So what happens is you have sponsors who need a market that allows for liquidity to make any cash.
Rates go up, prices go down, debt gets tough and sponsors starve for years.
In this case sponsors are not real estate investors.
They are service providers buying and selling and paying all kinds of taxes, taking all kinds of risk and doing all kinds of work.
The people who build long term wealth are the ones who make money on tax-efficient cashflow and appreciation over the LONG TERM.
They make money even when the ReFis are hard to pull off.
And they don’t care what other folks are willing to pay.
Do the big flips early and build the bankroll.
But when you have a few million in the checking account you should never sell real estate again.
15% IRR over 10 years doing one deal (1x the work) is much more efficient than trying to stack 25% IRR deals back to back for years.
All the while taking more risk, doing 10x the work and paying massive chunks to Uncle Sam.
Rethink your structure!
You’d be surprised at how many LPs will be just fine with you getting a piece of cashflow from day one, keeping their cash in the deal forever, and holding for a long time!
Folks also drastically underestimate the cost of idle capital.
If you sell that deal you instantly have a problem. Your cash is no longer appreciating or generating more cash.
It’s becoming less valuable every day and earning nothing.
So you have folks chasing more aggressive, bigger, riskier deals (or on a time crunch with 1031s) over and over.
After taxes, risk and brain damage they would have been way better off holding on to that early real estate.
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