Real Estate Investing in Today’s Economy, with Anna Kelley

Today, we’re talking with Anna Kelley, impact real estate investor, multifamily operator, and real estate mentor and coach, about the state of real estate investing.

With today’s federal debt and high inflation environment, Anna cautions that it’s time to be in capital preservation mode, not focused on cash flow and appreciation.  

So if you want to see how to invest during times of uncertainty, and understand the signs of the times to determine when to use value add vs. buy and hold strategies in different economic cycles, tune in now!

With a wealth of experience spanning multiple economic downturns, Anna offers invaluable advice on understanding macroeconomic trends and adapting investment strategies. We also tackle the realities of working from home, the normalization of disruptions, and how the professional landscape has evolved post-COVID-19.

Join us as we dissect the intricate dynamics of today’s real estate market. Anna Kelly shares her journey from humble beginnings to becoming a prominent real estate expert. We delve into the risks and rewards of various investment strategies, from syndications and non-traded REITs to distressed commercial properties, emphasizing the importance of informed decision-making amidst rising interest rates and economic uncertainty. Through real-world examples, we explore the impact of social media on investment behaviors and the necessity of a cautious, well-researched approach.

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Understanding Real Estate Investment Cycles

[14:22] “It doesn’t matter how smart you are, it doesn’t matter how good your job is [or] how much you know about investing, and how much you know in real estate. If you’re not really paying attention to the macro signs that things are shifting, you can make some really bad decisions about debt and go into it at the wrong time. And you can make some really bad decisions about the stock market and anything you invest in.”

In 2009, Anna Kelley decided she would never be blindsided by the marketplace again. She took the initiative to learn about market cycles and how to pay attention to major shifts in the market. Now that she understands the market cycles, she finds that Warren Buffett’s advice is timeless and true: “Be greedy when everyone’s fearful, and be fearful when everyone’s greedy.”

At a very high level, investment cycles begin at a “trough,” or a recession—basically when things have not been going well economically. This is the point at which interest rates drop in an effort to get people spending again. This recession period can generally last anywhere from 10-18 months, and then the following 2-3 years are often when the economy wakes back up again and people start to feel comfortable. It’s not an overnight process, Kelly shares, but one that takes time. People have trouble trusting the economy at first, so it takes a while to build that trust back up.

Then, you get to the expansion period. This is the peak of the investment cycle, and while it can seem like a great thing, it also signals that the next recession is on the way. It might take a few years, but you’ve got to be aware of what is going on around you to take advantage of the cycles.

[21:11] “At the moment that there is absolute panic and everybody’s afraid, that is the maximum point of opportunity.” 

The reason this part of the cycle is rife with opportunity is that there’s less competition, and lots of people aren’t thinking about opportunity. If you can buy when things are at a low point and just hang on to them, you’ve got a leg up on the market. In Anna’s personal opinion, we haven’t seen the end of the recession yet, we’re still at the top of it, and it will likely take some years to recover from that. Despite that, she thinks inflation will rear its head again after the recovery. So the assets she is investing in now have got to be able to ride out that recession and also be strong during the recovery phase, regardless of inflation. 

Where Are We Now?

We’re in a recession, but it’s a lot different from recessions of the past because it was ushered in by unprecedented amounts of money being fed into the economy. People received stimulus checks during COVID-19, and money was just being printed like no tomorrow. And now there’s this bifurcated economy. In May, Anna Kelley says that 66% of Americans were living paycheck to paycheck, even households with $250k incomes. But that also means that 34% of people are doing just fine. 

At this point, people stop spending money, so employers feel like they have to tighten their belts and make layoffs. Ironically, this causes inflation to stop in its tracks. This doesn’t mean prices go down, but they do stop going up, generally speaking. 

Tips for Commercial and Residential Real Estate

[51:34] “The good thing about buying today is if you have the funds… you can buy properties for pennies of the dollars compared to where they were two years ago. The risk is that you think they’re going to go back to a really low cap rate and rates are going to go right back to zero, and if rates don’t go right back to zero and cap rates stay higher, and you have more inflation in the next couple of years, that cap rate will go right back up, and you could actually have the same problem that people are having today. So you’ve got to be really careful in commercial real estate. You can buy on pennies for the dollar today, but you’ve got to have the wherewithal that you have a low loan-to-value loan.”

On the flip side, if you’re interested in residential real estate, now is a good opportunity to see what’s available around you. For example, you might be able to strike a deal with an investor who owns a small duplex or fourplex and is feeling overwhelmed by their loan. Look to areas with high demand for housing and low supply, and also be sure to seek conservative states that are landlord-friendly and have low taxes. Homes are going to have less cash flow, but are usually longer-term situations. That’s where you’re going to make the most money if you go in and buy now. 

[57:18] “You want to make sure that your cash on cash return is better than what you could get on a five-year treasury rate.

About Anna Kelley

Anna Kelley is an impact investor, passionate about creating real estate wealth that lasts and serves a greater purpose, and helping others to do the same. She is dedicated to investing for meaningful impact in the lives of her students, investors, and residents. In addition to investing in real estate for over 20 years, Anna was a top ranked private banker for Bank of America, where she managed the financial relationships of high net worth individuals and businesses. Her 2 decades of working with high net worth individuals to build wealth through both traditional investments and real estate, gives her valuable insight to help you create, grow, and preserve your wealth.

Connect with Anna Kelley

• Consulting on investments
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