All Forum Posts by: Eric Fernwood

Hello @Jonathan Weinberger,

The bigger issue with investing in any city where rents don’t outpace inflation is that you can’t achieve lasting financial independence. To maintain lifelong financial independence, rental income must increase faster than inflation. This does not happen in cities without significant and sustained population growth.

Take Detroit as an example. Its population growth from 2020 to 2024 was only +0.19% (and those were the Covid migration boom years). Rents fell in Detroit last year by 2.7%. U.S. inflation averaged about 4.55% per year over the past five years.

Looking at the impact of inflation on current buying power. Suppose rents increase at 2%/Yr over the next 30 years, inflation averages 4%/Yr, and your current total rental income is $10,000/Mo, here’s what happens to that income in today’s dollars:

• In 10: years $8,235 (a 17.65% decrease in buying power)
• In 20. years: $6,782 (a 32.18% decrease)
• In 30 years: $5,585 (a 44.15% decrease)

So even though your rent increases to $12,190 ($10,000 x (1 + 2%)^10) after 10 years, inflation erodes its value to the equivalent of $8,235 today. This is why, no matter how many properties you own in cities where rent growth lags behind inflation, you can’t achieve long-term financial independence.

Now let’s compare this to Las Vegas. Since 2015, the single-family home segment rents have increased on average by 7%/Yr. Starting with the same $10,000 monthly income, here’s what that looks like in today’s dollars:

• Year 10: $13,289 (a 33% increase in buying power)
• Year 20: $17,660 (a 77% increase)
• Year 30: $23,470 (a 135% increase)

When rent growth consistently outpaces inflation, your buying power rises over time, allowing you to improve your standard of living.

Summary

The city where you invest determines long term income, not properties.

Pre-Covid, the spread between the 30-year fixed rate mortgage and the 10-year has been in a tight band of 1.5% to 2%. The spread went into wild swings post-COVID when (Fed and mortgage) rates were artificially suppressed and then raised sharply. It is gradually coming down.

[Source: Board of Governors of the Federal Reserve System (US) via FRED®]

Assuming the spread returns to its pre-COVID range, and the 10-year in the low 4’s, my guess is that the 30-year mortgage rates will likely remain above 6%, though somewhat lower than today’s, for the rest of 2025.

I have another consideration for investors who are waiting on rates to go down. If you’re buying in a city where rents and property values are rising quickly, holding off usually costs far more than any benefit from a small drop in interest rates. Even if rates fall by half a point, the higher purchase price you’ll face later can wipe out any savings.

Real estate investing is always about the long-term view. The key is not short-term rate fluctuations but whether the market you choose can consistently deliver rent and price growth above inflation. If it does, you’re building wealth and moving closer to financial independence. Waiting on the sidelines only delays those gains.

Successful investing isn't about timing the market—it's about time in the right market.

Hello @Craig Cann,

It is tempting to chase properties with strong initial cash flow. But if your goal is financial independence, you need properties where rents increase faster than inflation.

A $7,000 Example

Suppose your properties generate $7,000/mo in a city where rents rise by 2% per year. After 10 years with this growth rate, your rent will increase to $8,533. However, if inflation averages 5% per year during this same period, that $8,533 will only have the purchasing power of $5,239 in today's dollars.

If you invest in markets where rents do not outpace inflation, you will eventually face two choices: continually cut your living expenses or return to work.

Rents Follow Prices

Property prices are determined by the imbalance between supply and demand.

In markets where supply exceeds demand, prices are low, enabling more people to buy rather than rent, limiting rental demand. Depending on the location, there is a 2 to 5-year lag between property prices and rent trends. So, current rent reflects property values from two to five years ago, when homes were worth more. That’s why properties with low prices usually produce higher initial cash flow. But weak demand limits appreciation and future rent growth.

In markets where demand exceeds supply, prices rise rapidly, fewer people can afford to buy, so more are forced to rent. This increased demand for rentals pushes rents higher. Because rents reflect values from two to five years ago, when homes were cheaper, initial cash flow is lower. However, strong demand drives much superior long-term appreciation and rent growth.

Summary

The conditions that create low prices and higher initial cash flow won't produce rents that rise faster than inflation. You have to either select properties with strong initial cash flow or choose properties that enable financial independence because rents will increase faster than inflation. You can not have both at the same time.

Hello George,

The issues with Section 8 tenants can only be partially mitigated by the property manager. The problem is the Section 8 tenant pool. Many live cash-based lives with no credit cards or bank accounts so evictions, judgements for property damage, mean nothing to them. Multiple property managers I’ve asked about the screening process for C-class properties told me the same thing: ALL HAVE HAD multiple evictions, evictions do not matter. The only requirement is two recent paycheck stubs and a money order for the first month’s rent.

I owned two 4-plexes outside Atlanta and the tenant segment they attracted was young professionals. I had no tenant issues and made good money with those properties.

I want you to understand the risk you are facing by telling you what two clients experienced renting to Section 8 tenants.

Client #1:

The client bought multiple single-family homes from us and made good money. He attended a seminar that promoted C-class properties with Section 8 tenants as the “secret” to wealth. He came to us wanting to buy four (class C) 4-plexes. We refused to sell them to him because our policy is simple: no one gets hurt on our watch. That decision cost us about $50,000 in commissions, but we felt it was the right call.

He didn’t believe our warnings and went to another realtor who told him multifamily with Section 8 properties were cash cows. Here’s what happened:

• Property 1: He lost so much money from tenant damage, vacancies, and only received the Housing Authority’s portion of the rent that he sold the property for a loss. For many months, repairs cost more than the mortgage.
• Properties 2, 3, and 4: Same story—severe tenant damage, vacancies, and only partial rent. They were damaged so badly that they couldn’t be rented out or sold. He decided that the most cost-effective solution was to let them go into foreclosure. (The city ended up condemning the properties and demolished the buildings.)

Client #2:

He purchased a single-family home in a good area. Always looking for a "deal", he rented it to a Section 8 tenant because he got about $100 more per month. After one year, he did not renew the Section 8 lease, and it cost him about $15,000 to restore the home to rentable condition.

Summary

From my experience, there’s only so much a property manager can do to reduce the risks. When you choose C-class properties, especially with Section 8 tenants, you’re exposing yourself to the very real chance of significant financial loss. Has everyone had the same outcome? No, I’m sure there are investors who have done well. But every client I’ve personally worked with who rented through Section 8 ended up with significant financial losses. In my view, no matter how much extra rent you might get through Section 8, the risk and potential losses far outweigh the benefits. It simply isn’t worth it.

It may be possible to house hack with Section 8 tenants. Start with these resources:

• HUD Notice PIH 2021-05: Use of Shared Housing in the Housing Choice Voucher (HCV) Program
• 24 CFR § 982.615–§ 982.618: Shared Housing rules in the HCV program

Section 8, practical considerations

Section 8 is often described as guaranteed rent from the government; however, the reality is different.

• Unpaid tenant share risk. In my experience across roughly 18–20 Section 8 properties, the tenant portion of rent was paid inconsistently or not at all. A property manager who specializes in voucher units told me that nonpayment of the tenant share is the norm. Plan cash flow assuming you may only receive the housing authority portion.
• Inspections and compliance. Section 8 inspections can be brutal. In one case, the tenant wanted all new kitchen appliances. The owner was losing money anyway and was not willing to provide the appliances. The tenant then proceeded to break all the windows and damaged doors and walls. He then called Section 8 for an inspection. They required the owner to repair everything before they would resume Section 8 payment. He had no choice but to buy all new appliances.
• Income risk. Many voucher holders have very low incomes and work in low-skill roles. In downturns, they are the first laid off and the last rehired. During the 2008 financial crisis, many voucher-occupied properties in Las Vegas went into foreclosure. Do not assume stable income from Section 8 tenants when the economy is uncertain.
• Property condition and fit. I have been in many Section 8 occupied properties. With almost no exceptions, the properties were filthy and not in any way maintained by the tenant. Do you want to live with someone who behaves like this?

Bottom line: The question is not only whether Section 8 house hacking is permitted, it is whether the tenant profile and program requirements fit your goals, budget, and tolerance.

Hello @Maxwell Wuensch,

Remote renovations can work very well when managed properly. We’ve delivered more than 580 investment properties to clients around the world, and every one required some level of renovation. Over the years we’ve learned what works and what doesn’t. Here are a few key lessons:

• Use the right people: Handymen often deliver better results than contractors at a fraction of the cost, as long as they’re properly overseen.
• Oversight is key: Without regular on-site overwatch, you will have increased costs, schedule delays, and poor-quality work. We have a dedicated team member who visits each job site every other day, records progress videos, and ensures work is being done correctly. Managing renovations remotely without your own local representative performing overwatch will inevitably lead to problems.
• Leverage matters: Working with an experienced team that manages multiple projects ensures vendors take every job seriously, large or small.
• Renovate smartly: Focus only on upgrades that match your target tenant segment and can be cost justified.

With the right team, clear documentation, and consistent oversight, remote renovations can be just as effective as local ones.

Hi @Varsha Kgan,

You’re asking the right questions. Many Bay Area investors run into the same challenge: extremely high home prices compared to rents. That imbalance makes cash flow very difficult, and California has additional hurdles:

• Rent control laws limit how much you can raise rents, even when market demand justifies it.
• Tenant-friendly regulations make it slow and expensive to remove non-paying tenants.
• High property taxes and fees further reduce returns.
• Insurance and natural disaster risks (fires, earthquakes) add uncertainty and cost.

For these reasons and more, we’ve completed over ninety 1031 exchanges, most of them out of California. Investors are moving their capital into landlord-friendly states where rents and home prices consistently rise faster than inflation.

One of the strongest examples is Las Vegas:

• No rent control — landlords can adjust rents in line with market demand.
• Pro-business and landlord-friendly laws — evictions for non-payment typically take weeks, not months.
• Strong migration and job growth — people and businesses are moving here, which pushes both rents and home prices higher.
• Consistent appreciation — since 2015, the property segment we target has appreciated at about 9% per year and rents at about 7% per year, both well above inflation.
• Lower entry cost — compared to Bay Area markets, you can often acquire two or three cash-flowing properties here for the cost of one in California.

Wherever you choose to invest, partner with an experienced local investment team. They already have the services, processes, and resources in place to find, evaluate, inspect, renovate, and manage properties. There’s no need to reinvent the wheel, and it shouldn’t cost you more than working with any other realtor.

To your other questions:

• Bedrooms: The larger the house, the smaller the pool of potential renters. For example, a five-bedroom home is likely to attract only large families with multiple children, which is a much smaller group compared to the many families with one or two children who would rent a 3-bedroom, 2-bath, 2-car garage home.
• New vs. resale: Both can work. What matters most is the tenant segment you are targeting and whether the property matches their requirements.

If your goal is long-term financial independence, invest in markets where both rents and home prices consistently rise faster than inflation. That is how wealth is built. California does not offer that environment today.

Hello @Michael Santeusanio,

You’re right, the two key factors are time and interest rates.

Time

There are two important timeframes with loans:

• How long it takes to get pre-approval
• How long it takes to close once the property is under contract

Pre-Approval

We require clients to be pre-approved before we begin working with them. Depending on the lender and the client’s financial situation, this can take anywhere from a few days to a month. For example, if a client has multiple income streams and is also a 1099 worker, some lenders struggle to process it, while others may take two weeks. Because we work with several lenders, we know which ones to recommend based on the client’s circumstances, so timing has not been an issue for us.

Closing

Most of our clients use conventional or DSCR loans. Both typically close in under 30 days, and we see very little difference in closing times between lenders.

Interest Rates

Interest rates vary more than closing times, but lenders often complicate things, making comparisons difficult. Our approach is simple. Only two numbers matter:

1. The total cost to acquire the property, including appraisal, loan origination fees, underwriting fees, discount points, down payment, and other expenses.
2. The monthly debt service you’ll pay.

Everything else, including APR, is noise. These two numbers are all you need to compare loans effectively.

Hello @George Villegas,

My first property was a C-class fourplex in Houston, Texas. On paper, it looked like a cash cow—similar to the fourplexes in Las Vegas in the price range you mentioned. But, I quickly learned that the reality didn’t match the projections.

The tenant base was low-income hourly workers paid weekly. They did not depend on credit, and when applying for another rental property, the property manager simply didn't care about how many evictions they had. Almost all the tenants in this segment have multiple evictions in the past. So there's no way to really scream out the bad actors.

I dealt with frequent evictions, people skipping out on leases, vandalism, and constant repairs due to the age and condition of the property. What looked profitable on paper ended up costing me about $1000 a month in losses.

Instead of focusing on the property type, I have been focusing on the tenant segment—the people who actually pay the rent. Over the past 17+ years, we’ve delivered more than 570 investment properties to over 180 clients worldwide (so we have accumulated a lot of data). Here are the results from our tenant segment focus.

• Vacancy rate under 2%
• Average tenant stay of more than five years
• Only seven evictions in 17+ years with more than 1,000 tenants

Choosing the right tenant segment and buying what they are willing and able to rent makes all the difference.

There’s another factor to consider. Multifamily properties are almost always owned by investors. In more than 17 years of doing hundreds of deals in Las Vegas, I have never seen a multifamily property offered for sale that wasn’t losing money—usually due to deferred maintenance or tenant issues. We’ve had clients buy multifamily in the past, and none of those deals turned out well.

Also, if you're using an FHA loan, you'll be living in one of the units. I strongly suggest visiting areas like East Desert Inn Road in the evening and asking yourself if that's where you want to live. My guess is the answer will be no.

Summary

Follow the money, not the dogma.

Hello @Craig Cann,

When I launched my real estate investing services business in 2005, I searched everywhere for reliable data. With my engineering background, I’m comfortable with analysis and research, but I quickly realized the available information just didn’t fit my needs. The main challenge was figuring out what our target tenants actually wanted and could afford to rent.

At first, I tried using traditional analysis methods to predict which properties would attract our ideal tenants. The problem was that the data was too broad and generic. What I needed was information specific to our tenant segment, but it simply wasn’t out there. So, I started gathering it myself.

Now, we have 12 to 14 years of detailed, historical behavioral data on our target tenants. We built this database by systematically collecting and saving information every day as we reviewed potential properties.

This process has given us valuable insights into what our target demographic—families with elementary school children earning $60,000 to $85,000 a year—looks for in a rental home.

Here are a few things we’ve learned from our data (for the Las Vegas market):

• Families in this segment prefer single-family homes.
• They won’t rent homes on lots smaller than 3,000 square feet.
• Driveways need to be at least as long as a standard car plus about a meter to the sidewalk. Anything shorter means the property takes longer to rent and earns less.
• The ideal property size is 1,200 to 1,800 square feet, with one or two stories.
• There are about 140 floor plans that don’t rent well.
• There are many more behavioral characteristics we've learned over the years.

Today, every property we consider must match roughly 40 behavioral characteristics. It’s taken a long time to gather this data, but it’s essential for choosing properties that perform well. Below is a summary of our 17+ year results:

• Average tenant stay of over five years.
• We delivered over 570 properties to 170+ clients worldwide, so we have a lot of data.
• We've had seven evictions in 17 years with a tenant population exceeding 1000.
• We have a less than 2% vacancy rate.

Data is essential but it's not easy to get the specific data you need.