Is right now one of the worst times to be a real estate investor?

[Mike H.]

I haven't been doing this as long as some of the big time investors here.  But I've had a pretty interesting run over the last 20 years.  And I'm just wondering if anybody else is seeing the same thing.  I started in sfh's in small towns near where I live and built a portfolio of 83 homes.  Started buying right after the crash when the numbers just seemed too silly not to buy and then stopped buying and started selling right when covid hit.

A few years before covid i was doing land flipping on a national basis and that was doing ok too. A little capital intensive but still did ok. 

And then as part of the land business, I saw an opportunity to go into new construction in eastern tennessee area with the vision of building some to sell and building some to hold - to where I could replace all the equity I gave up when I sold about half of my rentals here in Illinois.

So now I'm sitting on a hefty pile of cash. And it feels great to finally be cash rich and not just house rich and cash poor which is what I was for the longest time growing that portfolio.   The rental deals here in Illinois just haven't made sense in years.  I know some friends still doing it but they're few and far between. And I'm not that keen on the numbers.

The land flipping profits have pulled back too although I think there are ways to still make that work with just not as high of margins as there were previously.

And thankfully the cabin building in tennessee, while the market has pulled back some, is still going well and I'm very happy with my numbers.  But that was something that I kind of lucked into there.  Its more of a value added job than it is true investing.  

It just seems to me that there has always been a way to make money investing and now may be the one exception.  It looked for a minute like the model was going to be to go into STRs but that has gotten hit pretty hard to where its not a no brainer either.  Is it that interest rates have really just killed real estate investing? Is it more that the deals are still there but they're just few and far between to where you can't really scale anything you choose to do?  

Or is it that this is just the new normal in terms of what real estate investing deals are going to look like?
I remember when I was trying to get into the real estate investing game back in 04, 05, etc and seeing that the numbers just didn't make any sense.  There were very few discounted properties to be had and the returns were horrible.  You couldn't even cash flow after putting down your 20%.   They were all long plays.  And appreciation was modest - steady - but modest. 

Now I look at these STRs and I see the overall returns with property management built in and wonder why everyone is so down.  Historically speaking, STRs will at least allow you to cash flow right out of the gate and when you add in the appreciation and principal paydown and tax benefits, the returns are 40% a year or better on most of these deals.  I don't understand why younger people aren't interested in those deals.  That seems crazy to me to think thats a bad deal.

But what I don't see right now is the ability to get deals at any significant discounts and thats where I'm thinking I may be missing something here.  Again, I've had my head down from one niche to the next to where it seemed I could always find the "next" good thing. And then I'd ride the wave and grow my business with it and stop when the music stopped.  Right now the cabin building is really a hybrid thing. Its less a niche than it is a standard business.  I actually think the numbers are really solid right now and thats even better considered how much the market has slowed out there. 

My question though is does anybody see where investors should be investing right now in real estate because the numbers are just too obvious not to succeed? Or if there is nothing that fits that right now, where and when people see the next business model for investors - especially those with cash to lean into.