Welcome to The Real Estate Venturist. Every other week, this newsletter will give you a behind-the-scenes look at what it’s like to be a real estate entrepreneur. As always, this is not investment advice and merely my opinion.

Installing a shadow Fed

Poor Jerome Powell. The Fed Chair is trying to steer the U.S. economy responsibly, yet he’s facing name-calling from President Trump and legal threats from FHFA director Bill Pulte. Both have intensified their calls for Powell to resign. When Powell’s term ends in May 2026, it’s likely he’ll be replaced by a Trump loyalist. The independence of the Federal Reserve is about to face a real test.

Presidents have the right to appoint a Fed Chair who they believe will best pursue the Fed’s dual mandate: price stability and full employment. That’s the job Powell is balancing today. So far, the signs are positive—pending the impact of tariffs. Inflation has cooled, and the labor market remains solid, with 144,000 jobs added in June (versus expectations of 110,000), pushing the unemployment rate down to 4.1%. It’s hard to argue for a rate cut in this environment.

I can’t control interest rates, but I can prepare my real estate portfolio for what may come. Rate cuts are meant to cushion a downturn—not to fuel markets when they’re already strong. Stimulus for the sake of stimulus only inflates another asset bubble.

Why the push for lower rates?

Trump wants rates lower to make American homeowners feel wealthier. With lower rates, home sales should pick up. Right now, if you’re sitting on a mortgage below 4%, you have little incentive to move—unless forced by life or have the finances to do so. With national home prices holding firm, higher interest rates mean you get less house for the same monthly payment. But if rates drop, buyers can stretch further—and sellers benefit from higher values. This fuels a sense of wealth. More transactions mean more satisfied homeowners. And happier homeowners are more likely to vote for you.

But it’s not just homes. Lower interest rates juice the stock market, too. Companies borrow more cheaply and reinvest. Mergers and acquisitions pick up, pushing valuations higher. Bitcoin believers argue that the inflation of everything else only strengthens the case for a scarce asset like BTC. The result: rising prices across all asset classes. Everyone feels richer—on paper, at least. 

What this means for real estate

Multifamily won’t be left out. Many owners who bought at 3% cap rates in 2021 or 2022 are now sitting on assets valued between cap rates of 5% to 6%—or worse. They’re either losing money or facing a total wipeout. They’re praying for a Fed-led rescue in the form of falling rates and lower cap rates. But let’s be honest: 5% cap rates and 5% multifamily debt are normal. These are not distressed numbers. They simply reflect a lower-risk, lower-return environment.

I expect Trump will get his way in 2026 and install a Fed Chair who’s willing to cut rates. But remember: lower short-term rates don’t guarantee lower long-term rates. Historically, the 10-year Treasury has ranged between 100 to 300 basis points above the cycle low Fed Funds Rate. So even if the Fed cuts, the bond market may hold firm—especially if inflation expectations remain anchored.

If floating-rate loans (tied to short-term rates) drop below current fixed rates, that could reignite momentum in multifamily. Cap rates would fall, values would rise, and capital would rush back into the space.

But I don’t believe valuations will be driven solely by financial engineering. Fundamentals still matter. Apartment demand remains strong while new supply is slowing. That should drive net operating income growth—and modest value increases at today’s cap rates. That’s the steady, boring version of real estate returns we’ve always counted on.

I worry about another artificial asset bubble, even if it helps my portfolio. And like all bubbles, it won’t last. That’s why we’re underwriting conservatively—at today’s cap rates and interest rates. If values rise because of falling rates, great. But we’re not banking on it.

Instead, we’re ensuring that we can exit quickly if opportunity knocks. That means flexible loan terms and minimal prepayment penalties. What we’re not doing is assuming cap rates will meaningfully compress during our investment period. Hope is not a strategy. Though making sure we buy right today with the flexibility to sell quickly is a strategy that we’re deploying today.