INVESTING 101 OVERVIEW

LOCATION, LOCATION, LOCATION - Where is the best area of town to buy a rental property? Again the answer is simple... anywhere you can make money. It really doesn't matter if you are in a statistically high crime area or not, as long as the price you pay for the property allows you the opportunity to meet your financial objectives. Everyone has to live somewhere.

Keep in mind I'm speaking from a strictly "rental" aspect. We are not talking about appreciation, maintenance, age, future resale, etc. When you bring in those other factors, along with your personal investing preferences, then where you buy may be more difficult to pinpoint. You see it's hard to foresee what anyone neighborhood or market will do over the next 20 years or so. I can guarantee that all properties will get older and as they do will require more and more maintenance.

The two things that eat into rental profits are vacancy and maintenance. So buying a new property in a newer area of town that is near a school might be a good way to go... if you want a single family home. The problem here is that you pay a premium for this type of property and unless you either get a terrific price or you put a load of money into your down payment, you are likely to have a negative cash flow.

PROPERTY TYPES - Another question we get constantly is which property type is better? Well if you haven't figured it out by now, I guess I'll just have to say it again...any type where you can make money. Every property has it's advantages and disadvantages.

House - Your average house needs to have the lawn and or landscaping cared for. Houses are normally larger than most condos, which means there is physically more area a tenant can potentially damage. If your house sits vacant you are 100% vacant. Also, you normally continue to incur other costs with a vacant house. There are electrical, water, and landscaping requirements. However, you do have the advantage that you are not directly competing with all the apartments, condos, townhomes, and plexes on the market. Also, people who rent houses, as compared to other housing types, stay longer and move less.

Condo/Townhouse - These properties especially in a gated community can be difficult to rent. First of all the only people that are going to see your sign in the window, assuming your community even allows a for rent sign, are people that already live there. If it's a gated community, it's even more unlikely that a potential renter will see your sign. Why is signage such a big deal. Because most people drive the areas they want to live in, looking for available properties. Condos, have to compete with every apartment complex or townhome as well. On the plus side, an owner usually doesn't have to worry about the exterior of the property, and has a smaller interior to fix should it get damaged. Tenants in condo's however, as a demographic group, as compared to people that live in houses, have a tendency to move more often.

Plexes - Duplexes, tri-plexes, fourplexes. There really isn't any new property in this category, here in Clark County, for the most part, as compared to all other forms of construction. Consequently, these properties are normally older, and are found in the center of town. Your price per unit is usually less than compared to a condo, but your overall investment is much higher simply because of the size of the project. Depending on the building size, having one or a few vacancies may not kill you. Your overall cost per unit to maintain the building is less, you just have more maintenance to do. However, every major repair is initially much more cost intensive. When you replace the roof it might run $15,000 - $30,000. But on a per unit basis, it's a third of what it would cost to do a house. You get the idea.

The bottom line is that every property has it's advantages and disadvantages. If you buy an older property because it's cheaper than a new one, then you will probably be paying way more for maintenance. If you buy a new property, in order to avoid potential maintenance problems, but don't put much down when you purchase, you will probably be upside down in your rental income and mortgage payments. There is no perfect solution. It is what ever you are comfortable with. Just remember, you make your money when you buy.