All Forum Posts by: Eric Fernwood

Hello @Abigail Lipson,

You are right to spend the time selecting an investment city. The location where you invest determines all long-term income characteristics essential for achieving and maintaining financial freedom. The characteristics defined by the location include:

• Total capital required: If you can grow your portfolio using accumulated equity by cash-out refinancing, which is only possible in areas with high appreciation, you'll need considerably less capital from your savings.
• Inflation protection: Whether rents outpace inflation, enabling you to sustain your lifestyle indefinitely, only occurs in cities with significant and sustained population growth.
• Income persistence: How long your income will last. This is dependent on the city's long-term economic growth.
• Natural disaster risk: Certain locations are more prone to natural disasters, such as hurricanes, tornadoes, earthquakes, fires, and floods. Although insurance may cover the rebuilding of your property, it could be vacant for months or years until the community recovers and people return.
• Operating costs: Every dollar lost to property taxes, and insurance is a dollar less for you to live on.
• Rent control: Government control of your rental property can transform a promising investment into a nightmare.

Location Selection Process and Tools

You can try to analyze all possible cities in the US and select the “best”. But it could lead to evaluating hundreds if not thousands of cities, which is impractical due to the time required and insufficient data for smaller cities.

The other method is to eliminate all cities that are unlikely to be good investment locations, and the remaining few are worthy of further investigation. This is straightforward and practical.

The process starts with an initial list of candidate cities. Start with cities with a metro population of >1M if you want long-term, reliable income. Smaller cities may rely too much on a single business or market segment. Source: Wikipedia

From this initial list, eliminate cities that do not meet the following additional requirements.

• Minimize total capital required (to achieve financial freedom): To replace your current income, you'll need to buy multiple properties. The capital needed from your savings will depend on the location's appreciation rate. In low appreciation areas, you'll need to cover the cost of purchasing multiple properties entirely from your savings. However, in cities with higher appreciation rates, you can leverage the accumulated equity to buy additional properties via cash-out refinancing. Therefore, you'll need less capital in rapidly appreciating cities than in lower-cost locations. Never buy in slow-appreciating cities. Source: FHFA House Price Index
• Inflation protection: The only way to maintain your purchasing power and living standard is if your rents increase faster than inflation. Prices drive rents. Where prices are higher, fewer people can buy, so they are forced to rent. This increases demand for rental properties, which drives up rent. Where prices are low, more people can afford to buy, so fewer people rent. Where prices are low, rents increase slowly, so you will not have the money to pay inflated prices. Only buy in cities with significant and sustained population growth. Never invest in any location with a static or declining population. Source: Wikipedia
• Income persistence: You need a rental income that will last throughout your lifetime, which requires your tenants to remain employed at similar wages. Non-government jobs typically last between 10 and 20 years, so every non-government job your tenants have will eventually disappear. Unless new companies move into the city and create replacement jobs that pay similar wages and require similar skills, the only available jobs will likely be service sector jobs, which pay significantly less. Companies are unlikely to set up new operations in cities with high crime or high overhead costs. Never invest in any city on this list: Mapped: The Most Dangerous Cities in the U.S.
• Low natural disaster risk: A natural disaster can be a financial disaster for you. The issue isn't your property. Insurance will cover the cost of rebuilding. The problem is the community. Jobs, stores, roads, healthcare services, and gas stations can all be destroyed in a disaster, as is often shown in the news. With the community destroyed, your tenant has no choice but to move somewhere they can live and work today. It could take years to rebuild the community, and it may never recover in many instances. Meanwhile, debt service, taxes, insurance, maintenance, and other expenses continue without pause. The relative cost of homeowners insurance is the best indication of a high-risk location. Source: Insurance - ValuePenguin
• No 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, limit your ability to select a reliable tenant, and make evictions of non-performing tenants difficult or impossible. Never invest in any city with rent control. Source: Google search.
• Low operating costs: It's not about how much you gross. It's about how much you net. Every dollar lost to operating costs means one less dollar for you to live on. The two most significant operating costs for investors are property taxes and insurance. Operating costs vary significantly by state; only invest in states with low operating costs. Source: Insurance - ValuePenguin, State Property Tax Rates - Rocket Mortgage.

Lastly, select a city with an experienced investment team to narrow the list of cities further.

We are hiring! Due to the increasing client volume, we are adding an investor agent to our team.

Who Are We?

- A team of investment realtors with over 16 years working exclusively with investor clients.

- Delivered over 500 investment properties to 180+ clients worldwide.

- A repeat business rate of over 90%. Over 90% of clients are remote.

- Our services encompass property selection, evaluation, renovation, and management. [Watch a 2-minute video overview of our investor services](https://tinyurl.com/yjpfbyw3).

Our core team consists of four members:

- Cleo Li: Engineer & Co-Founder - CEO. Manages the business and strategic direction, ensuring client success.

- Eric Fernwood: Engineer & Co-Founder - Specializes in data mining, analytics, software development, and process improvement. Handles new client onboarding.

- Taylor Koki: MBA - Investor agent. Primary client contact and on-site property evaluator. (Taylor has been with us for nearly 7 years.)

- Selena Tsai: Manages transactions and renovations, including vendor and property manager handoffs. (Selena has been with us for over 4 years.)

Our Client Base

Our clients are high-income professionals, such as engineers, doctors, finance professionals, and business owners who are all highly intelligent professionals with cash and credit but limited time. They purchase passive income stream services, not traditional real estate.

Our average client buys 2.8 properties. Repeat business is our business, this requires customer satisfaction. This means that you will work with the same people over many years.

What You Will Receive

• Training: Comprehensive investment training, including directed reading, one-on-one sessions, and field training.

• Client Assignments: You will receive fully qualified and trained clients who have signed our buyer representation agreement, obtained loan pre-approval, and are ready to invest. NO lead generation, cold calling, or prospecting.

• Property Assignments: You will receive and evaluate potential investment properties that meet our proprietary algorithm criteria and align them with your client's goals.

• Client Contact: Client interactions primarily via Zoom/email/phone/text. You will rarely physically meet clients. Most clients live in other states or countries.

• Support: You are the client relationship manager and will be fully supported as needed throughout the entire sales cycle.

Who We Are Looking For

- Integrity: Someone who prioritizes the client's interests above their own. We value long-term relationships built on trust.

- Tech-Savvy: Comfortable with technology and detailed analytics.

- Confidentiality: You must be willing to sign a non-disclosure agreement.

- Commitment: You must be motivated and committed to a career as an investor realtor.

- Client Relationship: This is not a typical realtor position involving house showings. You will act as a trusted advisor to high-income individuals seeking financial freedom, not a traditional realtor.

- Excellent Writing Skills: Strong written communication is crucial.

- Self-starting: Excellent time management and organization skills.

- Licensing: Must hold a Nevada real estate license.

If you are passionate about investment real estate and eager to join an elite team dedicated to helping clients achieve financial freedom, we would love to hear from you. Please reach out to me.

Hello @Jesse Rathe,

So we are on the same page, I will assume that your goal is financial freedom.

Financial freedom is more than just replacing your current income. Financial freedom requires:

• Your rental income must increase faster than inflation so you will have enough money to cover inflated costs in the future. For rents to rise quickly, housing demand must continue to increase. Therefore, the city you choose must have significant and sustained population growth.
• Sufficient rental income to replace your current income. This will require purchasing multiple properties. If you buy in a location without significant and sustained appreciation, every investment dollar must come from your savings. If you buy in a location with significant and sustained population growth, you can use a cash-out refinance to reinvest accumulated equity as the down payment on additional properties. This will greatly reduce the total capital required.
• Lasts throughout your lifetime. Your rental income depends on your tenants remaining employed and paying rent. However, most private-sector jobs last between 10 and 20 years. So, unless replacement jobs are constantly being created, your tenants will not be able to continue paying current levels of rent. This requires a city that attracts new companies who will create the replacement jobs. Companies expand to locations with low crime, low operating costs, a pro-business environment, and a metro population >1M.

Having defined these three requirements, I will now provide the sources for the necessary information.

• Cities with a metro population >1M: Small towns may rely too much on a single business or market segment. Source: Wikipedia
• Population growth: Source: Wikipedia. Never invest in any city with static or declining population.
• Crime rates: Never invest in any city on this list: Mapped: The Most Dangerous Cities in the U.S.
• Operating costs: The best indicators of operating costs are state income taxes, homeowner’s insurance, and property taxes. Source: Insurance - ValuePenguin, State Property Tax Rates - Rocket Mortgage. State income taxes - Intuit

Another factor to consider when choosing a city is rent restrictions. I would never purchase property in a city with such limitations. Rent restrictions can limit your ability to select the best tenant, increase rents, and evict non-performing tenants. The best way to determine whether a city has rent restrictions is a Google search for rent restrictions in the specific city you're considering.

Jesse, these information sources should help you on your investment city search.

It’s June, and it's time for another Las Vegas update. For a comprehensive view of the Las Vegas investment market, message me for my blog link. It contains more detailed information on investing insights, analytics, and, particularly, investing in Las Vegas.

Before proceeding, note that the charts only include properties that fit the following criteria unless stated otherwise.

• Type: Single-family
• Configuration: 1,000 SF to 3,000 SF, 2+ bedrooms, 2+ baths, 2+ garages, minimum lot size is 3,000 SF, one or two stories.
• 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 (click to enlarge).

Overall Las Vegas Real Estate Market Inventory

The chart below, provided by the MLS, includes all property types and price ranges.

The inventory level continued its downward trajectory, significantly lower YoY.

Rental Market Trends

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

Rentals - Median $/SF by Month

Rents continued the up trend as expected. YoY is up 3%.

Rentals - Availability by Month

The number of homes for rent continued the downward trend. YoY is down 11%.

Rentals - Median Time to Rent

Median time to rent had a slight increase from April, but is still below 20 days. YoY is flat.

Rentals - Months of Supply

Only about 0.7 months of supply for our target rental property profile. YoY is down 36%! Demand is greater than supply. This will pressure up the rents.

We saw a similar tight supply in sales as well. Now just 0.6 months of supply. This will continue to push up the prices.

Sales - Months of Supply

Sales - Median $/SF by Month

Despite persistently high interest rates, the $/SF continued to climb, up 10% Year over Year.

Why invest in Las Vegas?

In short, to achieve and maintain financial freedom. However, financial freedom isn't just about replacing your current income. Financial freedom requires maintaining your lifestyle for life. This requires an income that rises faster than inflation, or you will not have the additional dollars you will need to pay future inflated prices.

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 $320,000 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. Las Vegas's average annual population growth is between 2% and 3%. What draws people to Las Vegas? Jobs. Depending on the article, there is between $26B and $30B under construction, and the last job fair had over 20,000 open jobs.

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.

It’s May, and it's time for another Las Vegas update. For a comprehensive view of the Las Vegas investment market, message me for my blog link. It contains more detailed information on investing insights, analytics, and, particularly, investing in Las Vegas.

Before proceeding, note that the charts only include properties that fit the following criteria unless stated otherwise.

• Type: Single-family
• Configuration: 1,000 SF to 3,000 SF, 2+ bedrooms, 2+ baths, 2+ garages, minimum lot size is 3,000 SF, one or two stories.
• 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 (click to enlarge).

Overall Las Vegas Real Estate Market Inventory

The chart below, provided by the MLS, includes all property types and price ranges.

The inventory level continued its downward trajectory, significantly lower YoY.

Rental Market Trends

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

Rentals - Median $/SF by Month

$/SF remained unchanged from March, now at the highest level in the last 13 months. YoY is up 3.4%.

Rentals - Availability by Month

The number of homes for rent continued the downward trend. YoY is down 5.5%.

Rentals - Median Time to Rent

Median time to rent continued to fall, now below 20 days, showing a heating up rental market. YoY is down 9.5%.

Rentals - Months of Supply

Only about 0.8 months of supply for our target rental property profile. YoY is down 33%! Demand is greater than supply. This will pressure up the rents.

We saw a similar tight supply in sales as well. Now just 0.5 months of supply. This will continue to push up the prices.

Sales - Months of Supply

Sales - Median $/SF by Month

Despite persistently high interest rates, the $/SF continued to climb, up 7.8% Year over Year.

Why invest in Las Vegas?

In short, to achieve and maintain financial freedom. However, financial freedom isn't just about replacing your current income. Financial freedom requires maintaining your lifestyle for life. This requires an income that rises faster than inflation, or you will not have the additional dollars you will need to pay future inflated prices.

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 $320,000 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. Las Vegas's average annual population growth is between 2% and 3%. What draws people to Las Vegas? Jobs. Depending on which article you read, there is between $26B and $30B under construction.

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 @Maxwell Emerson,

Your next step depends on your financial goal. If your goal is financial freedom, you'll need a rental income that can replace your current income and must increase fast enough to outpace inflation.

Inflation increases the cost of goods and services over time, effectively reducing the value of your money. For instance, if your rent is $1000/Mo and the annual inflation rate is 5%, the buying power of $1000 will decrease to $950 next year. You will need approximately $1630 in ten years to buy what $1000 can buy today. Therefore, if your rental income doesn't keep up with inflation, you must consistently reduce your monthly expenses or return to work to compensate for decreased purchasing power to maintain your living standard.

No matter how many properties you eventually own, unless rents outpace inflation, you can not achieve true financial freedom.

Back to Your Situation

You stated, “I don't believe that the property will continue to appreciate or see the rent growth it has seen over the past few years.” Thus, you may need to take action. To simplify the decision process, I created the following decision tree. (click to enlarge)

Bottom Line

Evaluate the property based on whether it will enable you to achieve financial freedom. If rent increases have not outpaced inflation, you know what to do.

Hello @Ryan Daulton,

A popular question. I am usually asked about stocks but CDs, mutual funds, and bonds are similar so I will compare them to real estate.

Clients frequently ask me whether real estate or stocks are the best investment. My answer is, “It depends on your goal.”

For most people, the goal of investing is financial freedom. Financial freedom is more than just replacing your existing income. Financial freedom is the ability to maintain your current standard of living for as long as you live. To achieve this, you need an income that meets three requirements:

• The income must outpace inflation: If the income does not outpace inflation, you will not be able to maintain your standard of living, and sooner or later, you will be back to being a daily worker.
• Income persistence: Your income must last throughout your life.
• Income dependability: The income must continue, even in bad economic times.

How do stocks and real estate meet the income requirements for financial freedom?

Stocks, Mutual Funds, CDs, Bonds, Etc.

All of these financial instruments are for capital accumulation. The concept is to accumulate sufficient capital and then draw it down over the remainder of your life. This is problematic for financial freedom for the following reasons.

• If you live longer than expected, you will run out of money. A nightmare many are facing.
• You need additional capital to offset inflation and potential market crashes throughout your remaining life.
• During bad economic times, stock prices plunge. Withdrawing the same amount for living expenses magnifies the loss of your working capital.

For example, if you need $10,000/Mo for 30 years (assumed remainder of your life), how much capital will you need to accumulate? Assuming no inflation and no market crashes:

• $10,000 x 12 x 30 = $3,600,000 in after-tax savings.
• If there is inflation or market crashes you will need far more. For example, if there are no market crashes and inflation averages 4%/Yr, you need to accumulate $6,730,193!

Inflation and market crashes are a fact of life, so you must accumulate additional funds to compensate. Plus, you can not assume that you will always make the right stock selection over an extended period of time. What if you make a mistake? Even the best money managers have been unable to do this over an extended period of time.

I regularly hear people say that over a xx-year period, stocks outperform real estate. One thing they missed is that because you will be living off the stocks, you cannot wait xx years to withdraw the funds; you will have to withdraw/sell every month, regardless of the market state. And, every time you sell, your working capital decreases.

What about dividend-paying stocks? Inflation, market dynamics, and taxes complicate the calculation of the total capital required to generate $10,000 per month for the rest of your life. It's enough to say that you will have accumulate millions before you get of the daily worker treadmill.

The one big advantage of stocks over real estate is liquidity. In most cases, you can convert your portfolio of stocks to cash in a day.

Real Estate

Real estate is a combination of recurring income plus capital accumulation. Let’s stack it against the requirements for financial freedom:

• If you buy property in a city where rent increases exceed inflation, you will have the extra income necessary to maintain your standard of living throughout your life, despite inflation.
• Rental income is a near-perpetual income that you can pass on to your children and their children. There are families in Asia and Europe who are still living off real estate investments their ancestors purchased over 600 years ago. With real estate, dynastic wealth is a real possibility.
• If you purchase properties that target a reliable tenant segment, your income will not be disrupted by economic turbulence, as demonstrated by our clients’ unchanged rental incomes during the 2008 financial crash and COVID.

Also, because rents and prices are both driven by population growth, where you have rapid rent growth, you have rapid appreciation. With rapid appreciation, you can use cash-out refinance for the down payment on additional properties. This is how I and many of our clients have grown their portfolios with reduced capital injection.

So, if your goal is $10,000/Mo, how many properties will you need to buy? If I assume each property provides $300/Mo net cash flow:

• $10,000 / $300 ≈ 33 properties

How much do you need for the down payments on 33 properties?

If you purchase in a city where prices are low because they have not kept pace with inflation, every investment dollar must come from your savings. How much would you need for 33 properties if properties cost $200,000 and your only expense was the downpayment and you put 25% down?

• 33 x $200,000 x 25% ≈ $1,650,000

If you purchase property in a city with significant appreciation, you can use the accumulated equity every few years through cash-out refinance for the down payment on your next property. If you use this approach, how much capital will you need to acquire 33 properties?

I will assume each property costs $400,000, and you are putting 25% down. The down payment for the first property will be:

• $400,000 x 25% = $100,000

If the property is appreciating at 8%/Yr, how long will you have to wait until you have sufficient equity that the proceeds from a 75% cash-out refinance will cover the down payment on another $400,000 property?

I will calculate the net proceeds from a 75% cash-out refinance using the following formula.

Net Proceeds = $400,000 x (1 + r)^n x 75% - $300,000

Where:

• r: Annual appreciation %
• N: The number of years into the future
• $300,000 is the loan payoff. I assume no principal paydown to simplify the example.
• 75% is the refinanced amount.

The calculations for the net proceeds are as follows:

• Year 1: Net Proceeds = $400,000 x (1 + 8%)^1 x 75% - 300,000 ≈ $24,000
• Year 2: Net Proceeds = $400,000 x (1 + 8%)^2 x 75% - 300,000 ≈ $49,920
• Year 3: Net Proceeds = $400,000 x (1 + 8%)^3 x 75% - 300,000 ≈ $77,914
• Year 4: Net Proceeds = $400,000 x (1 + 8%)^4 x 75% - 300,000 ≈ $108,147

So, after four years, you have the downpayment for your next property. Using cash-out refinance, the total capital required is greatly reduced.

There are additional advantages to real estate that stocks do not offer. Below are three:

• Leverage: You can acquire $1M worth of real estate by putting down $250K. When the real estate appreciates 50% (how many years does it take for Las Vegas properties to appreciate 50% at 10% a year? (4.25 years), you’ve tripled your equity. If you put $250k into stocks and when the stocks appreciate 50%, your equity increases by 50% minus taxes.
• 1031 exchange: You can sell one income property, buy a replacement income property, and defer capital gains taxes.
• In many cases, depreciation alone will reduce or eliminate taxes on your rental income.

Real Estate Disadvantages

• Liquidity: There is no way to convert real estate to cash instantly like you can with stocks.
• Higher entry price point: You can buy stocks for a$5 or less. With properties in a city with rapid rent and price growth, you will currently need between $125,000 and $150,000 for your first property.

Summary

I view stocks, mutual funds, CDs, bonds, etc. and real estate as completely different investment vehicles.

• Stocks, Mutual Funds, CDs, Bonds, Etc.: Stocks are for capital accumulation. Once you've accumulated enough capital, you sell shares monthly for living expenses. At the end of the drawdown period, you have no more shares.
• Real estate: Real estate provides a nearly perpetual income stream plus capital growth. If you purchase properties in a good investment city, rent growth will exceed inflation, enabling you to maintain your current living standard throughout your lifetime. Also, as your properties appreciate, you can grow your portfolio using cash-out refinance, which will increase your rental income with minimal additional capital.

Hello @Forrest Brown,

I propose a simple process for deciding whether to sell or hold based on the goal of financial freedom.

Financial Freedom

Financial freedom requires more than replacing your current income. It requires an income that enables you to maintain your current standard of living for the rest of your life. To maintain your standard of living, you need an income that outpaces inflation because each trip to the store costs you more for the same basket of goods. If your rental income doesn’t outpace inflation, you won’t have the additional money to pay inflated prices.

This means the decision to sell or hold depends on how the property has performed in the past relative to inflation. I created the following chart to simplify the decision process (click to enlarge).

The Bottom Line

Evaluate the property based on whether it will enable you to achieve financial freedom. If rent increases have not outpaced inflation, you know what to do.

Please note that the following applies only to our target property segment, not the entire Las Vegas metro. Click here to see the property profile we target.

The market is heating up, evidenced by shrinking days on the market for both sales and rentals. See the graphs below. Notice the significant decrease of days on the market YoY, 15% for rentals and 47% for sales!

Sales - List to Contract Days by Month

The number of days on the market is decreasing rapidly in 2024, driven by limited inventory and strong demand.

Rentals - List to Contract Days by Month

The same trend is true for rentals. Rental trends tend to follow sales. When prices are high, more people are forced to rent, which results in increased demand and rising rents.

The above charts show data through March 2024. Our participation in the market in April tells us that April is hotter than March. Our clients currently hunting in the market know how fast good properties are selling and how competitive they are. Those who recently put their properties on the rental market were delighted with how quickly they rented out. So when next month’s stats are out, I expect to see a continuing decrease in the days on the market for both sales and rentals.

Inventory has been frustratingly low and is getting worse

Sales inventory had stayed low throughout 2023 and has plummeted in 2024.

Inventory in March dropped to only 0.5 months, less than half of that a year ago! The last time we saw a 0.5-month inventory was during the crazed COVID days.

Even the rental inventory is decreasing rapidly in 2024.

The rapidly shrinking inventory for both sales and rentals can only mean one thing—rising prices and rents. This is already showing in March data, and I expect to see more price and rent increases in next month’s stats.

Sales - $/SqFt by Month

Rentals - $/SqFt by Month

For landlords, this is wonderful - rising property values and increasing monthly cash flow. Good time to expand your portfolio. If you don’t own an investment property in Las Vegas yet and have been thinking about it, now would be a good time to act, as the longer you wait, the higher the prices you will need to pay. Las Vegas properties will remain excellent investments for the foreseeable future due to the sustained economic and population growth. Still, it is always better to acquire an asset at a lower price.

Where the market goes from here depends on two words:

Interest rates

If interest rates increase by 1% or more, I expect the market to cool down correspondingly. The number of homes available will likely remain stable, but the pool of buyers will shrink in line with the rise in interest rates. This could result in moderate to negligible increases in prices and rents, depending on the exact interest rate levels. However, given the recent announcement by the Fed to cut interest rates by a total of 0.75% in 2024 and the stable state of inflation, it seems unlikely that interest rates will see a significant increase for the remainder of 2024.

If interest rates drop by 1% or more, I KNOW the market will switch to hypergear. Although more homes may enter the market, even more buyers will emerge, driving up prices, similar to what we saw during the COVID frenzy. However, with inflation still exceeding the Fed's target and the GDP and unemployment rate showing positive signs, there's little incentive for the Fed to cut interest rates aggressively. Doing so could risk letting inflation spiral out of control again. Therefore, I believe the chance of a significant interest rate drop in 2024 is low.

The most likely scenario is that the interest rates will remain stable at their current levels throughout 2024, with minor fluctuations. In this scenario, I expect the current inventory level to be the main price and rent driver. At 0.5 months for sales and 0.8 months for rentals, I expect a strong, but not extreme, growth in prices and rents, which means a 10-15% increase in prices and a 6-8% rise in rents for the year, inline with our 2024 Investor Outlook.

The investment market in Las Vegas is experiencing strong growth and is expected to continue the trend as long as the interest rate does not increase significantly.

Market Trend

Below are charts from our latest trailing 13-month market report, which includes March data. Remember that this data is only for our target property profile, not the entire metro area. To see all the charts, please click here.

Rentals - Median $/SF by Month

$/SF jumped up in March, now at the highest level in the last 13 months. YoY is up 5.2%.

Sales - Median $/SF by Month

Despite persistently high interest rates, the $/SF continued to climb, up 10.3% Year over Year.

Rentals - Median Time to Rent by Month

Median time to rent continued to fall after the holiday season, now at 21 days, showing a heating up rental market. YoY is down 12.5%.

Sales - List to Contract Days by Month

Median days on the market continued to drop rapidly, showing a heating-up market. YoY is down more than 46.7%!

Rentals - Availability by Month

The number of homes for rent continued the downward trend. YoY is down 12.5%.

Sales - Availability by Month

This chart shows the average daily number of properties for sale in a particular month. YoY is down 45%!

Rentals - Months of Supply

Only about 0.8 months of supply for our target rental property profile. YoY is down 27%! Demand is greater than supply. This will pressure up the rents.

Sales - Months of Supply

There are just 0.5 months of supply for our target property profile. YoY is down 54.5%! A 6 months supply is considered a balanced market. This will continue to drive up the prices.

Any questions, please let me know. Thank you for reading my post.

Hello @Antonio Waller,

There are data sources for everything you need. However, most are not online. Also, before you start researching, first decide on your financial goal. For most people, the goal is financial freedom. Financial freedom is not just replacing your current income. Financial freedom requires maintaining your current lifestyle for the rest of your life. Financial freedom requires a passive income that meets three requirements:

• Your income outpaces inflation: Inflation continually erodes the purchasing power of a fixed amount of money. What you can purchase today for $100 will require $155 in 10 years if the inflation rate is 5%. The only way to sustain your current lifestyle is if rents rise faster than inflation. This is determined by the location.
• Persistent: You can not outlive your income. This requires continual and significant job creation. This is determined by the location.
• Reliable: You need to be able to rely on the rent coming in every month, regardless of the economic situation. This is determined by the location, the tenant segment you target and the companies they work for.

In the rest of this post, I will explain how to select the investment location, tenant segment, and property, as well as the information needed and the sources.

Selecting an Investment Location or City

The investment location is your most crucial investment decision, not the property itself. The location defines all long-term income characteristics, including whether your rents keep pace with inflation, the total capital required to acquire sufficient properties to maintain your standard of living, and how long your income will last.

There is a straightforward location selection process. Start with an initial list of candidate cities and eliminate all cities that fail additional requirements. The result will be a short list of potential investment locations for further consideration.

• Cities with a metro population >1M: Small towns may rely too much on a single business or market segment. Source: Wikipedia
• Sustained and significant population growth: Prices and rents are a function of supply and demand. Demand is driven by population growth. Where there is sustained and significant population growth, the current housing supply will not meet demand so prices rise until the number of sellers roughly matches the number of buyers. Where population growth is stagnant or falling, the current housing supply is sufficient so there is little increase in prices. Rents are driven by property prices. Where prices are low, more people can buy, so there is little demand for rentals, so there is limited or no rent growth. Where prices are higher, more people are forced to rent so rents increase. In the best locations, rent growth outpaces inflation. Never invest in any location with a static or declining population. Source: Wikipedia
• Low crime - A rental property is no better than the jobs around it. And, it is not just the current jobs. The average lifespan of a company is ten years, and an S&P 500 company only has an average lifespan of 18 years. Every job your tenants have today will disappear in the foreseeable future. Without new companies moving into the city and creating replacement jobs, the only jobs left will be low-paying service sector jobs. Companies wanting to set up new operations will not choose high-crime cities. Never invest in any city on this list: Mapped: The Most Dangerous Cities in the U.S.
• 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 ability to select the best tenant. It may make evictions of non-performing tenants difficult or impossible. Never invest in any city with rent control. Source: Google search.
• Low operating cost - It's not about how much you gross, it's about how much you net. Every dollar lost to operating costs means one less dollar for you to live on. The two most significant operating costs for investors are property taxes and insurance. Operating costs vary significantly by state; only invest in states with low operating costs. Source: Insurance - ValuePenguin, State Property Tax Rates - Rocket Mortgage.

Tenant Segment Selection

Properties do not generate income; it's the tenants that pay the rent. If you rely on this rental income, it needs to be reliable. Reliable income comes from tenants who stay for many years, pay rent even during economic downturns, and maintain the property well. However, such reliable tenants are the exception rather than the norm. How do you maximize the odds of always having a reliable tenant in your property?

Begin by identifying a tenant segment with a high concentration of reliable individuals. How do you identify such a segment? There is no database or online source of this information. You can only obtain this information through property manager interviews.

Simplistically, ask multiple property managers the same question. “What would you buy if you wanted tenants who stayed many years, always paid the rent on schedule, and take good care of the property?” This is what I did. In my case, seven or eight out of the ten property managers I asked described the same properties. Once I knew the property type, configuration, location and rent range, I developed what I call a property profile. A property profile is a physical description of the properties you want to buy. A property profile has at least the following factors.

• Property type: Single-family, multi-family, condo, townhouse, etc.
• Configuration: One bedroom, three bedroom, one story, two-story, lot size, age range, garage size, etc.
• Location: Where the tenant segment is renting today.
• Rent range: How much is this segment willing and able to pay.

Notice that I did not select any aspect of the property. I determined the property characteristics that attract the segment with the behaviors necessary for a reliable income. Then, I bought similar properties. If you follow dogma on websites about the “best” property to buy, you are unlikely to get reliable tenants because each location is different.

Once you know the property profile for the properties you want to buy for a reliable income, it is time to select the properties.

Property Selection

In addition to conforming to the property profile you created based on income reliability, there are additional considerations, as illustrated below.

The rent is the critical factor. Knowing the rent, you work backwards to a purchase price. Where can you get rent information? There are no reliable online sources for estimating rent for a specific property. For example, below is a photo of a boarded-up fire-damaged property in poor condition.

The popular site for a rental estimates I checked predicted the rent as $2,199/Mo. The reason the rent estimate makes no sense is that such sites estimate rents (and prices) based on area averages, not a specific property. However, you will not buy an “area average” property; you will buy a specific property in a specific condition. In summary, general information does not apply to specific properties. Online sites have little or no value due to gross inaccuracies.

An experienced local investment team is the only source for the *specific* property information you need. They possess all the resources necessary to provide the information you need to make an informed decision. And, rental information must come from a skilled property manager.

The problem is that many estimate rent based on recent similar rentals. This is not valid. When people look for a place to rent, they compare what is available at that time and choose what, in their opinion, is the best option for them. What a property rent for recently has no relevance to a potential renter. The choose from what is available today. Also, they do not just look at the property down the street from yours, they may be comparing your property with a property across town. See the illustration below. To someone works in a central job location, housing areas 1, 2, and 3 are the same.

Only an experienced property manager can provide the information you need; there is no database or online source.

Where Is the Data?

I consolidated the information sources below. Reach out if you have questions.

Location Selection:

• Cities with a population >1M. Source: Wikipedia
• Sustained and significant population growth. Source: Wikipedia
• Low crime. Source: Mapped: The Most Dangerous Cities in the U.S.
• Rent control. Source: Mapped: Source: Google search
• Low operating cost. Source: Insurance - ValuePenguin, State Property Tax Rates - Rocket Mortgage.

Tenant Segment Selection:

• Tenant segment with a high concentration of reliable people. Source: Interview multiple local property managers.

Property Selection:

All information must come experienced investment team members, there is no other source. Below are the primary sources for each information item.

• Property value and offer price: experienced agent
• Rent range and time to rent: property manager
• Renovation item list: property manager
• Renovation cost: renovation company the team works with

Antonio, reach out if you have questions.