Passive investing offers a world of opportunities, but how exactly should you approach it in 2025? Host Chris Seveney dives into key real estate strategies, from multifamily housing to mortgage notes, breaking down the risks and rewards of each asset class. Whether you are eyeing long-term investments or considering short-term rentals with quick turnarounds, Chris offers practical insights to help you navigate today’s shifting market. Tune in to discover how interest rates, market trends, and smart decision-making can shape your financial future this new year.

—

Watch the episode here

 

Listen to the podcast here

 

5 Passive Investing Opportunities To Maximize Returns In 2025

Welcome back, everybody, to another episode of the show. I want to talk about five passive investing opportunities in 2025. I can’t believe it’s already 2025. I want to talk about real estate and the typical markets that people invest in real estate. These are my own personal opinions, so I’m sure there are going to be people who agree and people who disagree. I want to talk about my opinion on what I believe the investment opportunities are in 2025, real estate asset classes, and whether I would give it a thumbs up, thumbs down, or a neutral investment strategy.

Multifamily Real Estate Investing

With that being said, let’s first start with what has been extremely hot but has hit some bumps in the road and is an asset class that in 2025 a lot of people are scratching their heads on, “Do I invest or do I not invest?” That is the asset class of multifamily real estate. For those who are somewhat newer to real estate, multifamily is apartment buildings, typically more than four units.

There are different classes of multifamily. There’s Class A, which is the top tier, Class B, and then Class C real estate. Typically, the lower the class, the more volatility within that specific type of investment. For example, Class C multifamily typically has a lower price point and might have higher vacancies and higher loss rent ratios but also is bought at a lower price. Depending on how you manage it, it could go really well or it could go upside down.

What does multifamily have going for it in 2025? First, there is always a stable demand for people in a place to live. We’ll talk about commercial office space later. People need a place to live. There are reports out there about how many housing units we have that we’re short of. My personal opinion is I don’t believe that data. We have an inventory shortage but I question in regards to a housing shortage.

 

I also go back to 2006, 2007, and 2008 or even before then in the late ‘90s. People were like, “We need to build all this housing,” and we started building it. In ‘04, ‘05, and ‘06 and what happened in 2008 to 2013, you have your pick of the house you wanted. I don’t recall anybody ever saying there was a housing shortage. In 2010, 2011, and 2012, everybody had stopped building at that time and the number of people in this country continued to grow. You have that stable demand.

A benefit also to multifamily has that tax advantage to it with depreciation. What’s impacting multifamily in 2025? The top thing that typically impacts it is interest rates. Multifamily is typically an asset class that is bought with leverage. Meaning, you get a loan from a bank. What a lot of syndicators or funds do is they’ll raise 30% to 40% of the money from investors and they’ll borrow the remainder from the bank.

The value of the property is based on how much money it’s making. With money-making, there are two categories, the money coming in and the money going out. The money coming in sometimes can be a little bit easier to predict based on a stabilized building. Meaning, it stays 90% to 95% filled. Rents might increase slightly or decrease but there’s not a lot of change. What comes in typically can be determined. What goes out the door has a greater impact because there are a lot of unknowns, like miscellaneous repairs, additional repairs, capital expenses, and mortgage payments. They’re borrowing that money and the interest rate has that significant factor.

The other area that is really having an impact on multifamily is insurance. Taxes are always going to have an impact on a property as well as insurance. As I’m recording this, I feel sorry for what’s going on in California with the fires and the insurance claims and all that is going to do besides the exorbitant loss. I’m not downplaying. I can’t imagine losing my house to a fire and having to rebuild. Part of this that’s also going to be unfortunate is it’s going to raise rates for a lot of other people elsewhere as well. It’s going to be even more expensive.

In 2025, is multifamily going to be good or not so good? Here’s where I think it’s going to come into play.  For those people who are very good operators, they’re going to see ample opportunity in the multifamily space to be able to strategically acquire assets that might either be in distress or might be mismanaged. It’s like any real estate. We’ll talk about residential in another one.

There are not a lot of assets on the market. There’s not a lot of trading going on. The trading that does happen, there could be a significant opportunity. For me as an investor, I’m going to shy away from multifamily in 2025. I want to see how the dust settles. That’s not because I don’t think there’s an opportunity but the opportunity does pose some risk. I’m at a stage where I’d rather be at a waterpark on the lazy river, not on the top water slide and the excitement.

For people out there, if you’re looking at multifamily deals, take a look at the interest rate. How long is that locked up for? What are the financials? What type of property? How long has it been stabilized? If it’s a value add, meaning that the person’s going to go in and add value to it, what are they going to add to the value? Is the rent they’re going to try and get realistic? These are questions you can ask when they get the information. There are plenty of people out there that could help. That’s multifamily.

Commercial Office Space Investing

The next one, which a lot of people would consider the dumpster fire of real estate, is commercial office, which is investing in office buildings and shared workspaces. What’s going on with commercial office? Commercial office has the best long-term opportunity for large-scale investors because we’re seeing a lot of assets trade at historically low prices. When you see a $40 million asset that traded a few years ago and is trading for $5 million or $10 million, somebody holds that for a decade or 15 years, which is typically what you want. Commercial office space isn’t something that’s traded like a merchant multifamily where people might want to build it and flip it. Commercial office is a long-term hold. There are going to be plenty of opportunities.

Commercial office is the best long-term opportunity right now for large scale investors due to a lot of assets trade at historically low prices. Share on X

While people continue to look at the lack of demand for office, you are seeing more back-to-work versus remote. I come from a background where I worked for almost 25 years in an office and the last several years have been remote. There are pros and cons to both. I lean towards a mix with 3 to 4 days in the office. My company is completely remote. We’re not going into an office at this point in time or foreseeable future.

The reason I say this about office and why you’re going to start seeing some of this office space start to fill up again probably not in 2025 but in the future, but this is the year where you can get some prime buying, is the younger generation goes to get into the workforce. I can’t tell you how valuable it is to stand side by side with somebody working on an issue and asking questions to solve it.

Think about it this way for people who have kids. Have you ever helped your child build Legos? You’re sitting there and they’re watching you and showing you. Imagine trying to do that via Zoom. Think about that for a second. Could it be done? Yeah. For the younger generation out there who’s getting in the workforce, you want to be in an office and you want to be working next to somebody who is experienced because it’s going to lead to better job growth later on.

How does that impact commercial office? It goes back to if you’re an investor and you’re looking at a long-term play, not something that is 2 to 3 years but a 10 to 15-year investment strategy, commercial office is going to be a very good asset class down the road. It’s still going to have its bumps in 2025. It’s still going to be rocky because of the loans that are maturing, whether the banks are going to kick the can down the road or push the issue. Let’s go back to 2008 in residential real estate. That was a dumpster fire. People who end up buying good properties at that time and staying in the game are going to reap the benefits and rewards. That’s every asset class in real estate. You’re going to do well in the long run. That’s my thoughts on commercial.

Short-Term Rental Investing

Next, let’s talk about short-term rental. This is probably the one I am the most biased on. I am not a short-term rental fan. I was looking to own one and I’m glad I didn’t. Even having a management company, it’s still part of a business. Here’s why I am pessimistic about short-term rentals. One is, I believe exclusive of certain areas, they are going to be very challenging to continue to buy them.

 

Maybe you’ve owned 1 for 10 years or 15 years and continue doing it. I’m talking about if I wanted to invest in short-term rentals, would I? The answer is no because most of the best short-term rentals, where are they located? In the mountains. What happens in the mountains? There are fires. They could also be near the ocean. What happens near the oceans? Floods and hurricanes. The cost to manage those is a burden.

I’ll share a story. Right before COVID, in January and February 2020, we had a property under agreement in the outer banks. It was a 4,000 or 5,000-square-foot property. That was a duplex that you could use as 2 units or 1 unit. It was three rows back from the water. It was an awesome house owned by an LLC. We had it under agreement for $530,000.

We were going to go down and use it for a few weeks during the summer as well as rent both sides. Even renting it at that point in time would cover the cost. It wasn’t a great investment to make money but it was something long-term that I wanted to hold onto. It was owned by an LLC and the partners couldn’t agree to decide to sell it. COVID hit. We got cold feet and were like, “Let’s wait and see what happens.” It goes back to that uncertainty. I’m not the biggest risk-taker.

Fast forward, the house is worth over $1 million. In that area, rents have doubled for a week, but I can’t see that being sustainable. It’s in a great area. It used to be $3,000, $4,000, or $5,000 a week. $10,000 to $12,000 a week, I’m sorry but that’s not sustainable in whole regions and areas, especially an area there that could be hurt. I don’t see the sustainability. Even though we have inflation and everything else going on, I see people cutting back on things. I view short-term rentals as if you are buying them now, you missed the boat. Things are too expensive.

I’ll share another story about an asset in Gatlinburg. We’re looking at the note as a non-performing loan. It traded in 2021, I believe, for $900,000. A year later, it sold for $2.2 million. Neighboring homes are new construction on the market for $1.4 million to $1.6 million. They got foreclosed on and the lender still thinks it’s worth $2.2 million because they have an attachment to the property. Unfortunately, that property is not worth $2.2 million. It’s probably worth $1.3 million to $1.5 million. What goes up comes down. Part of it is that area, which is a beautiful area, has gotten overbuilt. There is high supply and the demand is going back to normal demand. We’re probably going to see prices start to go back to more historical levels. Short-term rentals are one I am the least positive on.

Single Family Rental Investing

Number four, let’s talk about single-family rentals. This is an interesting one because for the last couple of years, interest rates were low so all you kept hearing about was buy for cashflow. Single-family rentals, because interest rates were so low, you could leverage them and easily make money on them. You got that equity built up.

We’re talking about buying now. Would you go out in 2025 and buy a single-family rental property? The answer is it depends. Is it a focus that I’m looking at? Not yet. I’ve seen in certain markets, like the West Coast of Florida, some of the Rust Belt areas, and Texas, prices soften. I’m starting to see inventory pick up a little bit. Interest rates, which are at historic norms, are not high for people who’ve only been in real estate for 3, 4, or 5 years.

I was talking to my wife. In her 1st townhouse when she moved to the US, her rate was 8%. For my 1st house, I remember in 2001, when we got a rate at 6%, my parents were like, “Pay the rate lock. That is the best rate you’ll ever get in your life,” because rates were floating around between 6% and 7%. I could get a loan in my credit union for 6% or 6.25% but it had 3 points to it, which is ouch. Why do I say that? In single-family rentals, if you’re looking for cashflow, the interest rate is going to be a burden. The numbers are not going to work. Point blank, they’re not going to work.

I want to be clear on one thing. I’ll take us to a little side step here. We saw this from 2004 to 2007 when people kept jumping into real estate. Back then, they would buy and live in it for six months and move up to a bigger house because they’d make the money and keep jumping up. Typically, real estate is not a short-term play.

For my first house in 2001, I lived in it for 3 years. I paid $220,000 for it and I may have sold it for $250,000. It grew 2% to 3% per year. By the time you sold it and paid the fees, you broke even or made a little bit of money. What people have made over the last few years is not normal. If you’re thinking about buying real estate as an investment and only holding it for 2 to 3 years and thinking you’re going to get that appreciation, don’t. That’s my opinion. People can disagree.

For single-family, for a good portion in 2025, I don’t think you’re going to see increases. You’re going to see more stable leveling off. In some places, you’ll see some lessening because, to be frank, the salaries can’t keep up with the price point. Austin, Texas is a great and beautiful place but pricing has gone, to me, out of control there. There are not enough people making enough money to afford all these million-dollar homes. I know other companies are moving to Texas and stuff but that doesn’t happen overnight. Everything takes time.

For single-family, there’s an opportunity. Be strategic. I wouldn’t be banking on it for cashflow. I’d be looking at it for more of a long-term appreciation play. That’s what a lot of Class A, good real estate focuses on. I’m in the Washington DC area. We have a property that’s over ten years old. That has, since we bought it, tripled in value. When we bought it, it was pretty much break even on the rent. Now, it cashflows several hundred dollars a month. We have a 2.75% or 2.5% loan on it too, which is nice. The opportunity in single-family is there, but realize long-term play, not short-term. If someone asked if I would invest in single-family this 2025, I would.

 

Mortgage Notes Investing

Last but not least, let’s talk about what I do, which is mortgage notes. What’s the one thing mortgage notes have a benefit over all the others? They are not sensitive to interest rates. What do I mean by that? I mean you’re the lender. You’re not borrowing money. You are the lender. There’s a great opportunity in the market in 2025 as there has been in 2024 for things like seller financing.

If you have a property that you could sell and carry the note and you want to try and maybe avoid some taxes, get that person to put the 20% down. Sell it to them on seller financing. I’m not the biggest seller-finance person. To be clear, I’d rather sell it and get my money invested elsewhere. I’m an active investor. If people are more passive, that is an option because you could still get 6%, 7%, or 8% for that property. If you did some short-term lending and they bought a property and paid cash and they’re fixing it up and they need $100,000 to finish it, you could get 10% to 11% for 6 months interest-only on that, be in first position, and borrow with an 800 credit score. That is a good position.

For us, we invest in non-performing loans. I am very bullish on non-performing loans coming up this 2025. It’s been at historical lows. A lot of the data on traditional real estate, things are flatlining or things are softening. On distressed loans, it’s going vertical in a bad way. We went from all-time lows to back to where we were before COVID.

If you ask middle-class America if they’re better off post-COVID than they were pre-COVID, if they bought a home post-COVID, they’re going to say no. The reason is everything is expensive. We had to replace a hot water heater. It was three times what we paid several years ago. Go to the grocery store. Our insurance has skyrocketed. Things have gotten a lot more expensive. Have people seen that in their paychecks? I don’t think everyone has. That’s why on mortgage notes, you’re on the lending side. The interest rate environment is something that is not as much a variable. If you’re active and do non-performing, I see considerable opportunity.

Assessing Risk And Reward In 2025

Let’s talk passive. That’s where I really want to get to the audience. Over the next few years, are you looking for an income play or an equity play? That’s what it boils down to. How are your feelings about the economy? It’s going to be bullish or there is an equity play. Invest in a multifamily fund. Invest in an office fund. Invest in that type of opportunity. It’s going to be higher risk, higher reward. In 2021, you got awesome returns. In 2023, you may have lost everything that you have invested in an offering. On the mortgage note side, it’s an income play. Cashflow is what you’re looking for.

A lot of people, when things are a little more volatile, go to places that have less volatility. Personally, and this is my opinion, mortgage notes can be less volatile than other asset classes. It is a good opportunity because people are moving away from traditional banks to get lending because the banks are a lot more restrictive and there’s more opportunity in that space. If you talk to any multi-family developer, ask them how many deals are underwriting in closing. If you talk to a mortgage note guy or woman, we’re still seeing over $1 billion a month in loans. There’s plenty of inventory, but what we’re seeing is an opportunity out there as well. When you look at the availability and opportunity within each space, that’s something that allows us to come into play.

Banks are becoming more restrictive with lending. This creates opportunities for private lenders and investors in mortgage notes. Share on X

Investing Strategies For Different Risk Profiles

Let’s review and go back. If I put on my investor hat and I was a risk taker, I would go for investing in commercial office. If I was a non-risk taker, I would go with mortgage notes. If I was in between, I would go for single-family rental. That would be more long-term. I would then go for multifamily. Last, I would go for short-term rentals. I’m biased against short-term rentals. I love staying in them. They’re cool to have, but as an investment strategy, there are better options.

I was going to be biased on mortgage notes. That’s what we do. Back in 2022 when we launched our offering and we were competing against those multifamily guys, we were upfront and honest with people that that was a great asset class at that time. If you wanted to diversify mortgage notes, I would’ve told you back then, “That’s where I’d go first,” because rates were 3% and a cap rate at 5%. Meaning, you borrow money to make it. Now, if a cap rate is at 5% and an interest rate is at 6%, you’re in a negative place. It’s costing you more to borrow the money than the money coming in the door, so you’re already running a deficit. It doesn’t make sense.

I hope you enjoyed this episode of the show. As always, please leave us a review on your favorite station. I’m curious. What are your thoughts? Post it in the comments. What are you investing in in 2025? Where do you think I was right and where do you think I was wrong? I want to know your opinion. Take care and stay healthy. Have a happy new year.

 

Important Links

• Chris Seveney on X
• 7e Investments on LinkedIn
• 7e Investments on Facebook