All Forum Posts by: Eric Fernwood

Hello @Jennifer S.,

Reading your post you seem predisposed towards multi-family. Many people do believe that multi-family properties are better investments while others believe that single-family properties are better investments. I believe that you should select properties based on sustained return as opposed to letting any pre-conceived type of property limit your choices. However, below are some comments on multi-family properties that I hope will help.

Multi-Unit Considerations

• Lower rental risk. A single-family property is either 100% occupied or 100% vacant. With a multi-family property, if one unit is vacant, you still receive a portion of the total rent.
• Per unit cost is lower with multi-family than single family homes.
• When you wish to sell the property the only buyers will be other investors. This is a relatively small number of buyers compared to single family properties. And, the value of an investment to investors is largely based on the CAP rate. So, unless rents rise, the market value of the property does not rise.
• As long as you stay with 4 units or less, conventional financing is pretty much the same as single family investment properties. With 5 or more, you must obtain commercial financing with is more complex and takes longer.
• Multi-family (2 to 4 units) properties are usually purchased only by investors. And, in my experience, investors with performing properties do not sell them so you need to look carefully. The most frequent reasons I see for investors selling such properties include:

• High cost of completing deferred maintenance.
• Purchased at a high price or with expensive financing and can not generate the desired return.
• High turnover due to location or property issues.
• Frustration of trying to self manage the property.

Tenant Considerations

When you are considering any investment property, you need to think about the potential tenant population. Note: The remainder of this post is specifically about Las Vegas so only use the following material as points to consider if you are not buying in Las Vegas. 

Today, in Las Vegas, most of the 4-plexs I have seen rent in the $450/Mo. to $600/Mo. per unit range (This is very different than what I experienced in Fort Wayne, NYC, Atlanta and Houston). In general, people renting in this price range need to be near the major mass transit routes so you should only be considering properties within a block or two of the major bus routes. Most of the jobs are along Las Vegas Blvd so you only care about the east/west routes. The tenant population is largely cash based; many will not have a checking account or any credit cards, etc. This alters how rents are paid and collected. And, on average, evictions and skips are more frequent. Since this demographic is largely cash based, they have little to fear from a bad credit report or a judgment on unpaid rent so a lease means very little. You also have to expect more damage. For example, one such unit we have was rented earlier this year and after about 4 months the tenant skipped inflicting some significant damage. The cost to rehab this property will be about $3,000. 

Should the above dissuade you from buying a 4-plex? No. You can make good return on 4-plexes but you have to factor all the costs into your profit model. If you do and the property still makes sense, then it is a good buy. If the numbers do not look favorable, look for something else. Where is the best source of information on such properties? The property managers who specialize in these properties. Just drive the area and note the names of the property managers on the signs and talk to the major players. I have a list of property manager interview questions. If you (or anyone else) would like a copy, drop me an email.

I wish you success.

Hello @Michael Williams,

I can't speak for what the situation is in Florida but in Nevada only written documents are enforceable when it comes to real estate. So, if you have written documents containing the stated ARV, maybe you can do something about it. It would be interesting to see if this agent has prior complaints. In Nevada these would be listed with the Nevada Real Estate Division. You might check to see if there is a similar organization in Florida. If there is and the agent has prior complaints, you might want to file a complaint too. In Nevada, you could then go before the Real Estate board. If they determine the act was part of a behavior pattern or you have sufficient documentation that he sold you the property under false pretenses, then they can take action including having the agent pay a penalty. The advantage of this approach is that the standard of proof is lower than it would be in a court and the cost is very low (no lawyers involved).

I am impressed by your statement, "I realize this was my mistake..." Well done! It is too late for this property but I may be able to offer some advice on future flips. 

In order to make money flipping you have to buy the right property, in the right market, in the right location, at the right price with the right team. Yes, ALL of these things must go right to make money. Here I will only talk a little about the location and the market. In this post I went into more detail about the other critical components.

The first step in successful flipping is to determine if flipping is possible. In some locations/markets it is almost impossible to flip a property and not lose money. Below are some of the factors that I would consider:

• The price difference between trashed homes and homes in market ready condition must be significant. If there is a small difference, you need to look somewhere else. What I have been doing is to use software we developed to search for properties that are at least 20% below the sales comps of similar properties. Note that 20% is not a "magic" number. But, if you can't find properties that are priced significantly below comps, you need to look somewhere else.
• Seller's market. If you are in a buyer's market, it is unlikely that you will be able to sell the property quickly at the predicted sales price.
• Sales volume - There should be frequent transactions of similar properties. Not only will this increase the probability of selling in the shortest time, it will enable you to get reasonably good comps. Do the comps yourself, do not depend on others. (If you are not comfortable doing comps, let me know and I will explain how.)
• Skilled trades people are available at a reasonable price. A huge part of being successful is high quality, reasonably priced, readily available skilled workers. The skills you need will vary greatly but if you can't put together the right skills team, you are in serious trouble. Most people will work with a contractor or someone who will provide the overall quote and manage execution. Significant errors in your estimates could turn a profitable flip into a financial disaster.

I used the term "market ready" instead of rehab/remodel because I wanted to emphasize the importance of making the home similar to other homes selling rapidly in the local area. There is no universal "standard" for market ready. It depends on what similar properties are like. For example, if the vast majority of properties for sale have vinyl flooring in the kitchen, vinyl is what you should install. Installing tile might result in the property selling faster but it is unlikely that it will increase the price by the additional amount you spent. However, if similar properties have tile and you installed vinyl, your property will likely take longer to sell and will likely sell for less than market value.

You need to get the property to market ready, not less not more. Spend time looking at properties in the area to learn what is considered important by the local buying population and do not go beyond what is required. 

For more details on my process you can refer to this post. It seems to me that in your case the location characteristics made it very difficult to make money.

Hello @Wendell De Guzman,

No one knows the answer to that question because each time the cause seems to be different. And, I believe that tracking NODs may tell you what has already happened as opposed to what is going to happen. Perhaps this metaphor will help explain my view. If you contract measles, you will likely have a red rash. However, by the time the red rash appears, you already have the virus and your options for preventing the virus are nonexistent. The rash is the same as NODs. By the time NODs ramp up, the economy is already well into the crash. In Las Vegas during the 2008 crash, the time between the month the first payment is missed until the NOD is filed is between 6 months to 3 years. So, instead of predicting the timing of a crash, a much better approach is to prepare for a crash (at least from buy and hold point of view).

Preparing for a Market Crash

In my opinion, the best way to prepare for a crash is careful selection of your investment properties. This includes both the location and the type and rent range. Here is a link to a post on selecting the right location so I will not repeat it here. What I will cover here is the effects of rent range on rental income stability during times of economic stress.

I believe the goal of investment real estate is sustained profitability. Part of the necessary elements for achieving sustained profitability are:

• A population of tenants that are unlikely to lose their jobs during reasonable instability, like 2008 in Las Vegas. See my previous post in this thread on how rental properties performed during the 2008 to 2014 period.
• Good tenants - A good tenant as one who: pays all of the rent on schedule, takes care of the property, does not cause problems with neighbors, does not engage in illegal activities on the property and stays for multiple years. Please note that tenant quality does not necessarily correlate to rent rate. 

Rental Sweet Spot

Each market has what I call a rental sweet spot. This is the range of rents that has the largest population of potential tenants. I will explain this statement but first, I will make some generalizations that I will use later. Remember that generalizations will not work for specific cases but are usually more often right than wrong. The assumptions I will use are:

• A property that rents for $500/Mo. is generally less desirable than a property that rents for $1,000/Mo. to the average tenant.

• People would choose to live in a property that rents for $1,000 than a property that rents for $500, if money were no barrier.
• If a person can afford $1,000/Mo. rent, they are unlikely to want to rent a $500/Mo. property.
• Except in special cases, people are unlikely to spend more than 30% of their monthly income on rent.

If you plotted the number of tenants who wish to live in a property and can afford to live in that property, the number of prospective tenants by price would be something like the curve below. 

There is a relatively small number of renters who choose to live in undesirable areas or undesirable properties if they can afford better. And, there is a small number of tenants that can afford to pay a very high rent. In real life, the curve would be flatter, wider or skewed to the left or right but the concept does not change. The green rectangle below delineates what I call the rental sweet-spot. Properties that rent in this rent range have the largest population of potential tenants (resulting in higher rent and lower time-to-rent) and you are more likely to end up with the highest quality tenants. More about quality tenants later.

You could segment the curve by job/income level (The following is a silly segmentation but bear with me.) as shown below. 

Each of the potential tenants in each segment are subtable to different market challenges. For example, if your rental properties targeted the minimum wage class and as the minimum wage increases, the number of available jobs are reduced, you are going to have decreased rents and increased time to rent. The point is:

• Different price ranges (or segments) can and are affected by different market changes.
• To minimize the vulnerability to such market risk, you want to buy properties that fall into the rental-sweet spot because you will have the largest pool of potential tenants. If you do this, you are more likely to still be able to rent units out even in time of economic challenges.

Tenant Quality vs. Rent

I mentioned earlier what I consider to be the characteristics of a good tenant. Good tenants come from effective screening by the property manager, not from the rent range. So, if I targeted the "doctor/lawyer" segment (a property that is expensive to rent), I might have only one or two applicants to select from when I am trying to rent the property. If this is the case, the odds of selecting a good tenant are reduced. If I target the sweet spot I will have far more tenants to select from and the odds of selecting a good tenant are increased.

Summary

• It is very hard to predict a coming crash far enough in advance to take proactive action. All the "experts" missed the last one and they will likely miss the next one.
• Market crashes have and will occur in the future.
• The best way to protect yourself is to buy properties that will rent in the rental sweet-spot so you have the largest number of potential tenants.
• Only careful screening by the property manager of a significant number of applicants will increase your odds of getting a good tenant.

Wendell, this is a long answer to a short question but I hope this helps.

Hello @Newton Pham,

The current data largely comes from the MLS. The historical data we use has been accumulated over time from various sources then re-factored. We use this data as part of the filtering for investment properties. For example, we have collected historical data on:

• Floor plans and configurations that take much longer to rent.
• Whether the master bedroom is downstairs and the other bedrooms are upstairs.
• A minimum ratio of house footprint vs. lot size.
• Localized crime statistics. For example, there is a Big Box store near a subdivision. The subdivision itself has a fairly low crime rate. However, the Big Box store which the tenants would frequent regularly has assaults and robberies. So we eliminate properties in the areas where the tenants are likely to shop at that store.
• Average time-to-rent at the subdivision level for many key subdivisions.

We currently have about 50 property characteristics by which we vet potential properties. 

Hello @Bryan Christopher,

Thanks for the follow on questions; sorry I was not clear. A bit more details on the numbers I mentioned. 

"If you are looking for 5% to 7% real return (see my post on real return) and probable appreciation and you have $50,000..." Below is where the $50,000 came from:

Class A properties in the $175,000 to $210,000 range typically generate between 5% and 7% (we have a few at over 11%, but that is unusual). Are these properties straight out of the MLS? Yes, but very few pass our criteria. The concept of "wholesaling" is that you can buy a property significantly below market value by going direct to the individual owner. I have some problems with this concept:

• This assumes that people are willing to give away money; selling the property for less than it is worth. I have never personally known anyone directly who purchased a property at way below market value except when the property is in very bad condition. People know what their property is worth and want every penny that they can get out of it. Also, rarely are A class properties "wholesaled".
• Suppose you are able to find a "deal" through auctions, foreclosure, etc. What are the odds of this property being a good investment property? Based on the number of properties we screen in order to find a few, I doubt that they are good investment properties. I will explain what percentage of the MLS properties work out for us a little later.
• Another popular view which I do not understand is that it is vital that you buy properties at xx% below market value. Unless you are flipping what you pay for a property does not matter. (The following is an exaggeration in order to make my point.) Would you rather buy a property at xx% below market but lose money every month you own it or buy a good property at market value and earn a high return every month? All my clients care about is sustained high returns.

Another common belief is that there are no good properties on the MLS. I will guarantee you that there are very few good investment properties at any given time. How few? Very few. Typically, there are 7,000 to 10,000 properties available at any point in time. Out of the 7,000 to 10,000 properties, we can usually find only 20 to 30 good candidates. And, since we make offers based on desired return and not the list price, we probably get less than 1 out of 7 offers. If I do the math this equates to something like 20/7,000 x 1/7 = .04% of the available MLS properties. The only way we can find good properties is that we developed software over the last few years which enables us to rapidly get to the 20 or 30 properties. The properties we get have high returns and tenants tend to stay for multiple years.

On the "older condos", here is an example of actual numbers on such a property:

You have to pay cash for this type of property, they can not be financed. The cash/cash return is about 10% after property management, HOA, taxes, insurance, maintenance, etc.

Let me know if you have more questions. Post them or give me a call.

@Bryan Christopher,

A very good question. I will start by saying that when I owned properties in Houston and Atlanta, they were four-plexes. Some single family in Houston too. All things being equal, I personally prefer multi-family dwellings if the market is right. What is best depends on the individual market at the time you are buying, your goals, your cash and financing.

Single family homes could be the best property today but specialty small commercial might be the best in 2 years. There is no single simple answer. And, what is best today will likely not be the best 5 years from now. 

Everything I am about to say only applies to Las Vegas, today; in 12 months the market could be different. And, what is the best investment also depends on your cash, credit and willingness to take reasonable risk. Below are some examples: 

If you are looking for 5% to 7% real return (see my post on real return) and probable appreciation and you have $50,000 and you qualify for 20% down conventional financing, I would recommend:

1) Select single family class A properties in the $175,000 to $220,000 price range.
2) Select town homes in the $150,000 to $200,000 range.

I do not recommend condos in this price range because very few condos in Las Vegas are finance-able. There are much better ways to use cash than tying it all up in one property. After all, by definition the return on equity is always zero.

If you have $100,000 and are looking for 9% to 12% and you care little about appreciation (other than tracking with inflation), I would suggest a few of the older condos and town homes. Many of these generate $400 or more per month and cost less than $80,000.

If you are mainly looking for appreciation and returns in the 2% to 4% range are OK, class A single family homes in specific areas in the $220,000 to $350,000 range would be a good buy. This sort of investment is perfect for higher income earners who are building up a retirement income stream.

If you have $400,000 to $600,000, specialized commercial properties are good. We are working on a $2.4M 50 unit apartment complex that, with some renovations, will be very profitable (6% to 7.5%). However, the real value of the property is 5 to 10 years from now. Based on city of Las Vegas plans and talking to the major stake-holders around the property, we expect the property to double or triple in value when it is re-purposed to offices in the future. 

I could go on about goals and what is most likely to match these goals but I think I made my point in that there is no "one size fits all". And, the best answer for one person might be a disaster for the next. Plus, one or two years from now the market could change due to the market itself, changes in financing rules or tax regulations or ????? 

On HOA's, Las Vegas is unique in that most of the class A properties are built with HOAs. We like HOAs in the $20/Mo to $50/Mo. range. Tenants love the appearance and tend to pay a little higher rent that non-HOA subdivisions. In subdivisions with no HOA, you frequently see things like someone operating an auto repair shop out of their garage. We see reasonable HOAs fees as asset value protection. However, HOA's could be an absolute waste of money in another city. It all depends.

Wherever you plan to invest, it is critical that you have a trusted team who knows investments and has a deep understanding of the investment market. This is very different than a traditional agent selling homes.

Bryan, I jumped around quite a bit in this post. I hope I answered your questions. If not, post again or give me a call.

I will comment on two points related to the market crash issue:

1) Predicting when it is likely to occur. As people stated, tracking NODs is usually the easiest approach I know of. Our source is one of the title companies. What you are looking for is not an absolute number. What you are looking for is the changes in the rate of NOD's. In general, in Las Vegas, NOD's proceed foreclosures by about 6 months and they are likely to hit the market about one year later.

2) What's going to happen to your buy and hold properties during a market crash? Since we have access to actual data (we are Realtors in Las Vegas) we recently decided to look at the rental rates vs. $/SqFt rates from 2008 through 2014. Remember that the crash was severe in Las Vegas, and that most properties went down by 50% or more (many have since recovered to pre-crash values). When we started the study we discovered that the metro area data we could obtain from news sources was virtually worthless because there was no granularity; they averaged the entire metro area and even different property types together in some cases. We choose to base our research on one of the prime rental areas, which is shown in the map below. The property profile we selected is: 3 bedrooms 2 car garage, 1,200 to 1,500 SqFt. 

Using actual sales data from the MLS we looked at property prices ($/SqFt) and below is a chart showing the monthly average $/SqFt sale price between 2008 and 2014.

As you can see, prior to the crash in 2008, conforming properties in the selected area were selling for an average price of approximately $120/SqFt. By 2012 the average price fell to approximately $70/SqFt. What happened to rental rates during the same period? Below is a chart showing $/SqFt rental rates for conforming properties in the same area for the same time period as the above.

As the above shows, rental rates were virtually unaffected by the 2008 real estate market crash. So, if you purchased an investment property in late 2007 at the market peak and the property was generating an 8% return, it continued to generate an 8% return, even though the market value of the property went down 50%. However, this is not true of all areas and even all rent ranges in Las Vegas. Lower end rental properties that were primarily leased by construction workers and such (who really got hurt) fared much worse. I think this shows the importance of selecting the right location and properties that will rent to a stable tenant population. 

In summary, watch for changes in NOD patterns and select properties in locations and rent ranges that are likely to be stable even during a market crash.

@Bryan Christopher, @Sutton Zolner

There are still good properties in Las Vegas. We have been able to find class A properties that cash flow well. The challenge is (always) how to find them because you may have to consider hundreds to find one good property, which is why we developed software for finding good properties. We typically start with between 7,000 to 10,000 properties and our software will get us to under 50. Based on our experience, we eliminate more than half of these properties. The resulting class A properties have a real ROI (more about real return later) between 5% and 9%. Rehab is typically less than $5,000.

For balanced cash flow and appreciation, the basic characteristics we use include:

• Single family
• Two+ garage
• Three+ bedrooms
• Two+ baths
• Within a minimum and maximum lot size
• Built after specific year
• Average time to rent below 20 days
• One or two levels
• Association fees below a specific amount

We eliminate from considerations most properties based on a number of negative characteristics (we have about 50 such "negative" characteristics) including:

• Known bad floor plans
• Subdivisions with rent restrictions
• Known undesirable subdivisions
• Properties with traffic or access issues
• Properties with excessive drive times
• Master bedroom too small
• Ratio of lot size to the home's foot print
• Tandem garages
• Close to nuisances

For high cash flow properties (usually class B or C) the requirements are quite different and these are usually town homes, condos and occasionally older small single family homes. These generate a 9%+ real return and cash flow greater than $400/Mo. and average time-to-rent of less than 20 days. 

Real return - I see a lot of people assuming a 5% return in Austin is the same as a 5% return any where else. This is absolutely not the case. I'm repeating below some of the materials I posted earlier in this thread:

The formula we use for calculating return is:

ROI = ((Rent - Debt Service - Management Fee - Insurance - Real Estate Tax - Periodic Fees) x (1 - State Income Tax))/(Down Payment + Closing Costs + Estimated Rehab Cost)

For cash flow:

Cash Flow = (Rent - Debt Service - Management Fee - Insurance - Property Taxes - Periodic Fees) x (1 - State Tax Rate)

Below is a contrived example of the exact same property renting for the exact same rent in three different locations. This is of course impossible but the point is to show the impact of landlord insurance and property taxes on return.

Here is a summary of the property I will use:

• Purchase price $150,000
• Rent: $1,000/Mo. or $12,000/Yr.
• Financing: 20% down, 4.5% interest, 30 year term. Resulting debt service is $608/Mo. or $7,296/Yr.
• Down Amount: $30,000
• Periodic fees: $0 (for simplicity)
• Management fee: 8% or $12,000/Yr. x 8% = $960/Yr.
• Rehab cost: $0 (for simplicity)
• Closing cost: 0% (for simplicity)

Below are three cities with tax rates and landlord insurance costs:

Note: the data from the above comes from the following sources:

• State income tax source
• Insurance rate source. Note that this site contains national average homeowners insurance rates. I could not find a similar site for landlord insurance. Landlord insurance is typically 10% to 20% more expensive than homeowners insurance. The $710 rate shown here for Las Vegas is higher than what our clients pay, but I will keep it here just for comparison reason.
• Property tax source

Calculating ROI for each of the three cities:

Austin: ROI = (($12,000 - $7,296 - $960 - $1,625 - 1.9% x $150,000 - $0) x (1 - 0%))/($30,000 + $0 + $0) = -2.4%

Indianapolis: ROI = (($12,000 - $7,296 - $960 - $802 - 1.07% x $150,000 - $0) x (1 - 3.4%))/($30,000 + $0 + $0) = 4.3%

Las Vegas: ROI = ($12,000 - $7,296 - $960 - $710 - 1.07% x $150,000 - $0)/($30,000 + $0 + $0) x (1 - 0%) = 5.8%

Calculating cash flow for each of the three cities:

Austin: Cash Flow = ($12,000 - $7,296 - $960 - $1,625 - 1.9% x $150,000 - $0) x (1 - 0%) => -731/Yr or -60/Mo.

Indianapolis: Cash Flow = ($12,000 - $7,296 - $960 - $802 - 1.07% x $150,000 - $0) x (1 - 3.4%) or = $1,291/Yr or $107/Mo.

Las Vegas: Cash Flow = $1000 - ($600 + 8% x $1,000 + .086% x $150,000 / 12 + $710 / 12 + $0) x (1 - 0%) or = $1,744/Yr. or $145/Mo.

As you can see from the above examples, property taxes, state income taxes, insurance and other factors can make a huge impact on profitability. You need to take all these factors into account when you are considering purchasing a property and especially when you are comparing properties. 

In summary, there are good properties in Las Vegas, the problem is finding them. Also, when you are comparing returns between two properties in different locations you have to take into account all the significant recurring cost factors. Don't just assume that x% in one location is the same as x% in another location.

@Craig Hanlon

@Jay Hinrichs

I agree with Jay, equity is at best, unrealized gain. Plus, if you were to sell a property, the transaction cost is likely to be in the 6% to 8% range.

On buying a property for $150,000 which needs $20,000 in materials + labor, it may not be as good a deal as you might think. Below is a comparison between buying a property for $150,000 + $20,000 in materials if all your labor is "free" and it takes you 3 months to get it market ready. Also, I will assume that you can rent the property immediately (zero days) once the work is complete. I will also assume a 2% property tax rate and $1,000/Yr. landlord insurance and $150/Mo. in utilities (I needed some numbers so I pulled these out of thin air).

Scenario 1: $150,000 plus $20,000 and three months to make it market ready assuming 20% down, 4% interest rate, 30 year fixed.

Remember that it will take you 3 months to make it market ready so you will lose 3 months of rent in this scenario.

Scenario 2: $200,000 and ready to rent immediately with financing terms as shown above.

The above is an over simplification in many ways but I believe the basic concept is correct. From the above numbers, you may be better off buying a property in better condition for more. You will have some advantage in that your monthly debt service will be lower in Scenario 1 but the time to recover the difference is estimated as follows:

Payment Savings

Cost to Market Ready

Rent loss while making the property market ready: $1000x3=$3000

Rental Period to recover additional cost if the rent is $1000/Mo.:

Recovery Period (Mo.) = (10000+3000) / 191 = 68 Mo. or 5.6 Yrs.

In summary, when you are comparing buying a property that needs a lot of rehab, you have to consider the total costs involved when compared to buying a property in better condition. In Las Vegas, we typically reject any property that requires more than $5,000 in rehab unless there are special circumstances.

On buying properties for future gain (equity), I created a cartoon that I send to clients considering this path.

Hello @Mike Migliaccio

A very interesting question but I think it is a lot more complex that just term and rates. I don't have the answer but I can tell you our thoughts on a similar type of property. We are currently working on a $2.4M purchase of an apartment complex and we've spent far more time on what the local (sub-metro) economy is likely to do in the foreseeable future than on return rates and financing. I am not saying return rates and financing aren't important, they are. But what is likely to happen in the area is more important because it can change a performing investment into a nightmare.

For the apartment complex we are considering we've done a lot of research into how the 4 block area surrounding the property is likely to change in the foreseeable future. We've looked at all the on-line data available and spent a lot of time with city officials including planning, building, zoning and other relevant city departments. We talked to the current tenants to understand what they value and where they think the location is going. We also talked to representatives for all the major landholders in the area to understand their plans and directions. We now feel we have a reasonable idea of how the 4 block area is likely to change in the foreseeable future. We are now investigating job quality and quantity for the businesses where current and future tenants are likely to be employed. After all, rental properties are no better than the available jobs.

Based on our research to date we believe that with reasonable rehab costs we can increase profitability to a very acceptable level. And, based on our discussions with all the major area stake holders, we believe that in 5 to 7 years the property will likely be re-purposed and become much more valuable in it's new role. Based on what we know today and can foresee, we believe that our client is likely to own the property for at most 15 years. So, we are probably going for 20 year financing. 

In Summary we spent a lot of time to get a handle on the following:

Short term:

• Local population trend
• Local job quality and quantity trend
• Local crime trend
• Rehab vs. rental rates
• Maintenance costs

Longer term:

• Local area direction
• Infrastructure
• City planning directions
• Future uses
• Re-purpose costs

I think you should let your research along similar lines dictate your financing decisions.

I hope this helped.

@Bud Leiser

Bud, you are correct, my partner and I are(were) both engineers. You are the first to guess that!

@Jay Hinrichs

@Bud LeiserJay, as always your comments are insightful and reflect your deep experience. Always enjoy reading your posts.

My partner is a Las Vegas Realtor but lives in Austin TX so we have some familiarity with how the Austin property taxes work. And, I assume that DFW is about the same. Her property tax rate is 2.2%. The way her taxes are initially determined (at time of sale) is the local tax district rate x the purchase price. So, for a $100,000 property (if such a thing existed in Austin!) the calculation would be $100,000 x 2.2% or $2,200/Yr. It is then recalculated each year based on the county's assessment of current market value.

In Las Vegas, the process for calculating the tax rate is at best arcane (being kind here). The tax rate is recalculated in December of each year based on industry standard replacements minus depreciation x some magical factor plus the land value. To avoid all the mystical calculations, we determine the effective rate by calculating the actual percentage based on a few thousand recent sales. We find it ranges between 0.72% to 0.86%, depending on the tax district. If you want to really get the details, here is the place to start.

On expansive soil, there is some in Las Vegas but it is in a relatively small area. I have not personally had any foundation issues. I suspect that the lack of foundation issues is largely due to the hard as concrete "soil" we have and the level of the water table. I read that at the airport, the water table is 90 feet down and the airport is one of the lower areas in the city.