All Forum Posts by: Eric Fernwood

Hello @Stephen Sokolow,

YouTube and other sources can provide general information. However, you will be purchasing a specific property in a particular location. The best source for mid-term rental information is a local investment realtor.

I conducted a study last year in conjunction with a few clients and produced a white paper. If you would like a copy of this free white paper, DM me.

Below are some of the results of our study:

• Short-term rentals and mid-term rentals are fundamentally different. Short-term rentals mainly cater to vacationers. During difficult economic times, fewer people tend to take vacations. This is why many short-term rentals in Las Vegas were sold during the COVID-19 pandemic. In contrast, mid-term rentals are primarily driven by business necessity. For instance, there is currently a nursing shortage across the US, and traveling nurses help to alleviate it. Our research shows that traveling nurses usually start with a 13-week contract that may be extended. They require a place to live, which is why mid-term rentals are driven by necessity.
• The primary consumers of traveling nurses are hospitals with trauma care levels one and two and neonatal intensive care hospitals. Properties should be within about 5 miles of such hospitals. However, the property must be in a safe location, which is sometimes further away than 5 miles from the hospital.
• There are two primary places to market furnished rentals, the MLS and sites like Furnished Finder. Our research showed that furnished properties rented through the MLS have a $.60/SF to $.70/SF incremental rent above non-furnished long-term rentals. On Furnished Finder, the incremental rent appears to be about $1.20/SF.
• Having a property manager handle the mid-term rental is important. We are working with a property manager who will handle midterm metals at a reasonable rate.
• Always buy a property that would also be a good long-term rental. You need the backup option in case the mid-term rental market changes.

Stephen, this above should get you started. DM me if I can help.

Hello @Rachan M.,

We use three strategies to achieve first-year positive cash flow, often in combination. The prerequisite is choosing a performing property. If you do not select a performing property, there is nothing that can be done to achieve first-year positive cash flow.

This document outlines three strategies for achieving positive cash flow in the first year. The strategies are as follows:

Interest Rate Buy-Down

You can pay an upfront fee to reduce the interest rate on your loan. Below is an example comparing the benefits of an interest rate buy-down.

In this deal, the interest rate was reduced from 7.75% to 5.99% by paying 2% of the loan amount upfront: 2% x 70% x 370000 = $5,180.

The buy-down rates and requirements seem to change almost every day. So, we implemented the process illustrated below.

Once we have a property under contract, we send the client's preapproval and a property description to multiple lenders for their current interest rate buy-downs. After receiving responses from multiple lenders, I review the options and present the best five or ten to our client. During a Zoom meeting, we select the best option for them. The client then closes with the selected lender.

Increased Down Payment

Increasing the down payment is an option to avoid negative cash flow in the first year. Here's an example: I calculated the percentage of the down payment required to achieve net zero cash flow with a 7.50% interest rate. The down payment needed for net zero cash flow was 36%.

After-Tax Returns

When it comes to tax savings, it's important to keep in mind that you may have negative cash flow throughout the year. However, you will recoup those losses and more through tax deductions when you file taxes.

Note: Depreciation is calculated as follows:

• Annual depreciation = $360,000 x 80% / 27.5 = $10,473
• Monthly depreciation = $10,473 / 12 = $873
• Depreciation is a credit and I included it in recurring expenses

Combine multiple strategies.

We usually combine multiple strategies. For instance, the following model incorporates interest rate buy-down, a 30% down payment, depreciation, plus maintenance, and vacancy.

Rachan, I hope this gave you some ideas.

@Malieka Henry

Mid-term rentals (MTRs) have generated a lot of interest lately. In this document, I will share a portion of a study I conducted with some of our clients. While some statements are specific to Las Vegas, most should work anywhere. I also included a SWOT analysis for MTR in Las Vegas.

Profitability Depends On…

Mid-term rental profitability depends on four factors:

• Keeping the property filled
• The ability to charge significantly more for furnished housing
• Active support of tenants, so we get good reviews.
• The right renovation components to keep maintenance and turn cost low.

Success Factors

I believe the following are key success factors:

• Location - Not just near hospitals, MTRs must be in a safe and attractive location, with direct access to freeways, retail, and entertainment.
• Appearance - The property must be attractive, clean, and a good place to live. I recommend installing automation as one differentiator from other properties.
• The furnishings must be durable and attractive to tenants.
• Quality photos and a property-specific website that provides extensive detail about the property, the area, fun things to do, etc.
• Flexible lease terms. Apparently, nurses get 13-week assignments with potential extensions. We want to accommodate this easily.
• Promoting the furnished rental on various sites, including nurse staffing sites, the MLS, FurnishedFinders, and others.
• Cost-effective local management to ensure that service issues are handled quickly and efficiently. Especially for new guests, 24-hour support may be needed. [The property manager we work with has a $250 start-up fee, 8% of the collected rent, and a $300 tenant placement fee. They also handle maintenance, utilities, tenant turns, including cleaning and touch-up if needed, contracts, inventory, utility billing, and more.]

SWOT Analysis

When evaluating an opportunity, I utilize SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Although SWOT is typically used for analyzing a company's position, it is also effective for analyzing opportunities.

Below is my SWOT analysis of mid-term rentals.

Strengths

• We can find properties in highly desirable communities with HOAs because MTRs require a minimum 30-day rental period. Most associations have a 30-day minimum rental period. According to FurnishedFinder.com, the average stay is 92 days.

• FurnishedFinder.com appears to be a primary source for marketing furnished properties. I believe there is a $99 fee to list a property.

• There is a national shortage of nurses, which will mean increased demand for contract or traveling nurses.

• If we select properties that are also good LTRs, we have a fallback option.

• The following is from furnishedfinder.com. With most furnished properties renting for more than $2,500, MTR seems to be a way to significantly increase cash flow.

  

Weaknesses

• Ensuring that the property is continuously occupied will largely depend on factors such as the unit, its location, furnishings, and related marketing materials. I provide a more detailed description of this under the Opportunities section.

Opportunities

• If MTRs are proven to provide superior income to LTRs, we can easily replicate success.
• Based on my observations of websites, MTRs appear different from LTRs. We can differentiate our offering by providing a simplified and easy start for guests. This includes gaining access and loading the necessary applications to control the garage door and other capabilities.
• The MTRs I've seen on websites only have simple photos, without a specific location. If we create a website for each property, featuring photos, a video walk-through, a guide to local attractions, shopping, weekend activities, and other unique features, I believe it will be easy to differentiate our offering.

Threats

• Decreased demand for traveling nurses. This does not seem likely due to the national nurse shortage.
• The market is flooded with competition. If this happens, we will likely convert the property to a furnished or unfurnished LTR.
• Due to Airbnb and VRBO now requiring short-term licenses in Las Vegas for properties to be listed on their sites, unlicensed properties may turn to renting their properties out as mid-term rentals. This could significantly increase competition.

Technology Requirement

Keeping vacancy costs low and high guest satisfaction high will depend upon the proper use of technology. Below are examples.

• Access control - Install remotely programmable smart key locks on external doors, such as on the door to the garage and the front door. Ensure that there is a way to change access codes for each new guest. Additionally, provide guests with the app and access code programmatically before their arrival date so that they can access the property. This will also enable the property manager to handle remote showings. We would use a service like Rently.

• Garage control - The system must be able to programmatically change the garage access code for each guest. Additionally, it should allow the property manager to remotely open the garage door for receiving items when there are no guests on the property. The best option appears to be myQ protocol opener. May also wish to have a digital keypad for allowing access to the garage. Below is an example of such a keypad. This will enable the property manager to grant access for deliveries and tradespeople.

• Smart TV - The access point for all information will be the smart TV. The smart TV will link to the website for this specific property.
• WiFi - Enable guests to quickly log onto Wi-Fi through a QR code.
• Ring-type doorbell - This is both a security feature and a way to track individuals entering and leaving the property.
• Property-specific website - Develop software that generates a property-specific website displaying distances to nearby shopping centers, airports, freeways, entertainment, and other relevant locations. (This is something we would provide to our clients.) This website would have appropriate links to information on all devices.
• Security - External camera(s), especially at the entrance, that records and retains video (cloud) for an extended period. This is desirable/necessary for overall security.
• All the technology must be integrated and operate seamlessly in the eyes of the guest. This may require additional software development. This is something we would provide to our clients.
• CO and fire detectors that also send notifications to the property manager.
• Smart thermostat - This allows the property manager to control the temperature settings when the property is unoccupied. And, to cool the property down before a new guest arrives.

Hope this helps someone.

Hello @Joanne Gonzalez,

You are in a difficult position. I hope this post helps.

Below is a decision tree for property one. If I did not cover all the cases, let me know.

Some recommendations:

Work with a property manager - No matter how much you believe you can save by managing your own property, it is likely that you will end up losing more. Selecting reliable tenants is a skill that takes years of experience to acquire, and only a few property managers can consistently do this. In Las Vegas, I am aware of only two such property managers.

Condo considerations

The following is true for Las Vegas; I do not know if all apply where you are. The net is that condos are poor investments compared to single-family properties.

• Short tenant stays - Condos usually attract tenants who stay for around two years. These tenants are typically mobile individuals who do not have children tying them to a particular location. In comparison, the average stay in the single-family and townhouse properties we target is over five years. So, condo vacancy costs are much higher than with SFR.
• High HOA fees - Condos typically have high HOAs, making it difficult to get a reasonable rate of return.
• Condos have a lot of competition - In Las Vegas, condos compete with apartments for tenants, which keeps condo rents low. After all, would you rather rent a 20-year-old condo, or a newly built apartment with multiple pools, a theater, a running track, an exercise room, and free WiFi?
• Financing limitations - While residential financing is available for most condos, investment financing may only be available if the complex has 50% or higher owner occupancy. None of the complexes I've investigated meet this criterion. Investors will most likely have to pay cash for most condos. Single-family homes and townhomes are easily financed.
• Condo cross-unit maintenance issues - Condos are in close proximity to other units, which can lead to unwanted interactions. For example, if the unit above yours has a leak, it can damage your unit downstairs. Unfortunately, you may have no way to compel the upstairs owner to fix the leak or pay for your damages. It can also be difficult to get in touch with the owner. Meanwhile, the problem in your unit may worsen, particularly if the leak causes mold to grow.
• The close proximity of neighbors - Your tenants are likely to complain about noise, cigarette smoke seeping through their unit, and other issues. Unfortunately, there may be little you can do to resolve such neighbor problems.
• Maintenance cost - Condo associations typically maintain the exterior of the properties, but you are still responsible for maintaining the interior and everything else, including the HVAC. In our experience, the annual maintenance costs for condos, single-family homes, and townhomes are about the same. However, this may not be true in other climates.

Location Selection

The location is the most important investment decision you will make. Your financial future is tied to the economic growth of the city where you invest.

There are too many cities to evaluate so I recommend a different approach. Start with an initial set of candidate cities (metros with a population greater than 1M) and then eliminate cities that fail any of the additional requirements.

• Metros with a population greater than 1M. Small towns may rely too much on a single business or market segment. Wikipedia
• Both state and metro populations are increasing. Do not buy anywhere if the state or metro populations are static or decreasing. Wikipedia
• Low crime - High crime and long-term appreciation and rent growth are mutually exclusive. Do not invest in any city on Neighborhood Scouts’ list of the 100 most dangerous US cities.
• Inflation compensating - Every time you go to the store, the same basket of goods costs more and more dollars. In order to have the additional dollars needed to pay inflated prices, rents must rise faster than inflation. Therefore, a critical location selection metric is that rents and prices are rising faster than inflation. Rents tend to lag behind prices, so you can use the appreciation rate if you do not have historical rental data. Zillow Research
• Low operating cost - High operating costs can turn what appears to be a profitable property into a money pit. The three most apparent costs are income taxes, property taxes, and insurance. Insurance - ValuePenguin, Metro Property Taxes - LendingTree, State Property Tax Rates - Rocket Mortgage
• Low disaster risk - Natural disasters, such as tornadoes, can destroy entire communities, including jobs, shopping, and housing. If a tenant loses their home, they will immediately move to a new location with jobs and a place to live, instead of waiting one year or more for the property to be rebuilt. Even if your insurance covers the cost of rebuilding, it may be difficult to find new tenants because people have already moved away. Communities hit by natural disasters may take years or never fully recover. Meanwhile, your expenses, such as mortgage, taxes, insurance, and maintenance, will continue. To avoid this, choose a location with low-cost homeowners' insurance, which indicates a lower risk of natural disasters. Insurance - ValuePenguin
• Rent control - Some states and metro areas have implemented various kinds of rent control. Rent control may prevent you from increasing the rent fast enough to keep pace with inflation. It may limit your property manager's ability to select the best tenant. It may make evictions of non-performing tenants difficult or impossible. Never invest in any location with rent control.

At this point, you will have a small number of potential cities. The next step is to find a local investment team.

Hope this helps. Reach out if I can help.

Hello @John Anderson

The deals that make sense at any time include:

• Deals that will provide a long-term, reliable, passive income that keeps pace with inflation.
• Real estate is not a get-rich-quick scheme. It is a process for achieving financial independence over time, without having to quit your day job. Because real estate is a long-term investment, the initial return is not as important as what happens over the long term.

We employ three basic strategies to enable clients to achieve positive cash flow, in addition to selecting performing properties. In most cases, we combine two or more of these strategies. The three categories are as follows:

Interest Rate Buy-Down

You can pay an upfront fee to reduce the interest rate on your loan. Below is an example comparing the benefits of an interest rate buy-down.

In this deal, the interest rate was reduced from 7.75% to 5.99% by paying 2% of the loan amount upfront: 2% x 70% x 370000 = $5,180.

The buy-down rates and requirements seem to change almost every day. So, we implemented the process illustrated below.

Once we have a property under contract, we send the client's preapproval and a property description to multiple lenders for their current interest rate buy-downs. After receiving responses from multiple lenders, I review the options and present the best five or ten to our client. During a Zoom meeting, we select the best option for them. The client then closes with the selected lender.

Increased Down Payment

Increasing the down payment is an option to avoid negative cash flow in the first year. Here's an example: I calculated the percentage of the down payment required to achieve net zero cash flow with a 7.50% interest rate. The down payment needed for net zero cash flow was 36%.

After-Tax Returns

When it comes to tax savings, it's important to keep in mind that you may have negative cash flow throughout the year. However, you will recoup those losses and more through tax deductions when you file taxes.

Note: Depreciation is calculated as follows:

• Annual depreciation = $360,000 x 80% / 27.5 = $10,473
• Monthly depreciation = $10,473 / 12 = $873
• Depreciation is a credit and I included it in recurring expenses

Combine multiple strategies.

We usually combine multiple strategies. For instance, the following model incorporates interest rate buy-down, a 30% down payment, depreciation, plus maintenance, and vacancy.

John, I hope this gave you some ideas.

Hello @Branden Jordan,

Broad statements do not apply to specific markets. In this post, I will focus on the situation in Las Vegas.

2008 vs. Today

2008:

• 90 months of inventory
• The number of available jobs plummeted leaving a significant percentage without work.
• About all that was on the market were REO properties and short sales.

Today:

• 2.4 months of inventory and falling.
• Only a small percentage of Las Vegas properties purchased in 2022 or later are underwater.
• According to Monster and Glass Door, there are between 26,000 and 31,000 open jobs.
• The current number of distressed single-family homes (06/28/2023):
  • Bank Owned (REO): 12
  • Short Sale: 10
  • Foreclosure Stated: 13

I see no comparison between 2008 and today.

What are we seeing in the property segment we target? See the charts below.

Sales - Median $/SF by Month

Prices have continued their upward trend since January, driven by shrinking supply and steady demand. Year-over-year $/SF is down 9.8% due to a large increase in $/SF in April 2022.

Sales - List to Contract Days by Month

The median number of days on the market continues to drop rapidly. This indicates strong demand despite high-interest rates.

Sales - Availability by Month

This chart displays the average daily number of properties available for sale in a given month. The quantity of homes on the market is decreasing, which will drive up prices.

Sales - Months of Supply

The inventory is now less than one month, while a balanced market typically has a 6-month supply. Scarcity traditionally leads to an increase in prices.

Jobs

Jobs are the heartbeat of any city. Currently, Las Vegas has between 26,000 and 31,000 open jobs. There is between $18B and $26B for new projects under construction, which will create more jobs and bring more people to Las Vegas. And, more are coming.

Source: Thousands of California businesses have fled Golden State for Las Vegas

Conclusion

From what I can see and read, Las Vegas is currently performing well and is expected to continue improving in the future.

Hello @Daniel Adebanjo,

Rather than selecting locations based on how much you can spend and other people's opinions, choose a location based on your financial objectives. If your objective is financial independence, you need a reliable passive income. A reliable passive income meets three requirements:

✅ Inflation-compensating - Rental income increases faster than inflation, compensating for rising prices.

✅ Persistent income - Your income will last; you and your spouse won't outlive it.

✅ Reliable income - Your income continues even in difficult economic times.

The level of inflation compensation and income persistence varies depending on the location. The reliability of income is determined by the availability of jobs and the tenant segment that your property attracts.

Inflation Compensation

In order to have the additional dollars you will need to pay inflated prices, rents must keep pace with inflation. Demand is what determines both prices and rent. Where there is low demand, prices are low, and there will be little if any appreciation or rent growth. Every day that goes by, the buying power of the rent you receive will decline. Prices in some locations are higher because there is strong demand. Where there is strong demand, prices and rents increase. It's simple supply and demand.

Below are two indicators of a high-demand city:

• The population is greater than 1 million. Smaller cities often rely too heavily on a single market segment or major employer. In Canada, the minimum threshold would, of course, be lower.
• State and city populations are both increasing. If the population of a state or city is static or decreasing, do not invest in that location. When people leave a location or the population is static, demand for housing falls and rents either remain static or increase very slowly. This results in you being forced back onto the daily worker treadmill.

Income Persistence

Income persistence, or the duration of rental income, is dependent on jobs. It's not just the current jobs of your tenants that matter. Non-government jobs are short-lived, with the average lifespan of a company being 10 years. Even a Fortune 500 company has an average lifespan of only 18 years. This means that every job your tenants have today will disappear in the future. Unless new companies move into the area and create replacement jobs that pay similar wages and require similar skills, the only jobs that will remain will be lower-paying service sector jobs. This causes the average city income to decline and property prices (and property taxes) to decline or rise so slowly that they do not keep pace with inflation.

Cities depend on property taxes and sales taxes. When average incomes decline, city revenues also decline. This leaves the city with no choice but to cut back on services, including those related to police and schools. As a result, crime rates increase and people with sufficient income leave the area. This further reduces the average income, leading to a financial death spiral from which few cities have escaped.

The key metrics are:

• Crime - Employers looking for a location to set up new operations will not choose high-crime cities. Never invest in a city on Neighborhood Scout’s list of the 100 most dangerous US cities.
• Anti-employer states - Some states make it very expensive and difficult to operate, causing companies to migrate to more business-friendly states. And, companies looking to set up operations will avoid these states. Do not invest in any location where employers are fleeing or there is rent control.

Income Reliability

The only way to have a reliable rental income is if a reliable tenant continuously occupies your property. A reliable tenant is someone who stays many years, always pays the rent on schedule, and takes care of the property. Reliable tenants are the exception, not the norm. Also, because you will likely hold the property for many years, you will need multiple reliable tenants over time.

Start by identifying a segment with a high concentration of reliable tenants through property manager interviews. Once you identify such a segment, determine what and where they are renting today. Then, buy similar properties.

This process is highly reliable and works anywhere. No guesswork or gurus is required.

Summary

The location is the most important investment decision you will make, as it determines all long-term income characteristics. The second most important decision is the tenant segment. To have a reliable income, your property needs to be continuously occupied by a reliable tenant. This requires buying properties that match the housing requirements of a tenant segment with a high concentration of reliable tenants.

Daniel, if you do not have sufficient funds to invest in a suitable location, it is better to wait than to invest in a location that is guaranteed to fail in the long-term.

Excellent comments on this thread. My 2¢.

• Buying in a bad location. If you buy in a location that does not have a high appreciation rate, you will be back on the treadmill, the only question is when. The problem is inflation. Every time you go to the store, the same set of groceries costs more and more dollars. The only way you will have the additional dollars to pay for inflated prices is if your rents keep pace with inflation. This only happens in markets with significant housing demand. In such markets, rents and prices keep pace with inflation. If you buy anywhere else, there's nothing you can do to turn the situation around except to sell the property and buy in a better location.
• Spending money on gurus. We've helped over 180 clients on their path to financial freedom, and many have already achieved that goal and are living solely on rental income. Investing is actually very simple, and our new client onboarding process includes teaching people how to invest. On average, it takes about two hours to provide everything you need to know to be a successful investor. If mentors or gurus could do what they claim, they wouldn't need to sell seminars.
• Buying the property first - your property is no better than the tenant who occupies it. The only way you will have a reliable income is if your property is continuously occupied by a reliable tenant. A reliable tenant is someone who always pays the rent on schedule, stays many years, and takes care of the property. Reliable tenants are the exception, not the norm. Over the property hold period, you will need multiple reliable tenants. The best way to always have a reliable tenant is to buy a property that matches the housing requirements of a tenant statement with a high concentration of reliable tenants. Then, determine what and where they are renting today. All you have to do is buy similar properties. This process is reliable and works anywhere. If you buy a property based on someone's opinion and you do not have a deep understanding of the tenant segment the property attracts, you will likely lose a lot of money.
• Family and friends - Real estate investing is a business, not a hobby. As a business owner, you need the best performers on your team. What are the odds that Uncle Bob, who just obtained his real estate license, is a star performer in investment real estate? Furthermore, if Uncle Bob fails to perform, how would you fire him? It is crucial to have the best team members available and to replace any members who are not performing up to standard. You can't do this with family and friends.
• Renovation - renovation is the process of modifying a property so you can increase the rent, reduce time to rent, and reduce your maintenance costs. Renovation is not redecorating to your tastes. What you like or do not like does not enter into it. Listen to your property manager.
• Managing your own properties - I often hear about people who try to "save money" by managing their own properties. However, regardless of how much they think they will save, they often end up spending much more because they lack the necessary expertise. My recommendation is to let a property manager acquire a good tenant and manage the property for a year. After the first year, you can take over the management yourself.

Hello @Jaime Ortiz,

Las Vegas is a great location for investment. In this post, I will provide the basis for my statement.

Reliable Passive Income

The goal of real estate investing is to attain financial independence. However, to maintain this independence, the passive income from properties must meet three requirements:

• Inflation compensating: Rental income increases faster than inflation, compensating for rising prices.
• Persistent income: Your income will last, ensuring that you and your spouse won't outlive it.
• Reliable income: Your income continues even in difficult economic times.

Inflation compensation and persistent income are determined by location. Income reliability is determined by both location and the tenant segment.

How Does Las Vegas Measure Up?

The graphic below summarizes the residential investment situation in Las Vegas.

Prices and rents are driven by supply and demand. What is the situation in Las Vegas?

Housing Supply

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

There is very little undeveloped private land remaining in the Las Vegas Valley, and undeveloped land in desirable areas costs over $1 million per acre. As a result of these high land costs, new homes in our targeted locations start at $550,000. The homes that attract our target tenant segment are priced between $320,000 and $475,000. Therefore, even if many new homes are built, our target housing segment remains almost constant. This is different from metropolitan areas with unlimited expansion potential, where new home construction limits the rent and price growth of existing properties.

In summary, the supply of housing is limited for the tenant segment that we have targeted for the last 15+ years.

Demand

The driver for housing demand is population growth. The average Las Vegas annual population growth is between 2% and 3%. Also, Penske Truck Rental provided a list of the top moving destinations. Houston was #1, Las Vegas was #2. So, the population growth rate is likely to increase.

What attracts so many people to move to Las Vegas? While there are several factors, the most important is jobs. In a study I conducted in January, I analyzed two major job sites (Monster and Glass Door) for the number of open jobs in Las Vegas. According to these sites, there are between 26,000 and 31,000 job openings in Las Vegas. Other big attractions of Las Vegas include low crime, limited government, quality of life, a reasonable cost of living, and abundant entertainment.

What about future jobs?

The number of available jobs is expected to continue increasing. According to different studies, there is between $18 billion and $26 billion worth of new construction currently in development. As these projects are completed, they will create even more jobs and attract more people to Las Vegas, further driving up demand for the limited housing supply.

Another factor to consider is the exodus of people and companies from California. See the graphic below:

A significant portion of current and new jobs matches the tenant segment we’ve targeted since 2005. Therefore, the demand for properties priced between $320,000 and $475,000 will continue increasing over time.

Other developments

• Oakland A’s are moving to Las Vegas
• Formula 1
• Planned high-speed train from Los Angeles to Las Vegas in 2 hours

Conclusion

Given the fixed housing supply in our target price range and increasing demand, it is almost certain that prices and rents will continue to increase for the foreseeable future.

Jaime, you made a good decision choosing Las Vegas.

Hello @Kendric Buford,

Instead of focusing on the type of property, stay focused on your financial goal. If your goal is to have a reliable, passive income that you will not outlive, then your property must be continuously occupied by a reliable tenant.

A reliable tenant is someone who stays for many years, always pays rent on time, and takes care of the property. However, such tenants are the exception rather than the norm. Since you will hold this property for many years, you will need a succession of reliable tenants. To increase the likelihood of finding a reliable tenant each time, the property should attract a segment with a high concentration of reliable tenants.

Housing Characteristics and Tenant Segment Housing Requirements

Each tenant segment has a specific set of housing requirements. People within a segment will rarely consider a property that does not match all of their necessary housing requirements..

Below is an example of a segment’s housing requirements.

• Rent range: $1,500/Mo. to $1,850/Mo.
• Type: Single-family
• Configuration: 3+ bedrooms, 2+ baths, 2+ car garage, 1,200 SF to 2,100 SF
• Location: North of the river and east of Line Rd.

Every property has specific housing characteristics. Below is an example of a property.

• Rent: $1,700/Mo.
• Type: Single-family
• Configuration: 3 bedrooms, 2 baths, 2 car garage, 1,500 SF
• Location: North of the river and east of Line Rd.

The characteristics of this property match the housing requirements of the target segment mentioned above. Therefore, the majority of interested individuals are likely to come from this segment.

There are so lessons here:

• The tenant segment that a property attracts is defined by the property's characteristics, which cannot be changed.
• If you understand the housing needs of a particular tenant segment, you can purchase properties that meet those requirements and attract that segment.
• If you buy a property that does not meet all of your target segment's housing requirements, you are purposely excluding that segment from renting your property.
• If you purchase a property, only a specific segment of the tenant population will be interested in renting it.

Identifying a Segment With a High Concentration of Reliable Tenants.

To identify a tenant segment with a high concentration of reliable tenants, interview multiple property managers. If you would like a sample list of questions, please DM me.

What Properties Should You Buy?

Once you identify the right segment, determine what they are renting today. Based on the range of properties they are renting, you can derive the segment’s housing requirements. This is the profile of the properties you want to buy. This process eliminates guesswork, works anywhere, and we've used it over the last 15 years to deliver over 480 investment properties. We know it works.

Summary

Don't choose a property and hope that you'll get reliable tenants. This almost always fails. Instead, select a tenant segment with a high concentration of reliable tenants and then buy properties they want to rent.