When I reflect on the journey from that first Detroit duplex to managing $1.2 billion in assets today, I’m struck by how consistent our investment approach has remained. While markets have evolved, technology has transformed, and the competitive landscape has shifted dramatically, the investment philosophy that guided our first acquisition in 1994 continues to drive our decisions today.
As I’ve shared before, our core values of integrity, stewardship, growth, respect, and urgency define how we operate and treat people. But these values don’t exist in isolation—they directly inform how we evaluate opportunities, structure deals, and protect investor capital. Beyond these values lies something equally important: our investment philosophy. Over three decades and five distinct market cycles, we’ve refined our investment approach into six strategic pillars that determine how we evaluate, acquire, and manage assets. These aren’t theoretical frameworks developed in a boardroom. They’re battle-tested investment principles forged through real experience, real challenges, and real results.
Each pillar represents lessons learned not just from our successes, but from watching competitors struggle when they abandoned these investment fundamentals in pursuit of higher yields or faster growth. Today, I want to share how these investment philosophy pillars work in practice and why they’ve enabled PEM to deliver consistent results across changing market conditions.
Strategic Cycle Positioning: Active When Others Retreat
In 2003, I made one of the most important decisions in PEM’s history. After ten years of owning and operating projects in Michigan and Ohio, it became clear that the Midwest wasn’t progressing like the rest of the country with respect to jobs and growth. I began selling assets later that year and started looking for new markets—first Florida, then Texas, and finally Arizona. I moved the company from Michigan to Arizona in late 2004 and began acquiring assets in January 2005.
This wasn’t merely a geographic shift. It represented strategic cycle positioning in action—recognizing demographic and economic trends before they become obvious, then positioning for the next opportunity while others remain anchored to familiar territory.
Another example: In 2009, after watching the financial crisis unfold, it became clear there was material opportunity to buy discounted assets in the Southeast. We began acquiring assets in 2010, opened an office in Atlanta, and more than doubled our size in the Southeast over the next three years. While many competitors retreated during the uncertainty, we grew.
Most recently, in 2024, when most people were on the sidelines due to interest rate concerns, PEM started our first fund to acquire newly constructed Class A assets. When others see problems, we consistently identify positioning opportunities.
These experiences illustrate a fundamental truth about multifamily investment: market cycles create the most significant opportunities for disciplined investors. Our strategic cycle positioning centers on four critical capabilities:
- Continuous market intelligence and demographic trend analysis
- Proactive portfolio repositioning ahead of market inflection points
- Maintaining operational readiness during periods of uncertainty
- Converting market volatility into strategic competitive advantage
Multifamily investment volume declined 61% in 2023 to $119 billion, down from record-setting averages of $332 billion per year in 2021 and 2022, yet experienced operators who remained active found compelling opportunities at attractive valuations. When fear dominates, patience and preparation create competitive advantages that simply cannot be replicated in overheated markets.
Relationship-Driven Selection and Decisive Execution: The Power of Trust
Four of the six deals in our recent fund were brought to us off-market from long-term broker relationships. We’re currently working on a legacy project—an asset that couldn’t be reproduced today due to building restrictions and cost—that was brought to us off-market because of our relationships in the market.
Broker relationships in our business are critical. Most buyers look forward to the closing dinner with brokers hosting them post-closing. I’ve been to several closing dinners over the years, but I’ve never allowed one broker to pay for a meal. This isn’t about pride—it’s about respecting the integrity of these relationships that are essential to our success.
Over the years, the broker industry has consolidated significantly. With us operating in up to 14 states, these national broker relationships are critical. The ability for a broker to call several other brokers within their own firm to obtain an excellent reference for closing deals and not re-trading is priceless. Our reputation for closing deals and being both an excellent seller and buyer is one of our greatest assets.
This approach demonstrates the power of relationship-driven excellence in multifamily investment. Our systematic approach to selection and execution encompasses:
- Rigorous opportunity evaluation through established broker networks
- Decisive execution without re-trading to maintain competitive advantage
- Trust-based relationship cultivation that creates exclusive deal flow
- Reputation management that compounds competitive benefits over time
The relationship advantage proves itself repeatedly: in a relationship-driven business, trust and reliability often matter more than being the highest bidder.
Conservative Capital Structure: Planning for All Weather Scenarios
When the market heats up, prices go up and many buyers seek to increase debt to ensure higher returns for themselves and their investors. If they’re able to sell prior to the market softening, they win big. If the market softens during the hold period with higher debt, capital calls are required to save the asset.
I’ve found over the past 30+ years that real estate has great returns with conservative leverage. There’s no need to shoot for the moon and risk falling from the sky. I prefer to plan a successful flight in all possible weather scenarios.
When buying an asset in a competitive market, sellers are most concerned about the buyer’s ability to close. When someone notes they’re getting both a first and second mortgage (preferred equity or mezzanine financing), it creates another approval hurdle and higher risk. When someone states they’re bringing 40%+ equity to the table, that certainty of close question goes away.
Our conservative capital structure philosophy reflects a fundamental understanding of real estate investment dynamics. This approach encompasses four key strategic elements:
- Moderate leverage ratios (55-65% LTV) that preserve financial flexibility
- Fixed-rate debt and/or rate cap protection to mitigate interest rate volatility
- Extended interest-only periods to optimize cash flow during stabilization
- Competitive advantage through execution certainty in asset acquisition
This conservative philosophy has proven particularly valuable during the current interest rate environment. CRED iQ’s latest analysis shows multifamily distress has hit a 12-year high, with over $6.1 billion in delinquent community bank loans and CMBS distress rates jumping to 12.9% in January 2025. The Federal Reserve’s rate hikes are still creating refinancing pressures, with property owners who locked in 2-3% rates now facing 5-6% refinancing costs. Our rate caps and conservative debt structures have protected us from this payment shock that has affected many competitors.
Our approach to debt selection reflects this same philosophy. We prioritize 5-, 7-, or 10-year term debt with fixed rates, 3-5 years of interest-only periods, and work with lenders to ensure the lowest spreads available. This approach provides flexibility to sell as cap rates compress or refinance when interest rates fall, rather than being forced into decisions by debt maturity pressure.
Conservative capital structure isn’t about limiting returns—it’s about ensuring those returns don’t require perfect market conditions to be realized.
Integrated Asset Optimization: The Operational Advantage
When an asset is being acquired at a discount due to prior poor management or a very difficult tenant profile that needs to be changed, it’s often very difficult or impossible to make that change with a third-party manager without material cost and oversight by the buyer. The third-party manager isn’t incentivized to maximize returns. Rather, they’re paid to caretake the asset.
I often say that this is a unique industry where you turn over a $50 million business to a management company, and if they increase NOI by $100,000, the owner makes $2 million while the management company makes $6,000. Real estate is a passive investment for the investor, but it’s not a passive business. It’s a business that needs to be operated, and just like any other business, being a good operator matters.
During the Great Financial Crisis, most of the assets we purchased were capital-starved from the prior owner and underperforming. Having the long-term history and expertise to step in, understand how to renovate both exterior and common areas to make the project appealing again, and address deferred maintenance allowed us to act quickly. We could stop property deterioration and begin turning performance around to improve cash flow and value.
This operational philosophy demonstrates how vertical integration creates measurable investment advantages. Our integrated approach encompasses:
- Direct operational control that enables value-creation strategies others cannot pursue
- Unified ownership and management incentives that eliminate typical misalignment
- Rapid response capabilities for market opportunities and operational challenges
- Institutional knowledge accumulation that compounds competitive advantages over time
Academic research from an international study of 1,251 renters demonstrates a strong positive correlation (β = 0.278, p < 0.05) between vertical integration and property manager effectiveness. The study found that vertically integrated residential real estate companies achieved higher tenant loyalty, trust, pride, commitment to paying rent on time, and better tenant behavior—all direct drivers of NOI performance. The research concluded that “vertically integrated residential real estate companies have a distinct competitive advantage, better tenants.”
The integration advantage reveals itself consistently: when you control operations, you can pursue opportunities that others cannot.
Long-term Partnership Approach: Wealth Building Over Time
There’s a cost to sell a good asset. There are extra fees—broker fees, disposition fees, often financing payoff fees. Additionally, there are taxes to be paid on gains. Holding a well-located, well-operating asset longer allows cash flow to be distributed, taxes to be postponed, and fees minimized. Buying and flipping an asset often benefits the sponsor more than the investor.
PEM has always managed the sales process to maximize value and improve asset quality. We actively use 1031 exchanges to eliminate the requirement of paying income taxes on gains at time of sale. We rarely sell just to sell. We sell to move invested capital into a better market, a newer asset, or a superior opportunity.
Making a 25% IRR selling a good deal, only to return capital to investors who put it in the bank at 4%, then chase a different deal and pay associated acquisition fees to hopefully secure another good asset—that makes no sense. If the asset you’re selling was a great asset, then why sell it? If it was time to sell due to age or to transfer invested capital into a better asset, then that’s wise wealth management.
This patient wealth-building approach reflects our fundamental understanding of real estate as a long-term asset class. Our partnership philosophy centers on:
- Strategic hold period optimization based on market conditions rather than arbitrary timelines
- Tax-efficient wealth preservation through 1031 exchanges and strategic timing
- Fee minimization strategies that benefit investors rather than sponsors
- Value maximization through patient capital deployment and market cycle awareness
This approach contrasts sharply with typical sponsor models driven by fee generation. Industry research shows the average multifamily hold period is 5 years, with many sponsors holding as little as 3 years, driven largely by fee structures that reward transactions over long-term value creation. However, research from the NCREIF Property Index, which maintains data on over 7,100 properties with a market value of $539 billion, demonstrates that “the strongest results for apartments… came during the 7- and 10-year holding periods.”
Long-term thinking benefits every stakeholder: investors receive superior risk-adjusted returns, and we build lasting partnerships rather than transactional interactions.
Shared Stakes, Shared Success: Aligned Interests in Practice
When things are good, everyone wants to invest in real estate, and there’s no shortage of people who will take your money and make big promises. This has created a trend in our industry where investors often compare a well-underwritten, well-located deal with a high-risk deal, or they treat the sponsor as if they’re the ones in high demand.
PEM has found over the years that the best investor for us is someone who understands the risks that exist in real estate, isn’t fooled by the illusion of abnormal returns, and understands the value of relationships. We only manage funds from like-minded, aligned investors. With a three-decade-plus successful track record focused on operations and wealth growth, we are the unique part of the equation, and we actively seek relationships that align with our long-term, conservative, wealth management approach.
I always say, find a good deal, and you will never have a problem finding the money to acquire it.
Due to our structure and conservative nature, capital calls have been very limited over the past 10+ years. There have been a few instances where capital was needed to support an asset, and we invested that capital without seeking it from our investors. Investors don’t invest expecting to be asked for more money in the future. They’re counting on the sponsor to have conservative underwriting and operate based on sound business principles.
They wouldn’t be investors if they were told upfront they’d have to invest $100,000 today and maybe $25,000 more in two years. It creates uncertainty and confusion. By avoiding capital calls, our investors know their investment is protected and they won’t be surprised by unexpected demands to protect their initial investment or risk being diluted.
Our approach to investor alignment reflects a fundamental belief that sustainable success requires authentic partnership. This philosophy encompasses:
- Selective investor partnership based on aligned investment philosophy and risk tolerance
- Structural alignment through very limited capital calls and significant principal co-investment
- Transparent risk assessment that prioritizes long-term relationships over short-term capital
- Enhanced protection mechanisms when strategic circumstances warrant additional partnership safeguards
Our alignment extends far beyond avoiding capital calls. As a major investor in PEM investments, when strategic opportunities arise that benefit both partners and our business objectives, we may elect to provide additional protection mechanisms. While typical industry sponsors contribute 5-10% co-investment, our personal investment levels significantly exceed these benchmarks, ensuring our interests truly align with partner success rather than fee maximization.
Shared stakes create shared success: when sponsors have meaningful capital at risk, decisions naturally align with investor interests rather than fee generation.
Investment Philosophy as Competitive Infrastructure
These six investment philosophy pillars operate as an integrated system, each element reinforcing and amplifying the others. Strategic cycle positioning creates market opportunities that relationship-driven execution enables us to capture. Conservative capital structures provide the financial flexibility essential for long-term partnership approaches. Integrated asset optimization allows us to pursue value-creation opportunities that pure financial buyers cannot access, while shared stakes and shared success ensures every stakeholder benefits from superior execution.
This systematic approach has enabled consistent performance across varying market conditions:
- Over 20% average IRR maintained across 30+ years of operation
- Very limited capital calls in company history, protecting investor capital
- $300+ million in realized gains generated for investment partners
- Five market downturns successfully navigated with portfolio growth
When we completed our first fund in May 2025 with six institutional-quality properties totaling $347 million, this achievement represented the practical application of these time-tested principles rather than financial engineering or market timing.
After three decades of multifamily investment experience, I remain convinced that sustainable success stems from principled decision-making rather than market timing or financial engineering. Investment philosophy isn’t about predicting future market conditions—it’s about developing systematic approaches that create value across all market environments.
The six investment philosophy pillars that have guided PEM’s evolution from a single duplex to $1.2 billion in assets under management and growing represent more than operational guidelines. They constitute our commitment to every partner who entrusts us with their capital: strategic cycle positioning, relationship-driven execution, conservative capital structures, integrated asset optimization, long-term partnership approach, and shared stakes and shared success.
These principles transcend market cycles because they address fundamental investment dynamics rather than temporary market conditions. They’ve enabled consistent performance through five distinct economic downturns while building sustainable competitive advantages that compound over time.
Strategic Investment Partnership: Your Next Step
If you’re seeking an investment partner whose philosophy has been rigorously tested through multiple market cycles and proven across three decades of consistent performance, I invite you to explore how these time-tested principles might enhance your multifamily investment strategy.
Whether you’re interested in understanding our current investment opportunities, evaluating how systematic investment philosophy can strengthen your portfolio allocation, or exploring what authentic partnership looks like with a team that implements these principles in daily practice, we welcome that conversation.
At PEM, our investment philosophy represents more than theoretical framework—it’s the operational foundation that drives every decision, guides every acquisition, and protects every partnership.
Connect with our team today to discuss how our time-tested investment philosophy might align with your strategic objectives.
Paul Mashni is the Founder and CEO of Professional Equity Management (PEM), a vertically integrated real estate investment firm specializing in multifamily properties. With over 30 years of experience and more than 25,000 apartment units acquired, Paul has successfully navigated five downturns while maintaining an average IRR of 20%+ since inception. His background in accounting and finance, along with his law degree from Wayne State University, informs PEM’s disciplined approach to investments. Paul holds a Bachelor of Science in Accounting and an MBA in Finance from Michigan State University.