Join Bronson Hill and co-host Nate Hambrick on the Mailbox Money Show with multifamily veteran Gary Lipsky as they discuss whether multifamily is poised for a comeback. Gary shares insights from years of experience on navigating high interest rates, declining valuations, shifting rent growth, and the importance of strong market knowledge, disciplined underwriting, and long-term holds. The conversation covers current cap rate opportunities, surviving challenging cycles, the power of cash flow, and why patience and operator expertise matter more than ever.
Gary Lipsky is the President and CEO of Break of Day Capital, with over 1,400 multifamily units as GP. He is a two-time bestselling author and a seasoned operator focused on disciplined, long-term multifamily investing.
This episode offers practical wisdom for both passive investors and operators on positioning for the next phase of the multifamily cycle.
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Full Transcript:
Bronson Hill: All right, welcome, welcome, welcome to the Mailbox Money Show. I’m super excited to do this show. This is going to be amazing.
I’ve got a very special guest today, Gary Lipsky. He’s a two-time best-selling author and just an amazing guy, known him for quite a while. And he also lives in Los Angeles area, so we’ve been friends for a bit.
Now, I have my great co-host here, Nate Hambrick, who is the author of two books as well, The 18 Laws of Leverage being the most recent one. It’s a great book. Nate, talk to me about, are you still investing in multifamily now, or what’s been your experience the last couple of years in multifamily investing?
Nate Hambrick: I am. I’m actually looking at a couple of deals right now in the multifamily space. And it has been a dry season for a while, but I can also feel it.
You get these, as an investor, you get the Spidey senses where you were just at the cusp of something amazing. People are still really, really scared. The opportunities don’t look as good as they did five, ten years ago.
And that’s, I feel like it’s almost like we’re about to buy Bitcoin, right? Okay, maybe that’s a bad example. But it’s like, I feel like the floodgates are about to open and some things that look like okay deals today are going to be fantastic deals if you buy now and hold for the next few years.
So anyway, all that to say, I’m excited to chat with Gary since he has been in the multifamily space a lot longer than I have. And he also owns a lot more doors than I do. So this is going to be an awesome chat.
Bronson Hill: Well, Gary Lipsky is with us today, and welcome Gary. Good to have you, brother, and president, CEO of Break of Day Capital, over 1,400 multifamily units as a GP. Just really some impressive stuff.
You actually really wrote the book on asset management. I really enjoyed your book on that. You know, there was a saying, Gary, that was “survive till 25.” You remember that? “Survive till 25” because interest rates rose and people said, oh, it’s going to change, rates are going to come back down. Well, it’s kind of been extended now. It’s like, just keep surviving. Like the Journey song, don’t stop believing.
So people have to kind of make this change and adjust. But talk to us about kind of where we’re at right now in multifamily, and welcome to the show, by the way.
Gary Lipsky: Yeah, thanks. Thanks for having me. I really love your show.
And yeah, I believed in “survive till 25” as well. My crystal ball broke a long time ago because everything kept getting pushed back. And really, if you bought in ’21, 2022, you’re probably looking at holding to at least 2028 because everything bought then has lost about 35% of the value right now where we’re sitting, because cap rates are the highest in the markets that I am in — the highest point in the last 13 years. So you’re buying at six and a quarter where before you were buying maybe four, or a little bit above that, for the Arizona market.
Bronson Hill: Yeah, it has changed a bit. I know rates rose a few years ago and they rose pretty quickly. It was really a black swan event. They caught a lot of people on their back foot where we expected maybe rates to rise a little bit.
I think our thinking, just transparently, was we’re doing value-add multifamily a lot of the time and that rates are going to rise, but our margin of safety — as Warren Buffett talks about, where’s your margin of safety? — is that we’re doing value-add. So we’re coming in and we’re going to basically increase the value of these properties.
Well, what happened is it happened so quickly and the valuations dropped so fast that when it came time to extend or refinance those loans, you just couldn’t do it. Now, there are some people who had these super long-term fixed rates, and there’s a great lesson there as well. But are you guys doing value-add, or have you shifted your strategy at all in the last few years?
Gary Lipsky: Yeah. In the beginning we were doing big lifts, big value-add. Our first 12 deals, we averaged a 40% bump in NOI in the first 12 months. But you’re not getting that — the rent bumps now for renovations. And investors want more cash flow. So we’ve kind of moved to more like core-plus. We’ve been adding some value, but not relying on unit renovations because we’re not getting that. There might be a couple of income lines that we can add, maybe save some money on expenses, but that cash flow is so, so important for our investors and for our ability to raise capital.
Bronson Hill: Yeah, it’s changed a lot. What would you say — I don’t want to jump in just yet — but it’s gone a little slower than expected. There are situations where there’s been capital calls, there’s been losses. We’ve had some real challenges with partners where we got into deals that just haven’t gone well for some people. And I know institutions are still buying and there’s a lot of — it’s really like a great time right now if you can handle just cash flow being a little lower. But at some point this is going to shift and change. What do you tell retail investors right now about why it’s a great time?
Gary Lipsky: Well, one, I harp on where the cap rates are right now. And two, I talk about how for us, we go a mile deep versus a mile wide. So we know our markets really well. We’re under contract on our 12th deal in Tucson. We own eight properties right now in that market.
So really, invest with someone that really hones in on a market or a certain asset class, or just has really good years and years of data to present and to understand. Because things change, and you want to be investing with someone that has seen many years of whatever you’d invest with them. That experience is so critical.
Bronson Hill: Yeah, I agree. The experience definitely is helpful. Nate, I know you have some things you’re chomping at the bit to share here.
Nate Hambrick: Yeah. Well, you bring up a good point, Gary, because there are a lot of people that are in multifamily and they’ve been in it for a long time, but they’re in Tucson, Nebraska, Florida, Texas, and there’s nothing wrong with that. But I think there is value in saying, hey, we’ve been in this area for X, Y, and Z number of years. We know the area, we know exactly what’s going to happen.
I’ll give you an example. There was a group I was going to invest with here in Dallas. They’re not from Dallas and they kept calling their deal the Highland Park deal. Well, I’m from here and I know where they’re investing is not Highland Park. Now to them, it’s the same thing — it is not the same thing. I’ve been here for 20 years or whatever, and so there’s a lot of knowledge I had about the deal that they didn’t, and they were the ones sponsoring the deal. That’s obviously a hilarious example, but I think it’s really cool that you have been in those areas for a while.
So I guess the question I have for you, Gary, is: what are the micro opportunities you’re seeing for yourself? Like, take out the people who invest with you for a second — just for you. When you go to buy a property, what are some of the things you’re noticing, opportunities you’re noticing, because you know your area so well?
Gary Lipsky: Yeah. We’re getting off-market deals because we’ve operated in that market for so long. But obviously we’re seeing prices drop and we’re comfortable. Like, a broker might say, okay, the whisper is 36, and we underwrite it for, let’s say, 33, and just having the discipline to kind of wait and have that deal come back to me, because I know there’s not a ton of people underwriting deals at this point. So I’m comfortable where my price is. And if he finds a buyer that’s willing to pay more, great. If not, then it comes back to me and we fine-tune our underwriting and delve deep.
And knowing where new properties are getting built is really important — where you’re investing, what kind of absorption rate is happening, what other geopolitical things are happening as well. So we’re in Tucson and there are, I think, 12,000 fewer foreign students at the university this year. And it’s not just Tucson — it’s happening at a lot of universities. You have a lot less foreign students coming. And so how does that play in? We don’t cater to foreign students at our properties, but there’s still a little trickle-down effect that’s hurting occupancy a little bit. So really understanding your market and what the dynamics are plays a big role.
Nate Hambrick: Is that changing your exit strategy at all? Like, does that make you want to — based on where the cap rates are, based on what other people are willing to pay for the deals you’ve already owned for three, four, five, six years — is that changing your exit strategy at all?
Gary Lipsky: Well, it’s changing my exit strategy on my ’21 and ’22 deals because we’ve lost so much value, even though from an NOI standpoint, from an operations standpoint, we’re performing well. But you’ve had negative rent growth the last two years. And you just can’t force the sale at that point. You’ve got to buy yourself more time to gain back that value. And I think for those that can’t do that, they’re having to sell at a complete loss. But for those that can buy that extra time, it gets you to where you need to be.
And so yes, the whole strategy went from three to five years. And for a lot of our deals, we sold within three years. Now you’re looking at probably seven, maybe eight years to get to wherever we need to be, quite honestly.
Bronson Hill: Yeah, it’s interesting. I think back at the time — people don’t realize, a lot of people just think real estate’s all the same. They’ll say, oh, how’s the real estate? It’s like, well, what are we talking about? Multifamily, single family? In the commercial, especially the multifamily space, we were seeing properties that went down 40% in value over like a 24-month period. And it was shocking. I mean, again, you’re putting a 20% down payment on a property and it decreases by 40%. Doesn’t matter what you’ve done, you’re in negative equity. You’re in deep trouble, you’re negative.
Now, I will say this — some of those properties in ’21, ’22, the only way it really made sense was to use bridge debt. There really wasn’t any other way to finance it, and we were raising millions and millions of dollars for this stuff. So there’s some lessons for me. It’s that whole Warren Buffett quote, right? Be fearful when others are greedy, greedy when others are fearful. I think if you were to flip those times, right now is substantially lower risk and there’s substantially higher upside. But it is significantly — I would say like five to ten times — harder to raise capital now, in general, from retail investors. Not institutions, that’s a little different, but from retail investors or family offices.
What I want to talk about is the psychology of it. How do you — why is it that as investors, if I’m a passive investor, I’m just not leaning into this time? Like, oh my gosh, I can get it for 30%, 40% less now. That sounds like a bargain.
Gary Lipsky: Yeah. And I think a lot of investors can’t wrap their head around it because there was no recession that they could point to and say, oh, that’s affecting everything. And it wasn’t. It’s really multifamily — real estate in general — not even single family, because that’s held its own. Most people have mortgages under 4% and weren’t selling. It’s retail, mostly multifamily, to some extent industrial — not really like 2008.
Bronson Hill: It wasn’t like we look back and say, remember this event that happened, or COVID. It was like something totally unrelated.
Gary Lipsky: And so for the investors that were heavily in multifamily, you have a lack of liquidity because they’ve either lost money, their deal hasn’t sold, or they’ve had a capital call. And for some of their capital calls, they’ve still lost money, or they invested with people that — a lot of people jumped in during that time and they didn’t know how to run a business. And this is running a business. Their communication wasn’t as good, particularly when things got tough. There are some people that communicated great and navigated these troubled waters, and some people really struggled.
And so a lot of investors are very wary. And the stock market has been performing fairly well. Gold and silver have been performing fairly well. Bitcoin shot up quite a bit. So they have these other opportunities. And in multifamily, people invest with the herd. So they’re waiting for others to jump in, and that’s the time not to be investing.
Bronson Hill: Yeah. And then we talk about this a lot on the show — as a passive investor, you’re kind of a free agent. You can do whatever you want whenever. There are opportunities everywhere. We do all kinds of things: oil and gas, private equity, VC, development, different types of real estate assets. And I think there’s a good time to invest in certain assets, and there are times where it’s not a good time. Like when things are really hot, it’s actually not a good time to invest because you have more risk of some sort of downside. But when you’ve had some downside, some poor performance, or valuations have changed — particularly from a valuation perspective — it’s a great time for multifamily.
I guess, how do you know what inning of the game you’re in from the rebound? Like, how do we know — hey, it was mostly 2025, but now it’s longer. How do we know that’s going to change? Are we going to still be in the same spot five years from now with multifamily?
Gary Lipsky: Yeah, it’s a good question. I mean, obviously we study cycles, and there are a bunch of different cycles that we study. We’re obviously spending a lot of time on macroeconomics to protect our investors. The key thing is having not a short-term bridge debt — which I’ve certainly made those mistakes as well — but long-term debt to protect your investors, because you don’t know when a black swan event is going to happen that’s going to affect your investment thesis. And not being over-leveraged, because the smartest people out there still make mistakes on when the best time to buy and the best time to sell is. So you build in all of these mechanisms to protect your investors. You operate to the best of your ability and then navigate the waters that are ahead of you. Control the controllables.
Bronson Hill: Yeah, I love that. Nate, how do you do that as an investor? How do you evaluate one investment from another and what kind of asset you’re going to get into? You do a lot of different things in your investing.
Nate Hambrick: I think there’s power in just looking at a lot, a lot, a lot of deals, right? The more deals that you look at, the more trends you start to see, and the more operators you speak to — or the more operators you watch their presentations — you can get a better feel for what’s real and what’s not. Three years ago, every single deal I looked at had the exact same IRR. And you know, that’s not real. They’re not going to perform exactly the same. But it was like they were all at the Disney factory of investing and they all — my deal, let me guess, 18 to 20% IRR — and you already know what they’re going to say because everybody has the exact same IRRs. And that’s not real.
So I think there’s a lot of power in just looking at a lot more deals. If you look at a hundred deals and invest in one, I think that’s great. I also think — and this is one of the things that I love about partnering with you, Bronson — you’ve known a lot of these people for a lot of years. And so it’s helpful to know somebody that has already been in the deal, that has already seen a return. And that’s not a surefire golden ticket every single time, but the more that you meet people, the longer you’ve been in the business, you can be a little bit more selective on who you partner with, which I think is a lot of power.
So I’ll flip it back on you, Bronson, since you’ve invested in a lot of deals, you’ve had a lot of victories, a lot of in-betweens, a lot of downside — how do you think about investing now?
Bronson Hill: Well, essentially, I’ve had — this question comes up a lot. I’ve had over 2,500 individual Zoom calls with people that join our investor club. Gary, you’ve probably had a lot as well. And I’ll ask people, do you want cash flow? Do you want appreciation? What are your goals? A lot of people are like, yeah, I want a little bit of everything. I want tax benefits. I want that. And they don’t really know, and they haven’t really thought about it.
And I just realized, for me and for most people, I think cash flow is an important question. Does it cash flow? When does it cash flow? I think when something cash flows quickly, it’s less likely to not cash flow in the future. And if I make a lot of money in five years or ten years, well, that’s great, but that’s really hard to plan for and it may or may not be there. So things that cash flow I think are important. But I think it depends on what someone’s goals are.
If somebody’s paying — I mean, there are people now that are paying a 67% effective tax rate in the state of California. If you make over $1 million, you’re at a 39% federal tax rate plus the state is 13.3, so you’re over 50% there. Then you have a 15.3% Social Security tax — 67%, two-thirds of the money. So if you don’t have some sort of tax strategy and you’re finding investments like real estate, especially like oil and gas — things that you can reduce tax with — having some strategy is really important. This is where tax strategists help.
I wish there was some sort of — and there are, they’re just very difficult to find — some sort of financial planner. It’s typically tax strategists. You pay a fee and they’ll kind of make a plan for you, looking for these kinds of deals, invest this way, whatever. Because it comes down to — I had a call with a guy recently worth $26 million in a business. He’s invested, a lot of it is assets, he has a business, he’s kind of cash poor. But it’s like, well, what actually are your goals? And it’s just those conversations. We don’t spend a lot of time thinking about that.
Gary, I want to ask you a personal question related to this too. I know you have your business here, but let’s just take a step back for Gary Lipsky personal. How do you evaluate — are you fully in multifamily, or do you have some diversity of assets as well? I know guys that are worth $45 million and they’re all in multifamily, almost 95% or higher. I have a bunch of things — precious metals, different assets, different types of non-correlated assets. But how do you look at that for you personally?
Gary Lipsky: Yeah, I mean, I am way too heavy in multifamily. I’m over 90%, and having a significant amount of liquidity because I’m signing off on these loans. Now, that’s something I want to get away from as time goes on, because when the cash flow dries up, it really dries up. And so I need to be a little bit more diversified. I’m certainly not going to take the shotgun approach, but relying on more cash-flowing assets, I think, is going to be something that is very important to me going forward.
Bronson Hill: Yeah. I think cash flow — I mean, Robert Kiyosaki is always saying, if it doesn’t cash flow from day one, I’m out. And it’s challenging for a lot of multifamily deals because there are deals that don’t cash flow immediately, or maybe they do a little bit. I’ve had some that just kind of trickle out. Even the last couple of years that we’ve done, it is a little tricky.
But I think it’s just so interesting to me that I’ve talked to guys that are doing this. We had a call earlier where guys are doing multifamily and now they’re doing private equity. I know a guy who was a huge multifamily guy and he’s only doing private equity now — buying businesses and things like that that are higher cash flow. And so there is kind of a tension there as well.
I know we have some other benefits too. We’ve got depreciation back. Trump tax benefits have been extended. Is there anything else that you’re seeing or expecting? What do you expect over the next year or two? Obviously, this war in Iran — if it continues, or the Strait of Hormuz — as we’re recording this, maybe it’ll be resolved, but if it’s not resolved and oil is at $110 a barrel, there’s a lot happening right now. What do you see in the next 12, 24 months of multifamily? Do you think things are going to continue as they are? Do you think they’re going to get better or worse?
Gary Lipsky: Well, I do expect them to get better because supply is falling off the cliff. We had a ton of absorption we’re working through, particularly in some of the bigger cities — Phoenix, Austin, DFW — really pushing negative rents. The forecast that I see is some positive rent growth, potentially in the second half of this year, 2027, 2028. So that would be a big relief.
You’re still not going to have — you’re going to have more deal flow, which will help, because deal flow has certainly been really slow the last couple of years. But you’re not going to see a surge in pricing because there are still those ’21, ’22 deals that have to be worked through, and more are coming on the market — people having to sell. So we’ve got to work through this resetting of pricing.
So it would be a great time to buy, with NOI kind of slowly increasing moving forward over the next 12 to 24 months. But we’ll see how unemployment, AI, and all of the geopolitical things play out. They’re creating just a lot of noise out there, causing concerns for investors.
Bronson Hill: Yeah, that’s good. Well, man, I so appreciate you. You’ve been a leader in the space for a long time. And I was talking with a guy — you may know who he is — but he was raising $150 million a year, mostly for multifamily. And it’s gotten a little more challenging. He’s raising, I think, $20 million a year now. And sometimes it’s just the state that we’re in, which really, those numbers should be reversed. I mean, this is a way better time to raise. But he had a thought — it was like, hey, we’re just going to keep doing what we’re doing, we’ll get through it and just be on the other side. A lot of people have not continued. They say, I’m going to shift to something else, and they’ve done that.
So I really love what you’re doing. I love what you’re creating for yourself and your family and all that. So how can people reach out and connect? I know you have an event coming up as well, later this month. I hope we’ll get this episode out soon so people can hear about that. How can people learn about that event as well as any other way to connect with you?
Gary Lipsky: Yeah, for the event, it’s InvestSmartSummit.com. And it’s not just real estate — it’s all different asset classes, creating an investing thesis. So definitely sign up for that. If you go to our website, BreakOfDayCapital.com is the best way to reach us to find out about any opportunities. Sign up for our newsletter, book a call with me. And for the first five people that go there and sign up and mention Bronson or Nate, you’ll get a free copy of our Invest Smart book. So that goes to the first five people that do that.
Bronson Hill: I love it. Awesome. Well, thanks for being here, brother. I appreciate it. I’m going to just wrap up with Nate here, so just sit tight for a minute and we’ll get the episode loaded.
Nate, awesome interview, man. Love talking about multifamily. I know you’re a big multifamily investor. What were some of your takeaways from the interview?
Nate Hambrick: Know your niche, right? Because a lot of times we focus on a category. But focusing on a category is not the same as focusing on a category in a specific location, in a specific asset class and type. And so I think the deeper you can dive within a specific niche, the more you’re going to know, and the more leverage you’re going to have whenever there are those hidden deals that other people do not recognize. So that was a good reminder for me because I do have my fingers in a lot of pies, which can be a huge benefit and has been. But really going deep in a few, I think, is a superpower. How about you, Bronson?
Bronson Hill: That’s great. Yeah, I think, again, just a reminder that people who manage multifamily — it’s a great time. And if you’re in, maybe someone’s an operator or an owner and you’re listening, or you’re a passive investor, it’s just like — you know what, some things just take time. There’s value there, there’s value being created, there’s value being given.
And we had a deal in Jacksonville once that went from $27 million to $37 million in value in ten months and we sold it and we’re like, oh, we’re geniuses. But things don’t always move like that, and they move both ways. And so sometimes in times like this, the risk factor is actually lower. And it is an unpopular — a lot of people have gone through a big shift in multifamily, where it was the most popular thing ever, and then it got to be like, oh, it kind of became unloved.
So I actually look for those unloved things, because we know there will be a day in the near future where those things come back into favor. And multifamily is the number one institutionally owned asset class. Everybody needs it. There’s no technology out there now — no AI — that’s going to do away with people needing a bed to sleep in and a roof over their head. So it’s a really great opportunity.
I thought it was a great conversation today. So thank you so much to our listeners. Thanks for being here. Thanks for supporting the show. We’d love it if you share this show, or if you reach out to us, we’d love to let you know about our upcoming projects we’re working on. If you’re not on our investor list, you can click the link below or go to BronsonEquity.com.
We’d love to connect with you personally. And again, it really means a lot that you’re taking the time to educate yourself on all this stuff. Because there’s so much to learn. We learn in good times, we also learn in challenging times, and challenging times bring great opportunities. And so I hope you’re making the most of those opportunities and really taking advantage of them. So we’ll look forward to seeing you on the next episode of the Mailbox Money Show. Thanks everyone.
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