I’ve Been Investing for 30 Years. This Has Only Happened Twice

Thirty-year cycles contain brief deployment periods

McElroy explains that real estate operates in 10-year cycles with only 2-3 year windows for aggressive capital deployment, a pattern he has witnessed only twice in his career including today.

2021 cheap money created the current bubble

When inflation hit 9.1% in June 2022, the Fed's aggressive rate hikes popped the bubble created by 3% mortgage rates, repricing commercial assets down 30-50%.

Floating rate debt wiped out equity

Properties purchased in 2021 with floating-rate debt saw debt service costs explode, turning a typical $10 million building generating $160,000 annual cash flow into a money-losing asset with wiped-out equity.

Lenders facing $80 billion in troubled loans

With values below loan balances, lenders are taking back assets; Dallas alone has 1,000 multifamily buildings with debt service coverage ratios of 1.0 or less.

Loan maturities force distressed sales

Owners cannot refinance underwater properties without bringing millions in new equity, forcing distressed sales as loans mature and triggering lender takeovers.

Buying at 25 cents on the dollar

McElroy is acquiring a 278-unit San Antonio property for $8 million ($28,000 per unit) that appraised at $45 million in 2021, representing less than 25% of replacement cost.

Side-by-side market dysfunction

Adjacent properties show extreme disparity—one thriving with 2.8% fixed debt while its neighbor struggles with 7-12% floating rates and millions in deferred maintenance.

Fifteen-year construction deficit persists

Since the GFC, annual new construction has failed to meet the 430,000 units required for household formation, creating a supply shortage that supports long-term rent growth.

Permanent shift to rental housing

The 2008 crisis triggered a massive permanent shift from homeownership to renting, further tightening demand against the constrained supply of new multifamily units.