All Forum Posts by: Eric Fernwood

Hello @Yooni Choi,

While managing an out-of-state rental property yourself might seem like a money-saving strategy, the reality is much more complex. Drawing from my experience delivering over 550 investment properties, I can say with certainty that self-management isn't practical for most investors. In fact, even with my extensive experience, I choose to have all my properties professionally managed.

Here's why:

Tenant Selection Is Critical

The most valuable service a property manager provides is selecting reliable tenants. The wrong tenant can lead to non-payment, evictions, and property damage. Finding someone with the expertise to screen and place tenants properly is rare. Personally, after working with numerous property managers in Las Vegas, I only trust two to handle this task for my properties.

Compliance Is Complicated

Property management involves navigating a maze of city, state, and federal regulations. Professional property managers stay updated on legal requirements through memberships in state or national organizations. Unless you're monitoring these regulations full-time, it's easy to make costly mistakes. Even a single error could cost you more than years of property management fees.

Understanding Tenant Behavior

Properties don’t pay rent—tenants do. A skilled property manager understands tenant segments and their behaviors, which helps attract reliable renters. They can also guide you in choosing properties that appeal to dependable tenant demographics.

Access to Reliable Vendors

Property managers have established networks of cost-effective contractors for renovations and repairs. Without these connections, you’re likely to spend more time and money finding reliable help.

Enforcing Lease Terms

Proactively managing tenants and enforcing lease terms reduces the risk of evictions and other issues. This requires consistent oversight and experience, which most investors simply don’t have.

The Bottom Line

If you want to lose money and risk expensive legal fees, go ahead and self-manage. Otherwise, leave it to the professionals who have the experience, systems, and resources to do it right.

Each January, we publish our Las Vegas investment outlook for the upcoming year. We will present our findings for 2025 during the first 20 - 30 minutes of this virtual REI Meetup, with the remainder of the time for addendee Q&As.

We look forward to seeing you there.

Hi @Alan Asriants,

I agree that the traditional BRRRR strategy is ineffective in today's market. This is primarily due to two key factors: low inventory (leading to tight margins) and high interest rates. However, real estate investing is long-term, and markets are always changing. What doesn't work today may work in the future.

Another challenge with the traditional BRRRR model is the resulting high debt load often isn't fully covered by rental income, especially in today's high-rate environment. A more viable approach could be a straight 75% cash-out refinance—but only if you’ve invested in a city with strong, sustained population growth. This growth typically drives significant appreciation, which is the key to making this strategy work.

For example:

Let’s say you purchase a property for $300,000 with 25% down in a market with an 8% annual appreciation rate. How long would it take before a 75% cash-out refinance allows you to pay off the mortgage and have enough cash for a 25% down payment on another property priced at $350,000?

• Year 1: $300,000 × (1 + 8%)¹ × 75% - $300,000 × (1 - 25%) ≈ $18,000
• Year 2: $300,000 × (1 + 8%)² × 75% - $300,000 × (1 - 25%) ≈ $37,440
• Year 3: $300,000 × (1 + 8%)³ × 75% - $300,000 × (1 - 25%) ≈ $58,435
• Year 4: $300,000 × (1 + 8%)⁴ × 75% - $300,000 × (1 - 25%) ≈ $81,110
• Year 5: $300,000 × (1 + 8%)⁵ × 75% - $300,000 × (1 - 25%) ≈ $105,599

After about four years, you’d have enough equity to cover your next property's $87,500 down payment (25% of $350,000). However, the success of this approach hinges on consistent appreciation, which depends on demand.

The Key Factors to Consider

• Price Dynamics: Prices are driven by the balance between buyers and sellers. With more sellers than buyers, prices will fall until equilibrium is reached. Conversely, if there are more buyers than sellers, prices will rise.
• Rental Demand: Rents are closely tied to prices. Fewer people can afford to buy when prices are high, increasing demand for rentals and driving up rents. When prices drop, rental demand decreases, putting downward pressure on rents.

The Takeaway

The critical factor for success with this strategy is location—specifically, investing in areas with significant and sustained population growth. This growth fuels demand, drives appreciation, and ultimately makes strategies like BRRRR or cash-out refinancing viable over the long term.

Hello @Tove Fox,

You are not investing in a state, you will invest in an individual city. I recommend selecting an investment city based on the following criteria.

Key Criteria for Choosing an Investment City

• Rents Must Outpace Inflation

  Financial freedom depends on rental income growing faster than inflation. For example, with 5% inflation, a $100 basket of goods today will cost $162 in ten years. If rents don’t keep up, your income won’t sustain rising costs.

  What Drives Rent Growth?

  • Supply and Demand: When buyers outnumber sellers, prices and rents rise.
  • Population Growth: Cities with significant and sustained population increases are more likely to see long-term rent growth.

• Job Stability and Growth

  A property’s value is tied to the jobs in the area. Since companies have a limited lifespan (10–18 years on average), cities must attract new businesses to maintain job opportunities.

  Factors Companies Consider:

  • Low Operating Costs: States with lower property taxes and insurance costs.
  • Low Crime Rates: High-crime cities deter businesses and tenants alike.
  • Natural Disaster Risks: Avoid areas prone to disasters, as recovery can take years, impacting your rental income.

• City Size and Infrastructure Focus on cities with metro populations over 1 million. Larger cities offer better infrastructure, such as international airports, interstate highways, and a broader talent pool, making them attractive to businesses and tenants.

• Avoid Rent Control Rent control laws can hinder your ability to adjust rents to match inflation, limit tenant screening, and complicate evictions. Always research local regulations before investing.

The Importance of a Local Investment Team

A knowledgeable local team is essential for success. They offer invaluable insights into neighborhoods, regulations, tenant demographics, and market conditions—information you can't get from books or podcasts.

The good news is that working with an investment team typically comes at no extra cost. Since seller-paid fees usually cover their services, you get local expertise without additional expenses.

Final Thoughts

Live where you like, but invest where you can achieve financial freedom.

Out-of-state investing has proved to present excellent opportunities. More than 90% of our clients are out of state, and more than 90% have invested repeatedly with us indicating that they are happy with their investments. But success depends on choosing the right cities and building an experienced and reliable local team. Focus on locations with strong population growth, growing or stable job markets, low operating costs, and no rent control restrictions. With careful planning, you can develop a portfolio that consistently outpaces inflation and helps secure your financial future.

I hope this helps. Feel free to reach out for more details.

Hello @Jonathan S.,

While no investment is completely passive, proper real estate investing should be relatively boring.

You asked about the process and major considerations. This is a straightforward process that we’ve followed to consistently deliver high-performance properties, and it does not require secrets or gurus. See the illustration below (click to enlarge).

Goals

“If you don’t know where you are going, you might wind up someplace else.” …Yogi Berra

Setting written goals is the foundation of any successful venture. Writing them down turns your ideas into tangible objectives you can work toward. Your goals don’t need to be overly complicated. Start with these three key points:

1. Current Situation

   Assess your current or expected capital and credit within a realistic timeframe. If you’re not paying cash for properties, get pre-approved for an investor loan to understand your available credit.

2. Time Frame

   The shorter your timeline to achieve your goal, the more upfront capital and credit you’ll need.

3. End Goal

   Most investing goals focus on replacing their current income, like $5,000/Mo. However, financial freedom isn’t a one-time event; it’s about sustaining your desired lifestyle for the rest of your life.

Once you clarify your goals, the next decision is where to invest.

Investment Market/City

The most important investment decision you will make is where to invest. The investment city determines rent growth rate, appreciation, and income longevity.

What determines rent growth?

Property prices determine rental rates, which are determined by population change. Here’s how it works:

• Population Decline or Stagnation: If the population is static or shrinking, the current housing supply meets demand, and property prices decline (in inflation-adjusted dollars). Low prices enable more people to buy, limiting demand for rental properties so rents decline (in inflation-adjusted dollars).
• Population Growth: In areas with growing populations, demand outpaces supply, driving up property prices. High property prices mean fewer people can afford to buy, so more people rent. This added demand for rentals drives up rents.

You must invest in a city with significant and sustained population growth to achieve rent growth that outpaces inflation. Without population growth, your rental income will lag behind inflation, requiring you to find additional sources of income.

How long your rental income lasts depends on the job growth in the investment city.

Non-government jobs are inherently temporary. The average company only survives for ten years, while even large companies typically last just 18 years. This means your tenants' private-sector jobs will eventually end. Without new companies creating similar-paying replacement jobs, workers may have to settle for lower-paying service sector positions. When this happens, inflation-adjusted rents tend to decrease. Therefore, your financial freedom hinges on new companies continuously moving into the city, creating replacement jobs.

Companies have many options when selecting a location to set up operations. While different industries may have additional location requirements, there are four basic requirements.

• Low crime: Companies are unlikely to establish new operations in high-crime cities. Never invest in any city on this list of the 50 most dangerous US cities.
• Low operating costs: High operating costs are one of the driving factors for many companies, leaving states with high taxes, regulations, and other costs. Why would companies set up new operations in a city with high operating costs?
• Sufficient infrastructure: Companies select locations with major airports, highways, and a large population of potential workers. These are primarily found in cities with a metro population >1M.
• Pro-business environment: Many cities treat employers as adversaries through restrictive policies. Rent control measures, burdensome employment regulations, and excessive administrative requirements exemplify this. Companies know where they will be treated well and where they are not wanted. “Money goes where money is treated best.”

Your future ability to attain and maintain financial freedom depends on the city where you invest.

Investment Team

An essential location selection criterion is an experienced local investment team. While podcasts, books, seminars, and websites offer general knowledge, you'll buy a specific property in a specific location, subject to local rules and regulations. Only an investment team can provide the crucial local knowledge you need.

Moreover, you'll need various resources to find, validate, inspect, renovate, and manage a property. You have two options: attempt to gather these resources or collaborate with an existing team. Consider a different investment location if you can't find an experienced team with all the necessary resources.

Star by finding an experienced investment realtor. Here’s a BP blog for more info on this - 9 Vital Questions to Ask When Vetting Your Real Estate Investing Team

Tenant Segment

No property ever paid rent. The tenant who occupies the property pays the rent. And you need your property occupied by a reliable tenant. A reliable tenant stays for many years, pays the rent on schedule, and takes good care of the property.

Reliable tenants are the exception, not the norm. Every tenant segment has some reliable tenants. However, there will be a segment with a high percentage of reliable people. By interviewing your investment team, you can identify this segment and the properties they are currently renting.

Buy Properties

Once you identify the tenant segment you want to occupy your property and know what they currently rent, all you have to do is buy similar properties. This is the same process a national retail store chains use to determine store locations and what to stock. For example, in Hawaii, McDonald's sells poi and spam. In France, they sell wine.

They identified their customers (in your case, reliable tenants) and provided what they wanted to buy (rent).

Summary

Follow this proven, step-by-step process to maximize your chances of success and minimize risk in real estate investing.

Has this process proven successful? Absolutely. We've successfully delivered over 550 investment properties to over 180 clients worldwide following this process, and:

• Over 90% of clients have invested with us repeatedly, showing they are happy with their investments.
• Our average tenant stays over five years.
• 2008 crash - Zero decline in rent and zero vacancies.
• COVID - Almost no impact
• Eviction moratorium - Almost no impact
• From 2013 through 2023, the annual appreciation and rent growth rates were over 10% and 8%, respectively.

Jonathan, I hope this helps.

Hello @Richard Bautista,

Several aspects of what you described raise concerns. Specifically:

The $100K limit makes no sense, unless she has a process and data showing the sub 100k properties have been the best investments in that market.

Section 8 is problematic.

Over the past 16+ years, we've delivered more than 550 investment properties and provide comprehensive services. Only eight or so have participated in Section 8 housing—and every one of them lost money and quit after the first year. While Section 8 appears to promise "guaranteed" income, the reality is quite different.

Section 8 typically covers about 80% of the rent with tenants responsible for the remaining 20%. In our client’s experience, landlords often receive only the government portion, not the tenant’s portion. Despite the risk of losing their Section 8 status, tenants rarely pay their share.

There is likely to be significant damage caused by Section 8 tenants. One of our clients purchased and renovated a single-family home property for Section 8 use. Although the rent was slightly higher than the market rate, restoring the property to livable condition after just one year cost over $15,000.

The property isn't listed on major platforms.

This is concerning. While some agents have legitimate pocket listings (like selling between friends or family members), without a presence on major platforms, it's difficult to verify legitimacy. Plus, how can you get the best deal for the seller without exposure on major platforms?

The agent discourages you from visiting.

This is a major red flag. Our investor services business in Las Vegas has operated for over 16 years, and we always encourage clients to visit, especially for their first property.

References

Even with references, unless you know the area well and have real estate experience, you should see the property firsthand. I would also consider talking to her broker.

Also, has she provided references from BiggerPockets or Google Business?

She is also the property manager.

There are a LOT of skills, experience, knowledge, and resources required to acquire and operate good investment properties. It is unlikely that one person will be able to do a good job in every aspect. For example, the most important job of a property manager is securing reliable tenants—those who stay for many years, always pay rent on time, and take good care of the property. Such tenants are the exception, not the norm. I've worked with many property managers over the years in Las Vegas, and I only know of two who have this capability. These successful managers are highly experienced and manage a large number of properties.

Considerations

• Location is the most important investment decision you will make. While real estate investing aims to achieve financial freedom, this is only possible if you invest where rents outpace inflation and there is significant, sustained population growth. You haven't provided information about this, but understanding the long-term economic outlook of your target city is crucial.
• A local investment team is crucial for success. All information from podcasts, books, seminars, and websites is general knowledge. You're buying a specific property, in a specific location, in a specific condition, subject to local rules and regulations. The only source for all the local information needed is an experienced local team. Here’s a BP blog for more info on this - 9 Vital Questions to Ask When Vetting Your Real Estate Investing Team
• No property ever paid the rent. The tenant who occupies the property pays the rent. Therefore, you need to select the tenant segment first. You need a tenant segment with a high percentage of reliable people. Once you have identified this Tenant segment, determine what and where they're renting today, then buy similar properties.
• There is nothing on an MLS data sheet for investors. They are designed for homebuyers. Is this realtor providing you with the level of detail analytics that you need to make an informed decision? If not, I would not consider investing with them.

I hope this helps.

Hello @Carl Reza,

There is a lot of confusing information on different real estate websites. However, there is a straightforward process that does not require any secrets or gurus, which is illustrated below (click to enlarge).

I will summarize each step below.

Goals

Setting written goals is the foundation of any successful venture. Writing them down turns your ideas into tangible objectives you can work toward. Your goals don’t need to be overly complicated. Start with these three key points:

1. Current Situation

   Assess your current or expected capital and credit within a realistic timeframe. If you’re not paying cash for properties, get pre-approved for an investor loan to understand your available credit.

2. Time Frame

   The shorter your timeline to achieve your goal, the more upfront capital and credit you’ll need.

3. End Goal

   Most investing goals focus on replacing their current income, like $5,000/Mo. However, financial freedom isn’t a one-time event; it’s about sustaining your desired lifestyle for the rest of your life.

Once you have your goals, the next decision is where to invest.

Investment Market/City

The investment city determines all long-term income characteristics, including whether rents rise fast enough to outpace inflation and how long your income will last.

Understanding inflation: It takes more dollars to buy the same goods every time you go to the store. For example, if $100 buys a basket of goods today, in 10 years, with a 5% average inflation rate, you'll need $162 to buy the same items. If your rental income increases faster than inflation, you will have the additional dollars you need to pay inflated prices. If not, you must return to work to make up the difference between your rental income and inflation-driven prices.

What determines rent growth?

Property prices determine rental rates, which are determined by population change. Here’s how it works:

• Population Decline or Stagnation: If the population is static or shrinking, the current housing supply meets demand, and property prices decline (in inflation-adjusted dollars). Low prices enable more people to buy, limiting demand for rental properties so rents decline (in inflation-adjusted dollars).
• Population Growth: In areas with growing populations, demand outpaces supply, driving up property prices. High property prices mean fewer people can afford to buy, so more people rent. This added demand for rentals drives up rents.

You must invest in a city with significant and sustained population growth to have rents outpace inflation. Otherwise, you can never attain financial freedom because rents will not outpace inflation.

How long your rental income lasts depends on job growth in the investment city.

Non-government jobs are inherently temporary. The average company only survives for ten years, while even large companies typically last just 18 years. This means your tenants' private-sector jobs will eventually end. Without new companies creating similar-paying replacement jobs, workers may have to settle for lower-paying service sector positions. When this happens, inflation-adjusted rents tend to decrease. Therefore, your financial freedom hinges on new companies continuously moving into the city, creating replacement jobs.

Companies have many options when selecting a location to set up operations. While different industries may have additional location requirements, there are four basic requirements.

• Low crime: Companies are unlikely to establish new operations in high-crime cities. Never invest in any city on this list of the 50 most dangerous US cities.
• Low operating costs: High operating costs are one of the driving factors for many companies, leaving states with high taxes, regulations, and other costs. Why would companies choose to set up new operations in a high operating cost city?
• Sufficient infrastructure: Companies select locations with major airports, highways, and a large population of potential workers. These are primarily found in cities with a population >1M.
• Pro-business environment: Many cities treat employers as adversaries through restrictive policies. Rent control measures, burdensome employment regulations, and excessive administrative requirements exemplify this. Companies know where they will be treated well and where they are not wanted. “Money goes where money is treated best.”

Your future ability to attain and maintain financial freedom depends on the city where you invest.

Investment Team

An essential location selection criterion is an experienced local investment team. While podcasts, books, seminars, and websites offer general knowledge, you'll buy a specific property in a specific location, subject to local rules and regulations. Only an investment team can provide the crucial local knowledge you need.

Moreover, you'll need various resources to find, validate, inspect, renovate, and manage a property. You have two options: attempt to gather these resources or collaborate with an existing team. Consider a different investment location if you can't find an experienced team with all the necessary resources.

To build a local investment team, start by finding an experienced investment realtor. Feel free to ask for information on finding one.

Tenant Segment

No property ever paid rent. The tenant who occupies the property pays the rent. And you need your property occupied by a reliable tenant. A reliable tenant stays for many years, pays the rent on schedule, and takes good care of the property.

Reliable tenants are the exception, not the norm. Every tenant segment has some reliable tenants. However, there will be a segment with a high percentage of reliable people. By interviewing your investment team, you can identify this segment and the properties they are currently renting.

Buy Properties

Once you identified the tenant segment, you want to occupy your property, and what they currently rent, all you have to do now is buy similar properties. This is the same process a retail store uses to determine what to stock. For example, in Hawaii, McDonalds sells poi and spam. In France, they sell wine.

They identified their customers (in your case, reliable tenants) and delivered what they wanted to buy (rent).

Summary

A proverb has helped me: "Yard by yard, life is hard. Inch by inch, life is a cinch." If you take it step-by-step, you do not need any secrets or gurus.

Has this process proven successful? Absolutely. We've successfully delivered over 550 investment properties to over 200 clients worldwide, and over 90% of clients have invested with us repeatedly, showing they are happy with their investments.

It's December, and it's time for another Las Vegas update. For a more comprehensive look at the Las Vegas investment market, please DM me for a link to our blog. There, you'll find detailed information on investing, both in general and specifically in Las Vegas.

Before I continue, note that unless otherwise noted, the charts only include properties that match the following profile.

• Type: Single-family
• Configuration: 1,000 SF to 3,000 SF, 2+ bedrooms, 2+ baths, 2+ garages, minimum lot size is 3,000 SF.
• Price range: $320,000 to $475,000
• Location: All zip codes marked in green below have one or more of our client’s investment properties.

What we are seeing:

The chart below, from the MLS, includes ALL property types and price ranges. The overall inventory is higher due to the season. However, sellers currently on the market are more likely to accept lower offers, giving us some room for negotiation.

Rental Market Trends

The charts below are only relevant to the property profile that we target.

Rentals - Median $/SF by Month

Rents held steady from October to November, bucking the seasonal trend. YoY is up 3.5%.

Rentals - Availability by Month

The number of homes for rent decreased MoM, also bucking the seasonal trend.

Rentals - Median Time to Rent

Median time to rent increased in November to 30 days. This is expected for the time of the year.

Rentals - Months of Supply

About 1.6 months of supply for our target rental property profile. This low inventory will continue to pressure up rents.

The sales market is (finally) showing a seasonal slowdown.

Sales - Months of Supply

There are about 1.8 months of supply for our target property profile. A six-month supply is typically considered a balanced market. This limited inventory will likely continue to drive prices upward.

Sales - Median $/SF by Month

The $/SF decreased slightly MoM, conforming to the seasonal trend. YoY is up 7.6%.

Why invest in Las Vegas?

The goal is to achieve and maintain financial freedom. Financial freedom goes beyond simply replacing your current income—it's about sustaining your lifestyle for life. To accomplish this, you need an income that outpaces inflation. Otherwise, you won't have the extra funds necessary to cover the rising costs of goods and services in the future.

What causes rents (and prices) to increase?

Supply & Demand

Unlike financial markets, real estate prices and rents are driven by supply and demand. What is the supply and demand situation in Las Vegas?

Supply

Las Vegas is unique because it is a tiny island of privately owned land in an ocean of federal land. See the 2020 aerial view below.

Very little undeveloped private land is left in the Las Vegas Valley, and desirable areas cost more than $1 million per acre. Consequently, new homes in these locations start at $550,000. Homes that appeal to our target tenant segment range from $350,000 to $475,000, so the supply of housing we target remains almost the same regardless of how many new homes are built.

Demand

Population growth drives housing demand and price and rent increases. Las Vegas's average annual population increases by 40,000 to 50,000 per year. What attracts people to Las Vegas? Jobs. Ongoing construction projects valued between $26 billion and $30 billion fuel employment opportunities. The most recent job fair featured over 20,000 open positions.

In Conclusion

While nothing is guaranteed, the combination of population growth and limited land for expansion virtually assures that prices and rents will continue to increase.

Thanks for reading my post. Reach out if you have questions or would like to discuss investing in Las Vegas.

Hello @Catherine Javier,

This is a common question, Whether to keep, refinance, 1031, or sell. I created the following decision tree diagram to illustrate the decision process (click to enlarge).

The above decision process is based on the property’s performance record, with the goal of achieving financial freedom in mind.

Financial freedom is not just replacing your current income. It's about having an income that will enable you to maintain your current standard of living for life. This requires a rental income that meets the following requirements (click to enlarge):

Where to buy? The markets that can help you achieve financial freedom (see the Dependencies above).

Hello @Kyle Luman,

In the first few years, tax deductions like depreciation typically offset cash flow, depending on the rate of rent growth.

I also want to comment on your statement: “Buy in appreciating areas. Obvious, but maybe the least reliable as it is somewhat by chance.“

I do not agree that appreciation is a function of chance.

Appreciation is driven by the imbalance of demand and supply. In cities with static or declining populations, the existing housing supply typically meets housing demand. Such cities tend to have lower prices that rise slowly due to limited demand. If you buy in such a city, you are almost guaranteed to have limited appreciation and rent growth.

If a city has significant and sustained population growth, then the current housing supply will be insufficient and prices will rise until the demand (the number of people willing and able to buy) roughly equals supply.

Rental rates are closely tied to property prices. As home prices or interest rates increase, fewer people can afford to purchase homes, forcing them to rent. This higher rental demand drives up rental rates. Conversely, when property prices are low, rental demand decreases, causing rental rates to remain relatively flat or fall.

How can you identify cities that are likely to have significant and sustained appreciation and rent growth? Start with a list of cities with a metro population greater than 1M, and evaluate each city against all the additional criteria. If a city fails to meet any of the additional criteria, remove it from the list.

• Sufficient population: cities with a metro population greater than 1M. Small towns may rely too much on a single business or market segment. Wikipedia
• Significant and sustained population growth: Never invest in any location with a static or declining population. Wikipedia
• Low crime rate: Never invest in any city on this list: The most dangerous cities in America, ranked
• Low operating costs: Good indicators of a pro-business climate include:
  • Property taxes: State Property Tax Rates - Rocket Mortgage.
  • State average insurance cost: Insurance - ValuePenguin
  • State income taxes: Tax Foundation
• Low risk of a natural disaster: Natural disasters can devastate your property and the surrounding community, leading to job losses and the closure of shops and businesses. This forces people to relocate. While insurance might cover the reconstruction of your property, the community's recovery could take years or, in some cases, never occur. Meanwhile, your expenses, like debt service, taxes, insurance, and maintenance, continue. The cost of homeowners insurance is the best indicator of the likelihood of a natural disaster in an area. Choose a location with low-cost homeowners insurance because they have the lowest risk of natural disasters: Insurance - ValuePenguin

If you follow the above process, you will now have a short list of potential cities that are very likely to appreciate much faster than others due to their strong fundamentals.