501: Real Estate Postmortem - Lessons from the Crash and the Opportunity Ahead

Charlie Munger, the late sage of value investing and Warren Buffett’s right-hand man, once said there are only three ways a smart man can go broke: “liquor, ladies, and leverage.”

Now, of the three, leverage is the sneakiest. It shows up dressed like opportunity, whispers promises of scale and speed, and before you know it—you’re in a capital call or margin call.

But let’s be clear: leverage isn’t the enemy. In fact, if your goal is to become truly wealthy—if you want to build lasting, generational wealth—you’re going to need it. Unless you’re one of the lucky few who can throw a football 70 yards or sell out Madison Square Garden, leverage is your ticket to the big leagues.

At its core, leverage is simply using other people’s money—or time—to amplify your results. It’s a mortgage on a cash-flowing property, a business line of credit, or a carefully constructed insurance strategy. When used properly, it’s the financial version of driving a car instead of walking. It gets you there faster.

Leverage magnifies everything—the gains, yes, but also the losses. It’s the volume knob on your financial life. And in the last few years, when interest rates skyrocketed at the fastest pace in modern history, that volume went from background music to full-blown chaos.

And here's the thing: it wasn’t just the rookies who got caught. This cycle humbled everyone—developers with decades of experience, funds with billions under management, and institutional players with Ivy League MBAs. When the tide went out, even the smart money found itself swimming without trunks.

Some were caught overleveraged. Others had short-term debt in long-term projects. And a whole lot of people made the fatal assumption that the low-rate environment would last forever.

It didn’t.

But…just like the last financial crisis, this kind of wreckage creates extraordinary opportunity—if you know how to navigate it.

Because as painful as the last couple years have been for real estate investors, they’ve also opened the door to a once-in-a-decade setup. Distressed assets. Motivated sellers. And amidst all the carnage, leverage—used carefully, conservatively, and respectfully—can once again become the powerful tool it was meant to be.

This is not a time for fear. It’s a time for strategy. For discipline. For underwriting with humility and deploying capital.

This week’s episode of Wealth Formula Podcast is a postmortem on what went wrong in real estate over the past few years as interest rates surged and markets shifted. We break down the hard lessons learned—even by seasoned pros—and explore why today’s environment is starting to resemble the rare window of opportunity we saw in 2010–2011, in the wake of the mortgage meltdown.