John Edmunds Real Estate & Investments


Where Do You Start

Real Estate investing can be a profitable and rewarding adventure or it can be living nightmare, depending on when, why, and how you start your investing. Like anything in life, the first step to success is preparation, and the second step is knowledge. Many times beginning investors jump into the market before researching the trends or knowing their personal objectives. Many first time investors use inexperienced agents that just want to sell them a home or property with no long term relationship objective. Or the agent has no mechanical experience in plumbing, electrical, HVAC, remodeling, or rehab. In the end, good execution, timing, persistence, and of course a little bit of luck all help along the way. After years of working with investors of all levels, from large apartments to single family homes (and being an investor myself!) I've composed a list of some of the things that I consider key when considering getting into real estate investing.

If you analyze the current Las Vegas Market you will find only about 10% of the current listings are vacant and owned by banks, commonly called REO's. Another 10% are short sales and owner occupied. And the other 80% are Equity sellers a high percentage being flips (bought at the auction rehabbed and sold for quick profit). Personally I have no problem with flips as most flippers do a very good job rehabbing although a home inspection is always suggested unless your an investment pro. 

First time investor or seasoned pro, you must submit a good offer. Almost 60% of the offers I've received on my listings are poorly written or missing information, some will get rejected immediately by the seller or bank. A properly written and submitted offer will get submitted same day or 24 hrs. Right now the market is dominated with Equity Sales so your dealing with either the occupant of the home or an investor. 

Knowing what property to acquire remains one of the more difficult decisions for any home buyer or investor. It's much easier for an investor which I will go into below but for a owner occupant so many choices so many decisions...

You have to remember there is no perfect home. If you look at 5 homes you will finds things you like about each but are not included with the others on and on, so pick your priorities. Number of bedrooms and bathrooms is easy but size of lot, landscaping, kitchen amenities, location, bathroom amenities, etc. etc. etc.

The investor on the other hand looks at the financial numbers and tries to make decisions based on facts, and attempts to keep emotions in check.

The common way to evaluate different investment properties is through comparing CAP rates. CAP rates are determined by factoring all of the investment’s expenses (but not finance) and calculate that against the projected revenue. Too often, property management, repairs, maintenance and vacancy expenses are left out in determining a proper CAP figure.

But CAP shouldn’t tell the whole story in evaluating properties. An in-depth analysis should consider projected appreciation which will lead to a superior return on investment (ROI). Suppose you are offered two investment opportunities. One is located in Tallassee FL and offers a CAP rate of 8 per cent and another in Las Vegas NV that offers a CAP of less than 6 per cent. If CAP is the only component to consider, it is a no brainer. You buy the Florida property.

I'm sure you've heard the expression that past returns are no guarantee for future success. That is certainly true. But, it can be an indication. You also look at an area and see the growth within it to help estimate potential future growth. Based on your research, you conservatively estimate that the Florida property will grow at one to two per cent over the next five years.

Meanwhile, the Las Vegas property should appreciate at five to eight per cent over that same period.

Now calculate the projected ROI over those next five years. Ensure to include the numbers used to calculate the CAP rates, but add in the projected appreciation and you will likely find that the lower CAP rate property, with the better appreciation, winds up on top.

The other factor to consider is risk. If I'm going to take on a riskier venture, I want a better ROI. There is nothing wrong with a solid ROI on a low risk venture. If you acquire a well-maintained building in a desirable neighborhood, one might be willing to sacrifice some ROI to add that property to their portfolio. However, if one is willing to acquire a property that will include higher risk ventures, such as dealing with environmental issues, tear down and rebuild, complete renovations etc., then one should be looking for an ROI that can support that risk.

No one can tell you what an acceptable return on investment should be for any venture for you. A low risk individual who is accustomed to investing in GIC’s will not require the same return on a deal as a person who is more willing to gamble with his money.

My advice is not to wait around for the home run deal. Find a cash flow generating property in fair to good condition, located in a market that you have researched and understand to be a desirable area to invest and buy it. You can certainly use numbers to convince yourself not to take action in any deal, but, in my experience, the investors that do the best are those that take action.

When it comes to property investment, timing is everything. Ultimately, choosing the right time to enter the market will have a significant impact on the long-term success of your investment.

But how can you as an investor know whether the timing is right? Global property portal Lamudi has compiled a list of 10 tell-tale signs that now is the time to start building your investment portfolio.

1. You are financially ready. You have saved enough for the down payment and you have also established your emergency fund. You have taken into account home maintenance expenses. Your credit history is good and you are able to meet all the financial obligations.

2. You have set your long-term goals. You have a clear picture in your mind of the purpose of your investment and you are flexible enough to adjust to changing circumstances. You are not hesitant and when the timing is right, you are able to adapt to the market needs and the development of technologies.

3. You have done your research. You know the neighborhood of your future property well enough to foresee the coming trends and the possible changes in the community. You have researched all the schools in the area as well as the best commuting means and you are able to predict the next homebuyers needs.

4. You have chosen a stable economy. The area is financially stable, economic trends are promising and equities are surging. No demographic fluctuation or no irregular variation of population have been recorded in the area.

5. You understand the country’s policies regarding real estate. The policies of the region promote and encourage a positive, innovative environment as well as drive further economic growth. The tax policy in the state is positive for homeowners or investors. Global innovation index is rising in the area.

6. Infrastructure projects are underway and likely to lead to an increase in property values. The infrastructure of the area is being developed with a focus on: transport, energy, solid waste and water management developments. It's Las Vegas Baby.....

7. The region is moving toward sustainable development. The region’s awareness of global and local environmental issues is increasing, the demand for homes and apartments.  As more and more people head toward sustainable living, investing in sustainable property will increase its value in the future.

8. The location draws a lot of interest, Las Vegas Baby! Whether it is the best travel destination or the hot jobs spot, the location is always on the top of the search engine. It has become a successful startup hub already or is planning to do so in the coming years, driving a lot of job seekers into the area. The number of enrolled students is increasing every year, the area draws interest of international students.

9. You have found a reliable real estate agent. If you are an overseas buyer, it is particularly crucial to make sure you have a good representative on the ground. Your real estate agent is trustworthy and knows the local market well enough to be able to help you make the choice.

10. You have researched local differences in the property market. Whether you plan to invest in a single family home or residential apartment units, you are fully aware of all cultural differences that might occur when you deal with a property seller.