Timing is everything in commercial real estate—it can significantly impact your returns. This week, we’ll explore why understanding market cycles is essential and how navigating them effectively can optimize your results.

To date, we’ve gone “full cycle” on three deals, completed a cash-out refinance, and recently listed another property for sale. Every deal has been profitable, though some returns have certainly outshined others. What’s behind the difference in returns? Was it a matter of securing higher-quality properties or executing the business plan more effectively? That’s all up for debate, but as I look back on this, timing stands out as the biggest driver.

Market Cycles & Investment Returns

From 2016 to 2020, we benefited from favorable market conditions, with steady rent growth, declining interest rates, and increasing property values. However, properties acquired between 2020 and 2022 faced a tougher environment: rent growth stalled due to rising supply while operating costs like insurance and labor spiked unexpectedly. By 2023, market conditions became increasingly challenging, and we avoided any new acquisitions. This contrast highlights just how crucial timing is in driving strong returns.

So far in 2024, we’ve acquired two properties at 2018/2019 price levels. Supply is currently at an all-time high due to the wave of development projects financed at low interest rates that are now reaching completion. However, this supply surge is expected to drop sharply starting next year.

As new construction slows, the oversupply will likely ease, reducing competition among properties and creating a stronger demand for existing units. This shift could support higher rent growth and improved occupancy rates, ultimately enhancing the value of well-positioned properties like ours.

Staying Flexible for the Long Term

Timing the market is notoriously difficult. Anyone in our field who claims they know the perfect time to buy, or sell is simply guessing—no one can predict the future with certainty. As a passive investor, you ultimately must make your own judgment. Our goal with this newsletter is to provide clear, honest insights to help you make informed decisions.

There’s a proverb I believe holds true: “The best time to plant a tree was 20 years ago. The second-best time is today.” This philosophy translates to purchasing quality assets in high-demand areas with the mindset that we could hold them indefinitely. By investing in properties, we’d be happy to own long-term, we’re setting ourselves up to be glad we “planted the tree.”

We also know that adaptability is key. Each year, we reassess our portfolio to determine if it’s the right moment to take some chips off the table through a sale or to refinance and continue holding. This approach helps us remain flexible and ready to respond to shifting market conditions, allowing us to make decisions that align with long-term value creation.

Thank you for reading and your interest in BLVD Ventures. We look forward to having you follow along. Feel free to reach out anytime with questions and connect with us further using the button below.