Scott Trench

AI Summary

→ 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 INSIGHTS - **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. → NOTABLE MOMENT Trench reveals he expected to find better deals in Denver's small multifamily market by early 2026 but instead finds fewer opportunities than a year ago. Properties neither sell nor decline in price; sellers list then withdraw. Despite predicting either rent growth driving values up or continued price declines creating opportunities, the market remains frozen with minimal transaction activity. 💼 SPONSORS [{"name": "ReSimply", "url": "resimply.com/biggerpockets"}, {"name": "NREG", "url": "nreig.com/bppod"}, {"name": "Steadily", "url": "biggerpockets.com/landlordinsurance"}, {"name": "Rent to Retirement", "url": "biggerpockets.com/retirement"}, {"name": "PBR Capital Management", "url": "biggerpockets.com/pprcar"}] 🏷️ Portfolio Allocation, Multifamily Investing, Cap Rates, Stock Market Valuation, Rental Market Forecast