What Happened to Real Estate Investing?

0:00For a decade, real estate investing was easy. It was predictable. It was profitable. So what happened? Well, the market changed, and those easy deals are much rarer today. You don't find 1 % rule deals on the MLS in most markets. In some places, they've been gone for years. But frankly, I'm not even sure that's a bad thing. Investing in real estate might take more work today. It might be riskier, but it is still the best way to grow your net worth and one of the only ways to achieve real financial freedom. And now there's actually fewer people doing it, which means there's less competition for good deals because most people just aren't willing to put in the work.

0:42But I am. I've adjusted my strategies and real estate is still growing my net worth.

0:51Hey, everyone, I'm Dave Meyer, Chief Investment Officer at BiggerPockets. Henry is here, of course, too. Henry, what's up, man? Hey, what's up, buddy? How are you? Good. I'm doing well, despite all this negativity out there about real estate. But I mean, I think it's fair to say that real estate has changed a lot over the last couple of years. How would you describe that shift? You know what? It feels like a shift to people who probably started investing during the last 10 years. But I think to people who were investing prior to that, it's just part of a cycle. Real estate isn't supposed to be easy.

1:27And I think we're just now, if you started in the Goldilocks years, you're just now seeing the hard part for the first time. I think that's exactly right. It's so much of this is about expectations. And I mean, to be fair, like I started investing in 2010, so I haven't really seen a situation like this personally, but I do think I have the advantage of spending so much of my time looking at the history of the housing market and just can understand from the data and information and research that this is kind of normal. The fact that it goes into these cycles that ebbs and flows and things get better, they get harder, and then they get better again is just a normal part of not just real estate, but any economic cycle.

2:07Same thing that happens in the stock market, same thing that happens in cryptocurrency or anything that you invest in. Is it wrong to say that I think it's good? No, dude, I think it's good too. Why were you saying that though? Because everybody's doom and gloom about it. But I think it's a good thing for several reasons. A, I think it's a good thing if you want to buy assets because in any investing scenario, it's always easier to buy at a discount when there's some sort of uneasiness or pain involved in the market. So there's opportunity to buy a little bit lower right now. And it's not super easy.

2:42It takes work, but there's still the opportunity to do that. I think that it weeds out people who aren't great at investing or maybe were in your way of buying deals before and not doing a lot of research when they didn't have to because everything was a deal. It was tougher. And I think if you get started now and you get your reps in in a difficult market, when the market does come around and it becomes easier, you're so much better positioned to clean house because you learned and you got prepared during a challenging time. If you do it the other way around, you can sometimes get smacked in the face when the hard times come because you're so used to it being easy.

3:25So I think this is a great time. I actually think that makes a lot of sense, just trying to learn during a more challenging time. I mean, I think that's what sort of like the last generation of great real estate investors, a lot of them were investing through the financial crisis. It's not like they had perfect market timing and started in 2009 or 2010 and then just rode the wave. Most of them, whether it's our mutual friend, James Dannard or Brian Burke, who we were talking to the other day, or Jay Scott, like all these people learned how to really be good and stick to the fundamentals. Because if you can learn in a market like that, then you can succeed in a market that has some tailwinds.

4:04And I think really, ultimately, what is going on in the market, if we're trying to answer the question like what happened to real estate investing, I think people's expectations just have gone crazy. Like they're completely out of whack. And that is due to, I guess, some combination of the Goldilocks era. If you listen to the show, we call the Goldilocks era the time between about 2012 and 2022 when literally everything was perfect for real estate investors. Prices were low. Rents were high. You had structural supply shortages. You had super low interest rates. There is an abundance of information from bigger pockets and other sources that made it easier to learn the business.

4:45Like it was just so much easier to do it. On top of that, we got to call it out, had a lot of people on social media raising people's expectations even on top of that and showing off and perhaps even exaggerating, I dare say, their results of what they do and how well they do on real estate. And that just created this idea that real estate is something that is not, that it is a get rich quick thing or that retiring within two to three years and quitting your job and not having to work and that it's totally passive, that that's a thing. And it's not and it never was. And I think that is the fundamental challenge that this industry is having is resetting expectations back to what it's like to be a real estate investor in normal market conditions.

5:36Yeah, especially when you look at things that are a little bit more risky, because we were talking a little bit about this with Brian Burke. If you got into large scale multifamily syndications, and you were raising money in the Goldilocks era, it probably felt like you couldn't miss you raise some money, you go buy an asset, you start producing returns for your investors, and it feels great. And then the market shifts and things aren't as easy. And a lot of those people are getting themselves into trouble because, like I said, they got it at a good time. And when the market shifted, it smacked them in the face.

6:10And so if you were dabbling in single family, you probably took a lot less of a hit or were a lot less in shock when the market turned versus if you were doing something that required a lot more capital and a lot more experience. And now the market is forcing people to be much more fundamentally sound if they want to produce results. And if you didn't develop those fundamentals in the beginning, you're going to have to develop them now. And it's going to cost you something to develop them now. A lot of people rightfully started. They bought single families. They bought small to multifamilies during this Goldilocks era.

6:42And they were like, hey, I could do this. I could do a multifamily. And then all of a sudden, all of these tailwinds that we had that was just lifting all ships. You know, like the rising tide was lifting all ships. I benefited from it, too. Probably thought I was smarter than I was in some deals. And I think that's kind of just what happened with a lot of real estate. And now it's just become work, which it's supposed to be. Like, you know, like real estate investing is entrepreneurship. You're going to have to work on it. But that part hasn't, in my opinion, fundamentally changed. Like the things that allow you to do value add investing or to generate cash flow or loan pay down or all that still there.

7:23It's really just this like era where you could get appreciation for doing nothing and count on massive gains with easy, cheap money. That's gone away. But even without that, I still think there's good opportunity. And I still think it's better than other opportunities. I see other things that I would choose to do with my money. Yeah, I'm not shifting. I'm staying here. Yeah, right. Well, that's a good question. Like, do you see your margins changing a lot? Or like, are your returns on individual deals worse now? then they were, I mean, they have to be a little worse, right? Yeah, yeah. I mean, we're trying to mitigate that by just ensuring that we underwrite more conservatively and we buy at deeper discounts to maintain our margins.

8:07But that usually means you have to increase your volume of offers in order to keep the same amount of deal flow, or you have to be willing to do less deals because you're willing to pay less, but the deals end up being more profitable. So yes, you can still get the margins if you adjust the underwriting, but I would be lying to you if I told you that I bought deals that are giving me the same margins now that I was getting in 2016. Now, that's just not true. The margins are not as good. Yeah. And that makes sense to me because just to do a little bit of a history lesson here, right? Like what happened during the great, as long as back as we have data, since the great depression, since the 1930s, it was the biggest drop in home prices.

8:52so would deals coming out of that be the best that people have ever seen yeah they definitely would be like 100 i truly don't think we'll ever see that again in our lifetime like i think it's unlikely that we see those kinds of deals again yeah and i think that's where people get hung up is they're like i compare the deals and the returns that i get here in 2026 to what i can get in 2016 and it's frustrating yeah everyone wishes they could get easy money i do too right That would be great. But the job of the investor is not to say, I'm not going to invest today because I got better returns yesterday.

9:26The job of the investor is to say, what is the best use of my time and my money here in 2026? And real estate still seems better to me than every other thing out there. And so, yeah, margins are probably lower, harder to find deals. But can I still find today a real estate deal on market that is better than what I think the stock market will do over the next three years? Yes. To me, yes. That's the important thing, right? It is worth it to me to do the extra work of real estate investing because if I can get a 15 % return instead of an 8 % return, you compound that over 10 years, that is millions of dollars, millions and millions of dollars for the average person.

10:06And so is that worth the time? Hell yeah, it is. Yeah, 100%. It's absolutely worth the time. All right. So that's, I think, a fair assessment of what has happened to real estate investing is that it was abnormally easy to be a real estate investor. And that's great. I'm happy that that happened. Now, I think we're back to just more normal, fundamental style real estate investing. But I want to talk to you specifically, Henry, about what has gotten harder, the specific things that people should be looking at and why that has caused such a shift in, I think, mentality and psychology in the market, even if the return profile of the best deals hasn't changed that much.

10:45Let's get into that, but we do have to take one quick break. We'll be right back. Most investors spend all their time talking about their high level returns, but that's not the number that actually matters. What actually matters is what you keep after taxes, and that's where multifamily real estate quietly stands out. With built-in advantages like depreciation, the right deals can generate steady cash flow while reducing the tax drag. BAM Capital structures its multifamily investments around those fundamentals, pairing tax efficiency with disciplined operators and a long-term approach. This isn't about chasing hype or guessing market timing.

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14:29Yeah, I think everything got more expensive all at the same time. When interest rates started going up, right, that was just kind of a shock for people because we were at such historically low interest rates to then jump up to around. I mean, for investors, we were getting deals with, you know, nine, nine and a half percent interest rates at the height of the interest rate hikes. And when you have like one of the real estate levers that goes up, you can make an adjustment. And I think people were still finding ways to find deals or make deals work even at an eight or 9 % interest rate. But at the same time, insurance started to go up dramatically.

15:11There were storms across the country. There was problems in California. So insurance premium started to go up like crazy right around the same time. And then taxes started to go up and we were getting hit with higher than ever tax bills. Then we weren't seeing the rent growth that we were used to seeing. So rents weren't growing as fast as we would have expected or wanted rents to grow. It's just been one thing after the other. That is true. And then, yeah, prices were still going up. Even with all these other factors, some people were expecting prices to come down a little bit and they just didn't like not drastically and then on top of all of that seller expectations did not adjust with the new pricing and so if you were being a fundamentally sound real estate investor and you were adjusting your underwriting for all these new higher expenses which essentially means you need to offer at lower price points, sellers were not here for it because they just felt like their houses were worth substantially more than what a good, fundamentally sound investor could pay.

16:25And that just made finding and buying good deals extremely challenging. Yeah. It's just, I think you're right. It's just this one thing after the other. And I do think this is a real thing. Like if you look at behavioral economics, people just like have an anchor in their brain of what things are supposed to cost. And once that changes, it just like fries your brain. I experience this every day, right? Like you go to the gas station, you're like, this is wrong. I think you are incorrect about what you are charging me. And I think this is happening in real estate, right? Like you start underwriting a deal and you just got like insurance and it's like, all right, it's going to be three grand for insurance on this$200 ,000 house.

17:06You're like, no, not all. Even if you like underwrite the deal and it makes said she's like no i refuse to pay that but this is what i mean by the expert is by like being expectations and less about actually what the bottom line winds up being it's just we're all still trying to adjust to this new reality that has changed really quickly and so that's why that i think you know people are feeling like these things don't work but like you wouldn't be doing deals if they don't work right like so somehow you are making them work yeah now i will say 2024 going into 2025 was probably the lowest volume of deals I've done in a single year because of the things that I mentioned.

17:48Like I was making adjustments in my underwriting. So I was offering price points that would still allow me to make money, but I just couldn't get people to say yes enough. And so we did our lowest amount of volume that year. But yeah, I mean, we're still buying deals. And I think part of what's changing is sellers' expectations are adjusting a little bit. They're starting to realize that, okay, in some markets, homes are valued at what they were before, but in some markets, things are coming down and buyers aren't expecting anymore that if they say someone buy my house, that 37 people are going to raise their hand and say, here's an offer.

18:25They start to realize that now. Yeah. I think that that's the big thing that is starting to shift. And I think that's honestly where a lot of the negative sentiment is. I truly believe you can invest in any kind of market. History has proven that. Like, this is just absolutely true. But normally, I feel like the peak, the transition between like a seller's market, like we're in for a while, to buyer's market, which we're going into, is faster, right? Like, you usually go, you know, and you start to see, okay, inventory's going up, maybe things are a little bit less affordable, so prices start coming down.

18:57You get better deal flow. But there was just It was like 18 months. It's like two years of time where it was like the pendulum was about to swing back. And you're like, has it swung back? Has it started? Has it started? And it hasn't come fully back. And it has started now. I feel pretty confident that we are moving in that direction. But it kind of hung out there for like a while. And I think deals were just really hard to come by. And that didn't mean you couldn't find them. But you have to be patient. And I think that's the other thing that has happened is like, you could just buy anything for so long.

19:30No one has patience and understands that like, you gotta like maybe 2 % of leads or deals, you know, maybe 1 % of leads or deals. And that's okay. Like if you were in any other kind of market, if you were a stock picker, you don't get half of your stocks that you look into, you buy, you know, if you're a private equity firm, you don't buy 10 % of deals. You look at, you look at like one or 2%, like this is normal. You have to be willing to look for the cream of the crop. The market that we're in, which I don't think is a terrible market, what it is forcing us to do is to operate like a normal real estate investor, to do the proper amount of due diligence, to actually evaluate a good number of deals before making a buying decision.

20:12And the market's allowing for you to do that. There's not 37 offers on every house. You can take your time. You can evaluate deals. You can make lower offers. You can ask for concessions. This is what you should want. You should be a fundamentally sound investor and then buy something confidently. And if you can buy deals that work in a market, that's a little tougher. I am telling you when things shift and you start to see better opportunities that are more profitable, you're going to be so much better positioned to jump on those and beat out the competition when there is more competition because the market's more favorable.

20:46A hundred percent. You're going to be in a better cash position to do it. You're going going to be in a better education position to do it. You're going to have more confidence because if you can get, if you can build confidence now, this is, I think a really good thing for a lot of investors. It's hard to buy at the top. We've been at the, that's the thing is we've just been at the top for a while. It's, you could still do it. You've done it very successfully, but like, it's just harder. Like it is harder. And I do think things are going to get easier. I'm not saying they're going to get more obvious though.

21:14I don't think we're going back to this age where it's like, oh my God, I'm going to do a perfect deal and be really bad at investing. And that's good. Honestly, that's really good because now we're not going to have as many people who are bad at investing who are competing with us. If you're willing to get good at this, this is an advantage for you over the long run. I think that's really good. So I want to talk to you a little bit about some of the upsides and ways that you're looking for deals in this. But before I need to ask you something, what do you make of all these people on social media, people who are or were real estate investors saying real estate is dead.

21:49How do you interpret that? I just don't understand how you can say real estate is dead. Unless laws change that stop normal people from buying real estate, I don't think it's ever going to be dead. And also, if they're making money and not making money doing the thing they're trying to teach you how to do, then that's probably a red flag for me. So the people that I see saying that they're usually the people that I just can't verify that they actually do any real deals themselves. Yeah. I think that's absolutely true. Or like they were making so much money selling courses or doing burrs or coaching or whatever.

22:27And now the market has shifted. There's lower interest in real estate. I think like, that's just true. Like this is what we're saying. There's going to be less competition and like, maybe it's not worth it to them because they have this very high expectation of what they're supposed to be able to earn, not just off real estate, but off of teaching other people real estate. I think that's like another part that's going on in our industry as well. And they're just negative about it because this is the same thing with expectations. They anchor their expectations to the best time they've ever had.

22:57And that's just not the case. I personally, maybe I'm really negative. People are going to disagree with me. I just think investing returns across every asset class for the next five to 10 years are going to be lower. I just don't think they're going to be as good. And if you look at history, this just happens. It just happens. We've had some of the best probably last 15 years. It was incredible to be an investor. That can't last forever. It just does not happen. I hate when people say about investment, what goes up must come down. That is not true. That is just historically completely just dumb.

23:31That is not right. But does that, can you have an ever accelerating rate of growth? No, like it's going to slow down. And so like, I think everyone needs to just understand that like returns are going to probably be lower across the board, but like, can you still make 15, 20 % return on real estate on a rental property? Yeah. Can you still make 50 % on a flip? Yeah, That is unbelievable. Sorry, I'm cursing because it's just so much better than everything else. The stock market averages 8 % to 9%. If you look at any projection of the stock market over the next few years by any professional person, they say we're going to have a bad decade.

24:10So why would you call real estate dead when almost everyone agrees it's going to outperform every other asset class? All right, we've got to take a quick break, but Henry and I will be back to answer the question, what happened to real estate investing right after this. Here's the truth about passive investing. If the strategy isn't right on day one, the returns won't save it. Multifamily real estate offers structural advantages. Many investors are overlooking, including depreciation that can help offset taxable income while cashflow continues. BAM Capital builds its investment with that reality in mind.

24:44They're focused on solid operators, tax efficiency, and long-term performance. For investors who want real estate exposure without being landlords and who care about consistency over hype, this is a smarter way to allocate capital. Learn more at biggerpockets.com slash BAM. For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy. All the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Fundrise flagship fund.