A veteran real-estate investor who owns over 1,250 units across the country explains why 'more millionaires are made in downturns' like the upcoming housing correction — and shares 4 strategies investors can use to grow their wealth in 2023 (2024)

After reverse engineering the process, Allred determined that this would require the rental income from at least 40 units. So the next goal he set for himself was to own 40 doors by age 40 — a feat he managed to achieve four years ahead of time, at age 36. When he hit that milestone in 2017, Allred decided it was time to quit his full-time job in sales in order to focus entirely on real estate.

Today, the 42-year-old Allred has built a real estate empire that spans several states, including Utah, where he currently resides with his family. Allred has ownership in over 1,250 units across 30 different properties from 15 states, including the real estate syndications for which he is a general partner, according to documentation verified by Insider. He estimates his properties add up to over $30 million in total portfolio value.

It took a combination of hard work, perseverance, and sheer grit to get to where he is today, but Allred believes that there will be similar opportunities in 2023 for other real estate investors, despite heightened volatility in the sector.

There's power in proximity

With a likely recession on the horizon, constrained housing supply, and widespread uncertainty around interest rates in 2023, it's no surprise that Allred forecasts "choppy waters" ahead for the real estate sector, at least in the short term.

"There's a lot of distress in the market. I think it's going to get worse before it gets better," he told Insider in a recent interview.

As interest rates remain elevated in the first half of the year and buying dries up, Allred believes that many lenders will artificially lower mortgage rates by squeezing their spreads in an attempt to drive up the volume of deals closed. "They're going to really have to get aggressive to be able to hit their quotas," he remarked.

But ultimately, he believes that a recession this year will spur the Federal Reserve to lower interest rates meaningfully in the future.

Unfortunately, Allred also believes that the days of easy gains are long gone, especially given the deluge of investors that have flooded into the real estate market in just the last three years. Practically anyone who invested in real estate in the decade following the global financial crisis was able to make money, but going forward, Allred believes that investors will need to be much smarter in their approach in order to see big returns.

That means working with experienced advisors, agents, and other investors who are experts in their field and have a track record of success.

"Relationships are more important than ever now as we turn the corner in the real estate market cycles, because people want to do business with people they can trust," he said. "There's power in proximity."

Allred believes that beginning investors will find it especially useful to work with someone experienced in previous economic cycles and distressed markets so they can find better opportunities and receive help navigating any potential landmines in 2023.

"There's definitely a lot more risk for rookies coming into this space in 2023 that wasn't there in the past," he explained. "I think that a lot of people who don't know what they're doing are going to get hurt in the next year or two."

Top 11 hottest housing markets in 2023

Allred also emphasized the importance of investing in the right asset classes to mitigate the tough times ahead. He believes that these include apartment complexes, storage units, and industrial warehouses.

"Those three are very recession-resilient historically, and they all have a very strong outlook for performance going forward," he explained.

And with a larger divergence across regions in the future, Allred also places particular importance on investing in the right markets. For instance, he invests only in markets with positive net migration, which he finds by tracking U-Haul data.

"If you're investing in markets where there's a lot of people moving in now and projecting to continue to move into, there's going to be a lot of demand that drives prices and rents up," he explained.

Besides migratory patterns, Allred also believes that the political landscape of a state can particularly affect a real estate investor's success. For example, states that are traditionally red generally tend to be more landlord-friendly and have less government intervention around rent control or eviction moratoriums.

Currently, his top 11 states for investment opportunities include Florida, Texas, North Carolina, South Carolina, Georgia, Tennessee, Kansas, Utah, Idaho, Nevada, and Arizona.

Finally, Allred also recommended that investors take a value-add approach, which means finding investments that require sweat equity or strategic improvements. "That really just insulates us in the case of a strong downward turn in the markets because we've done so much to improve the asset and increase the net operating income," he explained.

Don't let trepidation get in the way of success

Despite foreseeing a more challenging environment for real estate overall, Allred still believes that it's the superior asset class for investors who want to increase their wealth.

"Even though we have tough times and high interest rates and volatility ahead, I 100% believe that real estate is still the best place to invest your money, to protect your money, and to find asymmetrical risk-returns," he explained.

He added that asymmetrical risk-returns — or comparing the downside risk of loss against the upside of potential gains — especially favor investors in real estate due to the inherent value of real assets, the tax benefits the sector offers, and because investment properties also create value for tenants.

According to Allred, investors also shouldn't let trepidation weigh them down this year. On the contrary, he believes that a housing correction like the one ahead can actually provide the best chance for investors to set themselves up for success.

"I fully agree with the statement that more millionaires are made in downturns than any other time, and most people don't see it that way — they think that real wealth and millionaires are made in good times. But statistics show that the majority of millionaires are created from the opportunities that develop in tough times and recessionary environments," he said.