We’ve all heard it: “Real estate is cyclical.”
It’s a phrase that gets tossed around a lot on podcasts, in pitch decks, and even in investor meetings. And to be fair, there’s some historical merit to it. If you zoom out far enough, you can often find what looks like a pattern: prices rise, overbuilding kicks in, demand softens, values correct, the market resets, and the next cycle begins.
But lately, that framework feels…off.
Because the truth is, the real estate market hasn’t followed a clean cycle in quite some time. In fact, the past few years have been a masterclass in unpredictability: a pandemic that reshaped housing demand overnight, supply chain meltdowns that stalled construction, remote work that shifted renter priorities, aggressive Fed hikes, and policy swings that threw entire asset classes off balance.
And yet, even with all of this, many investors are still trying to play a game of timing in the form of waiting for “the bottom,” chasing “the next peak,” or assuming we’re in “Phase 3 of the cycle” because that’s what the textbooks say.
But what if the market isn’t playing by those rules anymore?
Rethinking Risk in a Non-Linear Market
At Blue Lake, we’ve stopped trying to predict the market with a ruler and a calendar. Instead, we focus on what we can control: building strategies that can absorb volatility, adapt to change, and protect investor capital even when things don’t go as planned.
That starts with shifting our mindset from timing to resilience. Here’s what that looks like to us:
1. Focus on Assets That Can Withstand the Unexpected
We don’t invest in deals that only work under perfect conditions. If a property requires high rent growth, flawless operations, and an ideal interest rate environment just to break even, that’s a risk we’re not willing to take on our investors’ behalf.
Instead, we look for assets in suburban, secondary markets with:
- In-place cash flow
- Durable renter demand
- Proven operational efficiency
- Conservative financing
That way, even if the market shifts, and it will, we have enough cushion to remain flexible.
2. Focus on Assets That Can Withstand the Unexpected
Too often, diversification is treated like a checklist item. “We’re in three markets - done.”
But meaningful diversification means investing across different geographies, economic profiles, and rent demographics. A Sunbelt lease-up in a high-growth suburb carries different risks than a stabilized asset in a Midwest city with limited supply. Both may make sense, but not for the same reasons.
Real estate isn’t a single market. It’s a network of micro-markets. And they don’t all move in unison.
3. Underwrite Like the Future Might Surprise You (Because It Will)
Our underwriting philosophy is simple: assume the future will be harder than the past.
That means building in buffers including more conservative rent growth, higher operating expenses, realistic lease-up timelines, and elevated exit cap rates. It’s not pessimism. It’s stewardship. We’d rather outperform expectations than scramble to explain why we didn’t meet them.
And while we don’t claim to have a crystal ball, we do run multiple scenarios so we know what levers we can pull if and when conditions change.
4. Keep Liquidity & Optionality
Cash reserves aren’t just a safety net. They’re an edge.
When you have liquidity, at the asset and sponsor level, you don’t have to make rushed decisions. You’re not forced to sell into a down market or raise emergency capital. You can hold steady, reinvest where it counts, or pivot strategically.
We structure deals with this in mind because adaptability is the real hedge against uncertainty.
5. Pay Attention to Data, Not Just Headlines
Market sentiment can shift overnight. But fundamentals take longer to change.
We track real-time data across all of our assets: leasing velocity, renewal rates, operating margins, marketing lead flow, expense creep, just to name a few. That gives us a clear view of what’s happening on the ground, even when the national media says otherwise.
It’s not about ignoring the headlines;it’s about not being led by them and instead relying on data backed strategies.
6. Partner With Operators Who Lead With Transparency
At the end of the day, risk isn’t just in the asset. It’s in the execution.
The best sponsors aren’t the ones promising the biggest returns. They’re the ones who are proactive, communicative, and are willing to make hard calls when things go sideways. We’ve been through tough markets before, and are still navigating some pressures within the industry. But what we have learned and do know is that what matters most to investors is not just the outcome, but how we show up along the way.
Rethinking Risk in a Non-Linear Market
We understand why the idea of a predictable real estate cycle is so appealing. It gives investors a sense of control in a very big, very dynamic system. But the more time we spend in this business, the more we realize that cycles aren’t rules. They’re patterns we most often only recognize in hindsight.
Real estate doesn’t move in clean loops. It moves in fits and starts. It reacts. It adjusts. And sometimes, it surprises everyone.
So rather than trying to predict the next turn, we focus on building investments that can withstand the unexpected, and teams that can navigate through it.
Because long-term success in this market won’t come from perfect timing. It will come from thoughtful structure, smart partnerships, and the discipline to make decisions based on reality, not theory.
