US Existing-Home Sales Fell in January
The National Association of Realtors reported that existing-home sales decreased by 8.4% in January. Despite the drop in sales volume, the report noted that housing affordability improved for the seventh consecutive month.
- In the Midwest, multifamily apartment capitalization rates averaged between 5.05% and 5.6%, with markets like Cleveland (5.58%), Cincinnati (5.39%), and St. Louis (5.18%) offering some of the highest rates nationally. In Chicago, cap rates for suburban Class A multifamily properties shifted to a range of 5% to 5.5% in the latter half of 2025. - Key tax strategies for real estate investors include utilizing 1031 exchanges to defer capital gains taxes on property sales and employing cost segregation studies to accelerate depreciation on certain assets, which can increase near-term deductions. Depreciation is a significant non-cash deduction that reduces taxable income for landlords. - When analyzing Real Estate Investment Trusts (REITs), investors focus on metrics like Funds From Operations (FFO) rather than traditional earnings per share, as FFO adds back non-cash expenses like depreciation to better reflect a REIT's cash-generating ability. Other key valuation tools include the dividend discount model and assessing the Net Asset Value (NAV), which estimates the market value of the REIT's real estate assets. - For professionals transitioning into real estate investment firms, employers prioritize candidates with strong numerical and financial modeling skills, including advanced valuation and scenario analysis techniques. Networking ability is considered a critical soft skill for sourcing investment opportunities, and certifications like the Chartered Financial Analyst (CFA) or Certified Commercial Investment Member (CCIM) can enhance a candidate's resume. - Industrial and residential sectors, including apartments and single-family rentals, are projected to be among the highest-performing real estate sectors in the coming years. The growth in industrial properties is largely driven by e-commerce, while the residential sector benefits from a general housing shortage. - Aspiring investors often build capital through partnerships, private lenders, or creative financing like the BRRRR (Buy, Rehab, Rent, Refinance, Repeat) method, which uses equity from a refinanced property to fund the next deal. One successful investor, Sean Conlon, started his portfolio by saving money from his job as a janitor to purchase his first apartment. - Midwest markets like Cincinnati, Indianapolis, and Kansas City are attracting investors due to their stability and high rent-to-price ratios, offering better cash flow potential compared to more volatile coastal and Sun Belt markets. These cities often feature diverse economies anchored by government, education, and healthcare institutions ("feds, eds, and meds"), which provides a stable employment base. - To stay informed, Midwest real estate professionals frequently read market analysis and reports from firms like CBRE, RealPage, and Northmarq, as well as commercial real estate news outlets such as Bisnow.
