How a Cash-Flow-First Strategy Stood up to a Tough Real Estate Market

Written by:

Chris Caggiano

Date:

14 May 2026

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When borrowing costs rise and deal math gets tighter, real estate investors tend to split into two camps. Some chase appreciation and trophy properties in major cities, betting that values will bail them out later. Others become almost obsessively focused on what a building actually produces in cash today. Over the past couple of years, that second instinct has proved more resilient.

Josh Will, President of Virtus Diversified REIT, has lived through that split in real time. Will’s experience during this stretch shows why a cash-flow-first mindset can be worth considering. While several funds were trimming payouts or scrambling for liquidity, this business stuck to simple rules: buy where yields are higher, negotiate hard on price, and insist on tenants that pay reliably through the cycle. The result wasn’t magic, just discipline – and it offers a useful lens for anyone thinking about how to position real estate holdings when the easy money disappears.

A Market Under Pressure

The past two years have been an uncomfortable stress test for commercial real estate. Borrowing costs jumped quickly after a long stretch of cheap money, and deals that once looked straightforward became much harder to refinance. At the same time, many funds faced growing demands from investors to take their money out just as cash was becoming harder to find. Together, those pressures forced portfolio managers to make choices they had been able to avoid when rates were low and capital was abundant.

Broadly speaking, two approaches emerged. Some investors continued to prioritize rising property values and high-profile buildings in major urban markets, betting that long-term valuations would make up for thinner cash flow. Others shifted their attention almost entirely to what buildings were producing in income today – favoring reliable tenants, conservative borrowing, and assets that could carry themselves even if prices softened.

That divide shaped outcomes. Managers who relied heavily on future price growth were more exposed when refinancing costs climbed or when investors asked for cash back. Those who had built portfolios around steady income were better positioned to meet distribution commitments and ride out volatility without major changes to their strategy. The gap wasn’t about luck; it reflected how different playbooks responded when conditions turned difficult.

For Josh Will, that backdrop clarifies why his company doubled down on cash flow rather than chasing big-city price gains. A cash-flow-first mindset became more than a preference – it became a practical way to manage risk in a market that no longer rewarded aggressive assumptions.

A Test Case

One of the clearest examples of how Josh Will’s approach played out came from a retirement home that Virtus owned in Caledonia, Ontario. The property wasn’t acquired with a quick sale in mind. The purchase fit the company’s broader criteria: steady operations, reliable cash flow, and pricing that worked without relying on aggressive assumptions about future value.

“We weren’t trying to flip it,” Will said. “We bought it at a price that made sense for cash flow, and that’s what gave us the option to sell when the market surprised us.”

About two years after Virtus bought the property for roughly $4.8 million, another portfolio manager approached Will with an unsolicited offer. Given the broader market conditions, Will initially assumed the bid would fall short. Instead, it came in at around $6 million – high enough to force a serious look at the numbers.

After reviewing the economics, Virtus agreed to sell, ultimately negotiating a slightly higher price. By that point, the property had already been generating returns for investors, and the sale produced more than $1 million in proceeds. The outcome reflected the optionality that comes with buying at the right price: the ability to hold for income, or to sell when the market offers an attractive exit.

After the sale, Will recycled the capital into two multi-residential properties in Sudbury, another secondary market where pricing and yields remained more favorable than in major urban centers. The move reinforced Virtus’s focus on assets that could support themselves through cash flow while still leaving room for value creation.

For Will, the Caledonia transaction was a demonstration of how disciplined pricing and income-first underwriting can create flexibility in uncertain markets – allowing a portfolio to adapt without abandoning its core strategy.

The Case for Secondary Markets

The Caledonia sale was not an isolated outcome; it reflected where Virtus had been looking for opportunities more broadly. While many managers were competing for large, high-profile buildings in major cities, Josh Will deliberately spent more time in secondary and tertiary markets – places like Sudbury, Timmins, and smaller Ontario communities.

“That’s where the math works for us right now,” says Will. “You get better pricing, less competition, and real cash flow.”

Those markets offered two practical advantages. First, yields were generally higher, which made it easier to buy properties that covered their costs through rent rather than relying on future price growth. Second, thinner competition meant less pressure to overpay. In bigger urban centers, multiple bidders often pushed prices up and squeezed margins; in smaller cities, Virtus could be more selective.

That dynamic explains why Virtus recycled the Caledonia proceeds into two multi-residential properties in Sudbury rather than pivoting back to a major urban market. The deals were close to assets the company already managed, which made them easier to operate, and the pricing still aligned with Virtus’s cash-flow discipline.

For Will, the lesson is not that smaller markets are always better, but that today’s conditions have made them more fertile ground for income-focused strategies. In a tougher financing environment, the geography of opportunity has shifted – and buyers willing to look beyond headline cities have had more room to maneuver.

The Results 

Virtus’s performance over the past year reflects how its cash-flow-first approach played out in real time. The company’s net asset value rose by about 5%, with per-unit value for investors moving from roughly $10.53 at the start of the year to $11 by year-end. Including distributions, total returns topped 12%. Those outcomes did not come from a single blockbuster deal or a bet on rising prices; they flowed from a series of quieter decisions about where to buy, how much to pay, and how much risk to take on.

The numbers also mirror the choices Josh Will describes earlier. By insisting on properties that could consistently cover their costs through rent, favoring reliable tenants, and staying disciplined on pricing, Virtus built in a margin of safety that helped protect income when borrowing costs jumped. 

Today, that same logic is shaping what the company is doing next. Virtus has roughly $50 million in potential acquisitions in its pipeline and has set a goal of raising $10 million in new capital by April 1 to close on selected assets. Rather than signaling a change in direction, those plans underscore how the company is reading the current market: as a moment when careful buyers with dry powder can be selective.

The broader takeaway is less about any single portfolio and more about the strategy. In a tougher financing environment, portfolios built around steady income, conservative leverage, and geographic flexibility might have more room to maneuver. Diversifying across different property types can further reduce reliance on any one sector. Taken together, those choices helped one company ride out volatility, and illustrate why cash flow can be a durable starting point when markets get choppy.

Looking Ahead

If financing costs ease later this year, the environment that rewarded cash-flow-first buyers could shift again. Lower rates would likely pull more capital back into big-city properties and compress yields in secondary markets, making it harder to find the kinds of deals Virtus has favored recently. In that scenario, an income-focused approach wouldn’t vanish – it would have to adapt, either by moving farther afield, leaning into different property types, or pursuing more value-add opportunities.

At the same time, a slowing economy would test the other pillar of this strategy: dependable tenants. Rising expenses or weaker demand could put pressure on rents and margins. Buyers who start with cash flow may be better positioned to absorb that strain than those who rely on appreciation, but they would still need to stay disciplined. The broader lesson is that a cash-flow-first mindset isn’t a shield from volatility – it’s a framework that offers more flexibility as conditions change, whether money gets cheaper or tighter.

About the Expert: Josh Will is the president of Virtus Diversified Real Estate Investment Trust, a Canadian real estate company that manages a diversified portfolio of income-producing properties across multiple sectors.

This article is for informational purposes only and does not constitute legal, financial, or investment advice. Readers should conduct their own research and consult qualified professionals before making any investment decisions.