Scott Trench’s $1,000,000 Bet on Real Estate (Update)

What It Covers

Scott Trench returns one year after selling $1,000,000 in stocks to buy Denver real estate. He reports earning 6.42% cap rates but missing 12% stock market gains, costing roughly $100,000 on paper. The discussion covers 2026 market predictions, portfolio allocation strategies, rental market absorption rates, and navigating negative leverage in current conditions.

Key Questions Answered

• •Million Dollar Reallocation Results: Trench sold $1,000,000 from S&P 500 in February 2025 to purchase Denver multifamily properties. His quadplex delivered the projected 6.42% cap rate with property management, generating $5,500-6,000 monthly cash flow that funds his lifestyle. However, he missed approximately $100,000 in stock market gains as S&P rose 12% plus dividends during the same period.
• •Rental Market Absorption Forecast: Multifamily deliveries dropped significantly in 2025-2026 after historic supply peaks in 2024. Trench predicts vacancy rates will decline 200-300 basis points, driving rent growth to 3-4% in 2026, accelerating in 2027-2028. Immigration policy changes reducing arrivals by several hundred thousand monthly will moderate demand and temper previously forecasted double-digit rent growth for 2027.
• •Portfolio Allocation Framework: Trench maintains 45% real estate equity in Denver multifamily and 55% in stocks across retirement accounts, HSAs, and taxable brokerage. He holds a 2.5-year cash reserve due to real estate concentration, lack of W-2 income, and reputational risk as author of Set for Life. New investments flow into low-fee actively managed value funds from Avantis across domestic, international, and emerging markets.
• •Negative Leverage Challenge: Buying properties with 6% cap rates using 6.5% fixed-rate debt creates negative leverage, requiring investors to bet entirely on appreciation and rent growth. Current conditions demand exceptional deals, creative financing like assumable mortgages, value-add strategies, or alternative cash flow methods including room rentals and short-term rentals to achieve positive returns without significant equity investment.
• •Stock Market Valuation Concerns: S&P 500 trades at 40x CAPE ratio, highest-ever price-to-sales, and elevated price-to-forward-earnings. AI capital expenditure reaching $400-430 billion in 2025 and $600 billion in 2026 gets capitalized rather than expensed, masking true costs in earnings reports. Models become obsolete every three months while services remain free or low-cost, raising questions about sustainable corporate profit translation.