In our current real estate market, many of the old playbooks no longer apply. Prices remain stubbornly high. Interest rates have surged and returns that once looked easy are now squeezed thin. For investors trying to break into the space, it’s easy to get caught chasing strategies that worked a few years ago but are now mismatched for current realities.
Let me give you the hard truth: many popular strategies simply aren’t working right now. Here’s what’s falling flat and what you should be thinking about instead.
Buy-and-Hold Single-Family Rentals at Retail Prices
What’s not working:
- Buying turnkey or near-turnkey single-family homes at today’s prices using conventional 6–8% mortgage debt and hoping rents will cover the mortgage, taxes, insurance, and expenses.
- Counting on appreciation alone to bail you out of thin cash flow or break-even returns.
Why:
- High borrowing costs have crushed cash-on-cash returns.
- In many markets, prices are still at or near peak levels.
- Expenses (taxes, insurance, maintenance) have climbed, and rent growth is slowing or flattening in many areas.
Better mindset:
- Hunt for underpriced or value-add properties where you can increase rents, cut costs, or reposition the asset.
- Focus on debt-free or low-leverage models if you can’t make the debt pencil.
- Skip retail-priced turnkey deals unless you have a truly long time horizon and deep pockets.
Flipping Without a Margin of Safety
What’s not working:
- Relying on aggressive after-repair value (ARV) estimates.
- Assuming buyers will pay top dollar in a cooling or uncertain market.
- Taking on flips without a 20–30% margin to absorb surprises.
Why:
- Holding costs are higher (especially if you’re using hard money or bridge loans).
- Buyers are pickier and more cautious.
- Construction costs haven’t softened as much as hoped; materials and labor are still expensive.
Better mindset:
- Stick to deals with deep discounts where you have real room for profit after all costs.
- Be conservative in your resale estimates.
- Plan for longer hold times and price drops, not faster flips and rising comps.
Multifamily Value-Add With Short-Term Debt
What’s not working:
- Buying older multifamily assets using short-term variable rate debt, assuming you’ll refinance or sell in 1–3 years after renovations.
- Paying cap rates that are too low relative to your cost of debt.
Why:
- Interest rate risk is real — refinancing might not improve your position.
- The capital markets have tightened; buyers and lenders are cautious.
- Exit pricing is no longer guaranteed at premium valuations.
Better mindset:
- Lock in longer-term fixed debt or plan for holding through rate cycles.
- Only pursue value-add projects with genuine upside avoid projects where the numbers only work if rates drop or cap rates compress.
- Build a stress-tested model assuming slower rent increases, higher vacancies, and more conservative exit multiples.
Blindly Chasing Short-Term Rentals (STRs)
What’s not working:
- Jumping into Airbnbs or VRBOs just because the gross nightly rate looks good on paper.
- Ignoring local regulatory risks, saturation, and seasonality.
Why:
- Many STR markets are oversupplied, and average daily rates (ADRs) are softening.
- Cities are tightening regulations, adding taxes, or capping permits.
- Operating costs (cleaning, management, furnishings, marketing) eat into returns.
Better mindset:
- Be highly selective about STR markets.
- Focus on unique properties or experiences that stand out and justify premium pricing.
- Run full operating models, including taxes, fees, cleaning, vacancies, and regulatory risks not just gross rents.
Buying Land or Development Sites Without Exit Certainty
What’s not working:
- Speculating on raw land or entitled lots without a clear timeline or committed capital for development.
- Assuming you can flip dirt to the next buyer for a profit.
Why:
- Carrying costs are painful when debt is expensive.
- Buyers have pulled back, and developers are cautious.
- Entitlement timelines and costs have ballooned in many jurisdictions.
Better mindset:
- Only pursue land deals if you control the entire development pipeline and have the resources to see it through.
- Partner with experienced developers or investors who can share risk.
- Focus on infill or shovel-ready sites with clear, near-term demand.
Final Advice: Know the Cycle You’re In
The market always evolves, and what worked five years ago (or even last year) may not work now. Smart investors adjust.
In a high-rate, high-price environment, the margin of safety is everything.
- You need: Better deals, not just more deals.
- Conservative assumptions, not aggressive bets.
- Patience to wait for opportunity, not the fear of missing out (FOMO).
The fundamentals haven’t changed: You make money when you buy, not when you sell. But what makes a smart buy today looks very different from 2021 or 2019.
Stay sharp, stay disciplined and always run the numbers twice.