What if “Distress” Isn’t the Opportunity—But the Signal?

[Stasiu Geleszinski]

Everyone’s chasing distressed deals right now—loan maturities, capital calls, refi gaps. But here’s something I’ve been chewing on:

What if distress isn’t the opportunity itself—but simply the signal that outdated strategies are cracking?

I’ve been underwriting properties where the distress isn't due to bad operators—it’s due to capital stacks built for a 3% world. The opportunity isn’t the asset. It’s the misalignment—between institutional assumptions and current reality.

That gap is where creative buyers thrive:

• Flexible timelines

• Different capital expectations

• Local knowledge

• Renovation chops

• Lower cost basis or long-term hold horizons

What I’m wondering is: Are we looking hard enough at the why behind a distressed deal? Or are we just hoping for a bargain?

Sometimes, distress = mismanagement.

But often, it’s just a good asset priced with the wrong spreadsheet 3 years ago.

Curious how others here are navigating that line. What are you seeing in your markets? Are sellers coming around yet? Or are we still early?

[Henry Clark]

Quote from @Stasiu Geleszinski:

Quote from @Henry Clark:

OP.  Our model, we don't care.  Our financial modeling, we can back into the price of the land or property and know what works.  The onus is on us the Buyer, to cut the discussion short on that property, without even going to due diligence or financing discussions.  You're looking at Capital Stacks.  If the numbers don't work, then stop them early on their financial planning and due diligence.  Tell them to change their financial template.  They will be able to look through a lot more opportunities and faster then, on their part.

As far as the Seller not realizing the true value, again that is on us the Buyer.  We operate in a 40-mile radius.  Small town USA, plus 1mm metro area within 20 miles.  We identify the market strength in each area, decide on which market holds the best scenario.  Identify targets.  Make our offer at our number and then walk away.  Never get hung up on a property, then you lose negotiating power.  There are more fish to fry.  They will die, tire, or move at some point and then come back to that property later.  Just check in with them every year.

Is the Seller ready?  How long has the listing been out there?  If not longer than a year, then they don't know the market.  What are your value adds versus their operations.  Did they just inherit, thus a stepped-up basis, and no tax issues on sale?  Do they just want to get out of the property?  Can you assist with a 1031 on their part?  Are they downsizing?  Basically, bring solutions for them, versus just money.

We just, did 3 offer variations on a piece of land, all rejected.  Best market analysis and data I have ever seen for our business.  Could pay their figure, but don't want to at their price.  Walked away.  Moved on to a secondary deal which we are executing.

Just put on the market our 2nd Country Subdivision of 75 acres.  Just had our first sale.  This will be a slow sale of 5 to 7 years.  Can't wait till we are half sold and have our cash back out.  Already have another 80 acres identified to do another Country Subdivision in even a better market.

My brother is in Italy for the next 2 to 3 years.  Looked online with him at a property in the middle of Dallas.  Great location for what we do. Been on the market for over 3 years. Property is for sale and priced right for us.  There are several issues with the property.  Right of way for a gas pipeline on one corner.  High power electric lines cutting across the property, you can't build under.  Slight drainage through 1/5 of the property. On a major street and highway corner, perfect market traffic.  Works great for him.

He identified another piece of property near Houston.  Great situation, great price, great location, great financial potential; for him, but just too small.  Told him it doesn't matter if it is a home run, it will take his cash position down, to make a larger deal.  Plus managing it will take up time since he would live away from it, and not worth paying someone to manage.  Key point is for the Buyer to cut through the analysis as fast as possible, so they spend their time on better deals.

We also invest in Belize.  It's a buyers' market there, and a Cash market.  We make a list of 10 to 15 properties in descending interest.  List their price and then our price.  No negotiations.  Example:  They ask $500,000 we offer $300,000.  Our actual deal, they wanted $530,000 and we bought for $280,000.  Make 3 offers at once with a 3-day offer, subject to due diligence.  Then we move on to the next three.  Each Seller has their own personal issues and constraints, which you don't know.  One of them will bite.  The person we bought from had two issues, which we didn't know.

Another Belize deal which held more risk due to ownership process, we bought 89 acres for $1,000 per acre versus lowest price on the market is $3,000 to $5,000 per acre.  Took us 2 years to complete the process due to slow governmental process.  We could have lost $20,000 which we put up front with the owner with no process to recover.  This was not a Distress property, but it is a Distressed governmental process.

Basically, I think there are tons of deals out there.

Start small and Make Your Big Mistakes Early.

Thanks Henry—appreciate the depth. That “cut fast, move faster” discipline is something I’ve had to train myself into after years in brokerage where the instinct was to chase every whisper.

Totally agree the onus is on us as buyers to underwrite reality, not dreams—and not waste time when the numbers don’t land. What I’ve been noticing lately, though, is how much capital (especially newer or institutional) still fights that instinct. They’re optimizing for the wrong variables—pref equity thresholds, fund mandates, or models built for 2021—and they stay stuck in that misalignment longer than they should.

Also really like your point on bringing sellers more than just money. Especially on legacy deals, estate planning, or 1031 exits—that extra layer of empathy or creativity can unlock something price alone won’t.

Would love to hear more about your take on land deals in this environment. Any rules of thumb you’ve developed around when to hold vs. flip vs. entitle?

 Your tag line says developer in Cincinnati.  A couple of land approaches I have taken before are the following:

1. Self Storage- Wagon Wheel approach is what we use near larger cities. Majority of cities if you look at their road works are a wagon wheel. With a loop on the outside and road permeating like spokes in different directions. Cincinnati is overrun with large REIT locations. They naturally increase prices to maximize. What happens though as you get out of the city unit prices start to drop and the size of the locations start to drop. Most REITS prefer a location with at least 300 units and up. They also mainly do Climate control to maximize the land value. As you get away from the city less people want climate control due to the price and also how hard it is to load and unload, going through hallways and elevators. They prefer Drive up units at a lower cost. Trick- use the large REITs and their higher prices to push the rents higher going out on one of the spokes. Start buying or developing along that spoke. Rent examples: 10x20- $200 with REIT in the loop. Then $130 next exit, then $100 next exit, then $80 next exit. Start buying or building at these further exits and moving the rental rates up. You have the large REITS higher rates to your back and you have ease of loading due to drive up. The tenants are captured since they like to rent near them. They can't go towards the city. They can go to the next exit, but your already there. You might think they could rent to the left or right off of the road or spoke, but as the roads get further away from the city, the distance between Spokes or roads gets farther and farther. WHO CARES?  Let's use the first exit above.  Exit 1,  10x20 at $130.  Let's say you buy it at their price, and your cashflow breakeven is $90 of the $130; after costs and P/I.  So, you have cash flow of $40 per unit.  Now increase the cost by $10.  Not adding any cost or risks.  That $10/$40 is a 25% cash flow increase with no added costs or risks.  So, you say who cares I could do that at any storage location in the US.  But with this approach it is actually justified, and the risk is managed.  Plus, for you to control prices, you are using your competitors locations and investments to increase your value.  You keep pushing the price out down the road.  Guess what- Next you pick another road or spoke on the same large city and do it all over.  

2.  Railroads- Cincinnati has several railroads going thru it.  SO WHAT.  The US gave free land to the railroads, so the railroads could sale the land and townships along the rail to fund the railroad.  Even to this day there is unsold land by the railroads.  They don't advertise.  And yes, it can be in the middle of a city and people drive by it every day.  Couldn't get the GIS map showing ownership to pull up for Cincinnati, but I can tell there is Railroad land not being used.  Just call up their land department and make them an offer.  They will sale at market value. But location, location.  If you pick the right property, you have a deal.  Now they usually will not allow any type of Human habitation.  Don't want complaints next tot he tracks.  Thus, when you buy, subject to zoning, ask the PZ department to allow Commercial, or better Industrial special use or zoning.  

3.  They won't budge on their price.  Meet their price, but change the financing.  Some people are literally stuck on a number.  Had a storage location I really wanted to buy, but price was a little higher than I wanted.  Told them I will pay their number.  Paid 60% up front, then the remainder 5 years out with no interest.  This came back to my number I was willing to pay.

4.  GIS map.  Someone out there is doing AI on GIS maps.  Get a list of the following searches.  A.  Change in ownership in the last year up to 5 years ago.  Especially with same family name.  You're looking for stepped up basis due to death.; B.  List of consistent past due property taxes payment for several years.  Consistent late payers.; C.  Zoning Residential.  With multiple owner PIDs.  At the bottom of every property report there will be a listing of related PIDS.  Basically, other properties the same person owns.  Look for someone with 10 or more.  Then research them and see if they are 75 years old or more.  Put a package together to HELP them.  They are probably a Baby Boomer with a lot of rentals that needs to start downsizing.  Offer them- sale with no agent fees, installment payments to reduce sales tax, 1031 exchange support if you buy, take over property management with a phased sale agreement, betcha they want to go to a warm place far from Cincinnati during the winter- take care of managing their properties while they are gone, etc, etc.

Basically, come up with other angles versus everyone chasing the next great 3/2 deal.

Your question about Hold, Flip, entitle really depends on your personal REI stage. Early then flip to build cash snowball, later Hold the best situations, Entitle only do it for yourself. Other people won't pay you the Value you bring them.