Deal First, Macro Permission, Dry Powder
I bought because it was a deal.
That sentence has to come first. Macro conditions did not make a bad property good. A narrative did not create the margin. The asset-specific economics did: purchase price, rehabilitation cost, operating potential and the gap between my all-in basis and what another buyer would have paid.
The macro picture mattered second. U.S. consumer inflation had reached 9.1% in June 2022, the highest 12-month reading in four decades.[1] By the time I acted, inflation had come down from that extreme. That did not guarantee lower rates, easy refinancing or a soft landing. It did tell me that the direction of the shock had changed. The fire was no longer accelerating at the same pace.
Then came the third condition: we had reserves ready.
That is the piece most cycle stories skip. Everyone likes to say they will buy the crash. Few maintain the balance sheet required to do it. Cash feels unproductive near the top. Paying down debt feels boring when asset prices are rising. Liquidity looks like a drag — until it becomes the only reason a good buyer can move while everyone else is protecting what they already own.
My framework is not “buy the dip.” It is a three-part gate:
The deal must stand alone. I need a basis that protects me from being exactly right about the future. The project should work with slower revenue, higher costs and a longer stabilization period than the optimistic case.
The macro must give permission. I do not need perfect conditions. I need evidence that the dominant shock is peaking, that financing stress is visible in price and that I am not paying yesterday’s multiple for tomorrow’s uncertainty.
The reserves must survive the project. Cash cannot merely close the deal. It must carry surprises after the closing: construction delays, weak months, insurance, taxes, repairs and a refinancing market that refuses to cooperate.
Remove any one leg and the decision changes.
A bargain without reserves can become a forced sale. Reserves without a bargain can become expensive patience wasted on an average asset. A favorable macro story without either one is just a television trade.
This is why deleveraging was not retreat. It was preparation. The return on unused borrowing capacity is invisible until the cycle turns. Then it appears all at once as speed, negotiating leverage and the ability to say yes without begging the market for permission.
The correct order is:
Deal first. Macro permission second. Dry powder third.
That order protects the downside while preserving the upside. It also explains why two investors can see the same economy and have completely different opportunities. One sees fear and freezes. Another sees the same fear, but already did the balance-sheet work.
Sources
- U.S. Bureau of Labor Statistics, “Consumer prices up 9.1 percent over the year ended June 2022, largest increase in 40 years.” https://www.bls.gov/opub/ted/2022/consumer-prices-up-9-1-percent-over-the-year-ended-june-2022-largest-increase-in-40-years.htm
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