Las Vegas Real Estate Investing: How Eric Fernwood Built Properties

Eric Fernwood (00:00)
So many places I read on bigger pockets and others is buy this kind of property. Well, you know, the best kind of property in Boston might be the terrible property in Houston. So you can’t make generalized statements. So what my approach is, is to determine which types of properties are occupied, people stay many years, pay the rent, so on and so forth.

How you could actually do this anywhere in the world?

Ask multiple property managers that similar question in where they all converge. That’s what you should be buying.

The property type doesn’t matter. It’s the container. It’s not what pays the rent. It’s the people who pay to occupy the property to pay the rent. So you want to attract people who are ultra reliable.

The rest is simple. Ask people who are experts in the field what they would do if they wanted to attract people with the right financial behaviors and listen to them.

Michelle Kesil (02:26)
Hey everyone, welcome to the Investor Fuel Podcast. I’m your host, Michelle Kesil Today I’m joined by someone I’ve been looking forward to chatting with, Eric Fernwood, who’s been making serious moves in the property space in Las Vegas. So excited to have you on the show here, Eric.

benefit from hearing about how you’re providing investment properties and educating investors. So yeah, dive into all of those topics.

Eric Fernwood (02:56)
Where would you like to start?

Michelle Kesil (02:57)
Yeah, so for people who are not familiar with you and your world, just give the short version of what your main focus is.

Eric Fernwood (03:04)
Okay, our focus is primarily properties that will enable financial independence. There’s a bunch of characteristics that have to exist for that to happen. For example, your rent must increase faster than inflation. You must be able to grow your portfolio with the least capital, things like this. so far what we’ve done is we’ve delivered a little over 570 investment properties to 170 clients worldwide.

The properties perform well due to the demographic that we target because tenants pay rent, properties don’t. So right now, or for the last 15, 17 years, our vacancy rate had been below 10 per, below two, sorry, below 2%. Our tenants stay on average over five years. We’ve had seven evictions in 17 years out of a tenant population of over a thousand. Now, how we’re different.

Most people will talk about properties. We don’t believe properties pay rent. They never have. The tenant pays the rent. So what we are focused on is a narrow demographic who stays many years, always pays the rent, takes good care of the property. And what we’ve done is essentially through research, we’ve identified what and where these people are renting and we’ve been buying properties similar to that. And this worked extremely well for our clients.

The other difference I would mention is that we’re engineers. We have a very analytic based approach. There’s no opinions, there’s no hope or anything like that. So everything’s been about, you know, repeatable processes and we provide a full service. Everything from education through property management, mostly through third parties and things like that. But we provide a whole service for our clients.

Michelle Kesil (04:46)
Awesome. And yeah, can you share a little bit more about who your clients are and yeah, like kind of what the majority do?

Eric Fernwood (04:50)
Yes.

So of the 170 plus clients, I want to say eight or 10 were local. All the rest live in other states or other countries. We’ve never met 60 % of our clients. Many have never been to Las Vegas in their lives.

Our typical client is an individual with a good amount of income who understands the benefits of investing in real estate but doesn’t want to get involved. They don’t want to manage anything. They don’t want to do anything. So with our processes, generally,

based on interviews of existing clients, they tell me that to get their first property, the grand total time investment they had was about eight to 12 hours, because it doesn’t take a lot of time the way we do it, because we don’t send them all as data sheets, we send actual analytics that you can make decisions on. So our clients are doctors, lawyers, engineers, company owners, ⁓ successful business people, and they’re very sharp people.

Michelle Kesil (06:34)
Awesome. And what has been the key to keeping your business running smoothly?

Eric Fernwood (06:39)
⁓ research. We do a heavy amount of research on our demographics and understand what they’re doing and how it’s changing. So since we are focused on the tenant segment first who pays the rent, we’ve had to slowly move things as the demographic has changed. Salaries are increasing quite rapidly in Las Vegas, so we need to move the property levels up as that goes and so forth.

That’s a lot of time. The other thing is we provide a full service. So we’re involved with everything from inspections through renovations, largely through third parties. But for example, we standardized all of our renovation components in 2017, but we don’t do the same thing to every property. It depends on the demographic segment is going to target the subsegment, I should say, and the current market conditions. So.

And the property itself. So for example, suppose you buy a property and it has laminate counters. We know our demographic loves granite counters, kitchen counters. But what if the competition also has laminate counters? It’s a waste of your money to put in granite. You’re not going to get anything more for it, really. But if everyone else has granite and you have laminate, you have to do it pretty much. So it’s very, very focused on the current competition and what needs to be done.

to maximize your rent while minimizing your spend.

Michelle Kesil (07:55)
Yeah, absolutely. And I know we chatted a little bit before the call, but maybe you can share with the listeners about why Las Vegas in particular and what makes this a good spot for investing.

Eric Fernwood (08:08)
Yes, Las Vegas, I was living in New York City, decided to create this business and I had several choices. Probably Las Vegas was dead last or something because my impressions of Las Vegas was not good, City. So, but what really makes the difference here is pro-business government, low cost of operations and land shortage.

My best guess today is there’s less than 16,000 acres of undeveloped privately owned land. The vast majority of it is owned by the federal government. It’s even a little bit worse than that. There’s physically no room to go. I mean, like if you go to the west, you have a mountain range. Other side of that’s a national park. If go north, you have the military zones up there. East, you have a mountain range and national parks. So there’s really not much you can do. There’s no way to expand the amount of land. land here,

starts at about 1 million an acre and it goes up rapidly from there. Then what that really means is that new homes cost started, new homes started about $550,000. Our demographic can only afford to rent properties that today are priced between 350 and 475. So it doesn’t really matter how many five, six, seven, $800, $1,000 homes they build. It does not increase the amount of properties in that three.

50 to 475 range. Combine that with a large number of jobs. The last job fair in Las Vegas had over 2000 available positions, sorry, 20,000 open jobs. That’s a lot for little city like Las Vegas. Now that’s today. That’s why people move to a city as jobs. The next thing is that the current situation, according to the local newspaper, there’s about $28 billion under construction or in late

planning stages. So there’s future jobs coming. jobs are the lifeline of investing. Your tenants have to be employed. They got to make money or they’re not paying your rent. So Las Vegas has a perfect combination of ever increasing demand for this fixed inventory price between 350 and 475. And there’s really no way to increase it.

So that’s partially why Las Vegas.

Another big thing is it’s very pro-landlord. An eviction here for a non-paying tenant will typically take between 17 and 35 days. End of story. There’s nothing you can do about it. Consequently, due to our demographic and the very straightforward landlord-friendly laws here, we’ve had seven evictions in 17 years out of a tenant population of over 1,000. If people know

that they’re not going to be, they’re going be penalized if they do certain things, they’re not going to do them. So it’s a combination.

Michelle Kesil (11:20)
Yeah, absolutely. That’s such good information. Awesome. So let me ask you this. What are you most focused on solving or scaling next in your business?

Eric Fernwood (11:31)
Since we have primarily remote clients, we have very few locals, what we wanted to do was to create a business model where it required very little time from our clients to successfully invest here. Most of our clients we’ve interviewed after they’ve purchased their first properties. It took between eight and 12 hours of their total time to get a property. And so we’re focused on remote investors who have time

have no time, have money, but they don’t have any time to get involved with real estate. And so most of our clients will not come to Las Vegas to see their properties, the vast majority in fact. So we do everything that they need done. And we do it efficiently because we built processes, we’re engineers, everything’s a process or we’re not going to do it. just, we don’t believe in luck or hope or anything like that. We believe in repeatable processes. So

focusing, continuing to focus our business on our customer base, which is these high income earning individuals and ⁓ building that out. that’s really important to us. And that in long-term support because the largest source of business is repeat business and referrals from existing clients or average client buys over three properties from us. So our repeat business is a huge part of our business.

Michelle Kesil (12:46)
Awesome. Yeah, so how do your customers find you guys?

Eric Fernwood (12:52)
We’re terrible at marketing. have to tell you this. So we have all the referrals, case studies, testimonies. We have all of that, but we have not done a good job of marketing ourselves. The problem is the two founders are engineers. And so the majority of our business comes from referrals. Like I have two more meetings today with new clients and they’re both from existing clients. So that’s how we get most of our business. The other thing is we publish a lot of articles on things like bigger.

Michelle Kesil (12:55)
You

Eric Fernwood (13:19)
We used to be writers for bigger pockets, but they changed their editorial content to only internal writers. But biggerpox has been a big source for us and again, referrals are everything to us. Long term support has really been a big plus for us. For example, we have a situation where if clients have a problem two years from today, three years, five years, doesn’t matter. They reach out to us, let us solve the problem, four of them.

What does that mean? Well, for example, we picked up a whole group of doctors. had a doctor who had a problem. He reached out to me. We solved the problem for him. He’s very happy. I asked him, who else should we be talking to? And he invited me to a staff meeting. So we presented the entire staff. We picked up three or four more doctors who were buying properties. So long-term support and no hassles is pretty much what our clients are looking for.

Michelle Kesil (14:07)
Awesome. I know you mentioned you support investors with their education journey. Can you share a little bit more about that?

Eric Fernwood (14:12)
Yes.

Yes, our approach on investing is pretty different from most. We basically followed what McDonald’s and Costco and Barnes and Noble, Trader Joe’s, all these places. What they do is they have identified who their customers are. In our case, our customer is people who stay many years, always pay them around schedule and take good care of the property. Well, they identify their customer and then they localize things, but they provide what they want. For example,

in Hawaii, McDonald’s sells poi and spam, neither of which are my favorites. But in France, when I was working in Paris, tried to get a meal at McDonald’s without beer. Beer served with everything. So they localized their product, but that attracts people in so they can try their traditional menu. We do the same thing, and we teach people how to do that. And so it becomes very easy. We teach them how

the relationship between tenant segments and properties. Find the people you want and buy what they’re willing and able to rent. I mean, it’s a fairly straightforward process, but they haven’t seen that. The other thing is cash flow and ROI are interesting factors, but can you see a company like Costco basing whether or not they’re going to open a new store location based on probable first day sales or are they going to look down the road?

We teach them how commercial properties are evaluated and things like this. ⁓

broader perspective. a lot of our, I mean, it takes about two hours for me to make you more knowledgeable than most of the published authors because everything is process and fact based. There’s no opinions in this thing. And we’ve done our best to eliminate individual opinions from property selections and everything else. So we literally on our onboarding process, we take you through a training session, two hours.

two one hour sessions I should say. At the end of that, you’re gonna know more than most of the published authors on real estate investing because we stole things for commercial.

Michelle Kesil (16:50)
Awesome. Could you maybe share one of those tips that maybe some of the investors listening can learn from you?

Eric Fernwood (16:56)
Absolutely.

So many places I read on bigger pockets and others is buy this kind of property. Well, you know, the best kind of property in Boston might be the terrible property in Houston. So you can’t make generalized statements. So what my approach is, is to determine which types of properties are occupied, people stay many years, pay the rent, so on and so forth.

How you could actually do this anywhere in the world? And I validated my modeling through interviews. I basically asked about 15 property managers, hey, if you wanted to buy properties that attracted a tenant segment that stays many years, always pays the rent on schedule, takes good care of the property, what and where would you buy? And 13 of 15 said the same thing. So if you were in Kathmandu or Singapore or Cleveland,

You can do the same thing. Ask multiple property managers that similar question in where they all converge. That’s what you should be buying. Now it might be multifamily in one place. It might be high rise condos in another. It might be townhouses or single family. The property type doesn’t matter. It’s the container. It’s not what pays the rent. It’s the people who pay to occupy the property to pay the rent. So you want to attract people who are ultra reliable. a lot of that’s one of the most complex things we have.

The rest is simple. Ask people who are experts in the field what they would do if they wanted to attract people with the right financial behaviors and listen to them. So it’s pretty simple and it works anywhere in the world and it’s very location specific.

Michelle Kesil (18:30)
Yeah, and what are some of those financial behaviors that you commonly see?

Eric Fernwood (18:34)
The ones we look for are people who are employed at jobs that are mission critical and they’re not going to lose their jobs. For example, if you had an auto repair business and you have to cut back, you’re going to fire the front office staff. You’re not firing the mechanics because they’re the ones that actually make you the money. So part of our research is to find people who, whether we have a…

Drop in tourism or not, doesn’t matter. These people are always employed. And how, well, I thought I did a good job in 2005 and six when I was studying this. You never know as an engineer until you stress test it. In 2008 financial crash, our clients had zero decrease in rent and zero vacancies because of the demographic that we’ve been targeting. None of these people lost their jobs, it didn’t occur. Now property prices plunged 50%, but their rental income didn’t go down and it didn’t stop.

So we have multiple people now living on their rental income. And so we have to have high reliability. There’s nothing else. The other thing is that I want to mention is that while cashflow pays bills, the appreciation actually grows wealth. For example, my partner and I purchased a townhouse not too far south of where I am today. And we paid

I don’t know, $180,000, $190,000 for this thing. We had negative cash flow the first year. Four years later, I have $450 a month cash flow and a lot of equity. We then did a cash out refinance and bought our next property. Today, I get about $1,000 a month after all expenses means everything. And my grand total investment in these two properties is about $70,000, including renovation and everything. So.

teaching people how to grow their portfolio, at least capitalism is very big part of our training as well. it’s again, it’s very straightforward stuff because we took things from the commercial world. My opinions don’t matter. Processes and facts matter.

Michelle Kesil (20:27)
Yeah, absolutely. That’s such good advice. And I know you mentioned you provide the analytics and data as well. How does that work?

Eric Fernwood (20:34)
Well, there’s, in my opinion, there’s nothing on an MLS data sheet that has any value to an investor. if you had a property that’s performing well, would you lay awake at night and say, man, I wish I had another 37 square feet in that house? No, you don’t care. It’s a numbers thing. So what we’ve done is we have basically taken the kinds of analytics normally available to say Blackstone or somebody like this who’s doing institutional investors. And we provide that to our clients.

And so it’s, we provide very extensive analysis of these properties and the process we follow eliminates individual opinions. For example, we use a data mining engine that I created to select properties that match the housing requirements for the demographic we want. But then we have multiple people who must agree on the property. So there’s a chain of people who all must agree that property is good. If anyone says, I don’t think so, it’s gone.

Because of this, we don’t have bad properties. And it’s not because we’re lucky or something. It’s because we have experts who all have their own opinions and their own strengths, and they all have to agree on it. So that’s why we do pretty well in terms of having reliable properties.

Michelle Kesil (21:45)
Amazing. Thank you for sharing all that. So before we wrap up here, if someone wants to reach out, connect, learn more from you, where is the best place that they can find you?

Eric Fernwood (21:55)
Well, obviously our website is the easiest one, but if you want to just reach out to me directly, my name is Eric Fernwood. So my email address is ericfernwood at gmail.com. me an email and then let’s set up a Zoom meeting. The reason we want to start with a Zoom meeting is it isn’t about just buying properties. It’s about buying properties that fit your financial goals. And everyone has different goals. They’re in a different situation and they’re starting from a different point.

So we tailor what we do for individual clients to their individual situation. And that means we need to talk about it. I need to understand your situation. The other thing is we’re not gonna match everybody’s needs. I mean, we have a very focused business. And if you wanna be outside that focus, we’re probably not a good match for you. But we’re only gonna know that if we talk. So please just reach out to me.

If you’d like to call me at 702-358-8884, so either the email ericfernwood at gmail.com, or you can call me by phone, whichever is best for you, or text me on that number too. Hey, thank you for the opportunity to be on your show.

Michelle Kesil (22:57)
Perfect.

Thank you. Yeah, we really appreciate your time, your story, and your perspective. So thank you for being here. And for those of you that are tuning into the show, if you got value from this, make sure that you’ve subscribed. We have more conversations coming with operators just like Eric, who are building real businesses. And we’ll see you all on the next episode.