EP 385 Rating the Best Ways to Own Real Estate in 2026 (From a $500M Investor)

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Putting your money into real estate could be one of the best financial decisions you ever make.

It could also be one of the worst.

And strangely enough, the difference isn’t necessarily whether you bought real estate.

It’s what kind of real estate you bought—and what you expected it to do for you.

When my sister Nancy and I first started investing, we certainly didn’t have all of this figured out. Over the last seven-plus years, we’ve gone from complete beginners to building a real estate portfolio approaching $500 million.

Along the way, we’ve returned more than $45 million in capital to investors and helped create more than $110 million in tax savings.

And we’ve learned a lesson I wish someone had taught us much earlier:

Not everything called a real estate investment actually behaves like an investment.

Some assets create income.

Some create appreciation.

Some create both.

And some?

They dress themselves up like wealth and quietly hand you another job.

So if I had to rank seven of the most popular ways to invest in real estate today—from the ones I’d build around to the ones I’d personally avoid—here’s where they’d land.

F Tier: House Flipping

Let’s start with the one television made look irresistible.

You know the formula.

Buy the ugly house.

Cue the demolition montage.

Knock down a wall.

Install the beautiful kitchen.

Then comes the big reveal:

“$90,000 PROFIT!”

And listen, people absolutely make money flipping houses.

That’s not my issue with it.

My issue is what happens the morning after you sell.

You wake up owning…

Nothing.

No tenant is sending you rent.

No property is quietly appreciating in the background.

No debt is being paid down for you.

If you want another $90,000, you need another house.

Then another renovation.

Then another buyer.

Then you start the entire process over again.

That’s when I realized something:

House flipping isn’t necessarily an investment. It can be a very profitable job.

And there’s nothing wrong with having a profitable job.

It’s simply not the kind of ownership we’re trying to build.

You also carry renovation risk, timeline risk and market risk. Miss badly enough on any of the three and the beautiful spread you thought you were earning can disappear.

For the kind of wealth we’re trying to create?

House flipping: F tier.

It can absolutely pay you.

But so can a job.

That’s the problem.

D Tier: Short-Term Rentals

Oh, short-term rentals.

The gorgeous mountain cabin.

The beach house.

The perfectly staged living room with the giant windows and hot tub overlooking the trees.

I understand the appeal.

And yes, short-term rentals can work incredibly well.

But I think people sometimes buy the property before realizing what business they’ve actually entered.

Because you’re not simply running a rental.

You’re running a hospitality company.

Guests.

Cleaners.

Reviews.

Turnovers.

Pricing.

Seasonality.

Booking platforms.

Customer service.

And then there’s the risk you have almost no control over: regulation.

Imagine building your entire investment thesis around short-term rental income.

You calculate the nightly rate.

Estimate occupancy.

Model your returns.

Buy the property.

And then your city changes the rules.

You didn’t make a bad operational decision.

The property didn’t suddenly deteriorate.

The rules underneath your investment simply changed.

That’s more moving pieces than I personally want for the return.

Short-term rentals: D tier.

Potentially a fantastic business.

But I wouldn’t automatically confuse that business with passive real estate investing.

F Tier: Real Estate Syndications

Now we’re getting controversial.

Because Nancy and I operate real estate syndications.

So surely I’m putting them near the top, right?

Nope.

As a category, I’m putting them in F tier.

And there’s a very important reason why.

A syndication isn’t an investment strategy. It’s a structure.

That’s it.

It’s a way for multiple investors to pool capital to own an investment together.

The structure itself tells you almost nothing about whether the investment is good.

Yet I’ve watched investors spend enormous amounts of time studying the deal…

The projected return.

The market.

The property photos.

The business plan.

The waterfall.

…and surprisingly little time studying the human being who will actually control their money.

That is completely backwards.

A beautiful pitch deck can’t rescue a bad operator.

A fantastic market can’t fix poor execution.

And an attractive projected return means very little if the person responsible for delivering it doesn’t know what they’re doing.

So stop asking:

“Is this a good syndication?”

Start asking:

“Who am I handing my money to?”

Because in private real estate, the operator is part of the investment.

If you’re selecting syndications based primarily on projected returns and beautiful decks?

F tier.

Not because the structure is bad.

Because the way many people choose one is.

B Tier: Class B and C Multifamily

Now we’re entering territory I know very well.

Class B and Class C multifamily.

Workforce housing.

The apartment communities where millions of Americans live ordinary lives.

I’ve owned it.

I still believe in it.

And historically, I think it’s one of the great real estate wealth-building vehicles.

People need somewhere to live.

You have diversified rental income across many units.

And unlike a single-family rental, losing one resident doesn’t mean losing 100% of your property’s revenue.

But today I’m watching this segment more carefully.

Collections matter.

Delinquencies matter.

Insurance expenses matter.

And perhaps most importantly:

How much pricing power does this particular renter actually have?

When the economy gets tighter, households with less financial cushion tend to feel it first.

That doesn’t make workforce housing a bad investment.

It makes selection increasingly important.

Right property.

Right basis.

Right market.

Right renter demographic.

Right operator.

Long term, I still love the asset class.

Today?

I’m more selective than I’ve ever been.

Class B and C multifamily: B tier.

The model isn’t broken.

The moment simply requires more discipline.

A Tier: Self-Storage

Now let me introduce you to perhaps the least glamorous real estate on this entire list.

Metal boxes.

Roll-up doors.

A fence.

Maybe a little office.

That’s basically it.

Nobody is filming a glamorous Netflix series about transforming Storage Unit #347.

And that’s precisely why I like it.

In the right market, self-storage can produce remarkably durable cash flow without the operational complexity of many other property types.

People move.

People downsize.

People get married.

People get divorced.

Businesses need space.

Families inherit things they aren’t ready to throw away.

Life happens.

And somehow…

We keep accumulating stuff.

That creates demand in strong economies and weak ones.

The operating model can also be relatively lean compared with other real estate businesses.

It’s not sexy.

It’s not supposed to be.

Sometimes boring is the strategy.

Self-storage: A tier.

Quietly doing its job while everyone else chases whatever happens to be exciting this year.

A Tier: Retail and Industrial

For years, we’ve heard some version of:

“Retail is dead.”

Meanwhile, industrial real estate became so associated with giant distribution centers that many investors assumed the opportunity belonged only to enormous institutions.

Neither story tells the whole truth.

There can be phenomenal investments in both.

But this is where the details really matter.

Who’s your tenant?

How strong is their credit?

How long is the lease?

What happens when that lease expires?

If the tenant leaves tomorrow, what rent could you realistically charge the next tenant?

And here’s a question investors sometimes forget:

Could another tenant even use this building?

A highly specialized property might be perfect for its current occupant and nearly useless to everyone else.

That’s why one assumption can completely change the economics of a retail or industrial deal.

Get those assumptions right, though?

The leases, tenant quality and cash flow can be incredibly attractive.

Retail and industrial: A tier.

Fantastic for investors willing to do the homework.

Potential landmines for investors who don’t.

S Tier: Class A Multifamily

And finally…

Home turf.

Class A multifamily.

Let me tell you why.

At one of our communities recently, we had twelve tours in a single week.

Four applications came from those tours.

And soon our problem wasn’t finding people who wanted to live there.

It was running out of available homes.

We started putting people on a waitlist.

That’s the kind of problem I want.

Class A doesn’t mean every beautiful new apartment building is automatically a great investment.

Price still matters.

Market still matters.

Supply still matters.

Debt absolutely matters.

But in the right market, you’re serving a renter with greater financial cushion while owning the newest, best-located and often most desirable housing in the competitive set.

And underneath every sophisticated real estate model is one incredibly unsophisticated rule:

Supply and demand still win.

If people want what you own…

And there isn’t enough of it…

You have something powerful.

That’s why we intentionally build around this category.

Class A multifamily: S tier.

Not because it’s glamorous.

Because when the market, basis, supply and demand line up, I believe the fundamentals can be incredibly strong.

So, What Real Estate Should You Actually Buy?

Here’s my final ranking:

S Tier: Class A multifamily
A Tier: Self-storage; retail and industrial
B Tier: Class B and C multifamily
D Tier: Short-term rentals
F Tier: House flipping; real estate syndications when you’re choosing the structure instead of the operator

But please don’t walk away from this article thinking:

“Great. Palmy said Class A is S tier, so I’m buying Class A.”

That’s missing the entire point.

Because the asset class is only the beginning.

A fantastic asset purchased at the wrong price can still be a terrible investment.

An attractive syndication with the wrong operator can still lose money.

And an asset I rank lower might be perfect for someone whose skills, goals, capital and time horizon are completely different from mine.

The better question isn’t:

“What’s the best real estate investment?”

It’s:

“What’s the best real estate investment for what I’m trying to accomplish?”

Then study it.

Not another twenty TikToks.

Not another YouTube thumbnail promising you passive income by Tuesday.

Actually study it.

What are comparable properties charging?

What’s happening with supply?

Who is operating the deal?

How is the debt structured?

What assumptions have to come true for you to make money?

And what happens if they don’t?

Because after nearly $500 million of real estate, I’ve become convinced of something:

The asset you choose determines what’s possible.

But the way you buy it, operate it and govern it determines what you actually get.

Choose accordingly.

You’re not just buying real estate.

You’re deciding what kind of owner you’re going to become.