The Investor Perspective: Why Math Rules the Market
2 min read
What You Will Learn
- Why investors compare real estate returns to the stock market
- Why "just put more money down" is bad advice
- How the buyer pool shrinks when the math does not work
- Why creative finance exists to solve real financing gaps
The Competition: Beating the Stock Market
Real estate investors aren't just looking for a roof over their heads; they are looking for a return on their capital. For most, the benchmark is the stock market. If a property doesn't provide a higher return than a simple index fund, investors will move their money elsewhere.
This is why "just putting more money down" to get a loan approved is a fallacy. Increasing the down payment lowers the investor's Return on Investment (ROI) and locks up cash that could be used elsewhere. Smart investors look for leverage that works for them, not against them.
“An investor's goal is to maximize their return while minimizing their risk. If the math doesn't beat a passive index fund, the deal doesn't happen.”
The Shrinking Buyer Pool
After the housing crash, laws were passed to prevent the truly predatory lending that caused the crisis. Today, if a property's income can't support its debt, traditional financing becomes a wall. When a property—especially a 2-4 unit multifamily—is priced based on "comps" but its rents can't cover a mortgage, the buyer pool shrinks to almost zero.
Creative finance solves this by ignoring rigid bank structures and focusing on the actual math of the deal. By restructuring the payments or the interest, we can make a property attractive to the largest possible pool of buyers, ensuring it sells for its true value.