’re recruiting capital investors and you’re getting ’em a return, you know, they’re gonna appreciate that and be grateful. We’re in this for the long term, you know what I mean?

And, and so we wanna have a long, um, resilient and consistent track record over the decades.

Well, Zach, I wanna, uh, thank you for being on this show. It’s, uh, you know, it’s, it’s nice to get perspective on, you know, what’s going out there from somebody who’s, you know, pounding the pavement every day. And you know, keep up the good work.

Yeah. Thanks so much, Bob. Good seeing you. We’ll talk to you soon. Right back. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties. Now you’re trying to catch up. Meanwhile, you’ve got a mortgage, a private school to pay for, and you feel like you’re getting further and further behind.

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That’s it for me this week on Wealth Formula Podcast. This is Bach Joffrey signing off. If you wanna learn more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom Wheelwright and Ken m visit well formula roadmap.com.