Why You Should Not Confuse “Speculating” with Real Estate Investing

Summary: In today’s real estate expansion cycle it’s easy to fall victim to the temptation to
gamble and speculate on property appreciation. Maverick Investor Group helps our clients avoid
this costly trap and instead to buy based on real estate fundamentals, where market
appreciation is a bonus and not a requirement for having a successful real state investment
experience.
Why You Should Not Confuse “Speculating” with Real Estate Investing
The current real estate market offers a once-in-a-generation opportunity for real estate investors
to pick up property at highly favorable prices at the beginning of a growth cycle. And while
upside appreciation potential is one of the potential ways to profit from owning real estate, it
should not be viewed as the primary profit center. Smart investors buying rental property today
should be careful to avoid the irrational exuberance and speculative buying of a decade ago that
had seriously detrimental consequences for so many investors.
The mistake is easy to identify and easy to avoid:
Don’t speculate. Don’t gamble. Don’t buy properties that need to appreciate in order to be
profitable.
Maverick Investor Group helps our clients buy investment property based on real estate
fundamentals. Tight adherence to data-driven, unemotional facts relating to local economic
indicators, price-to-rent ratios and supply/demand trends is imperative.
When buying investment properties, buyers should, at a minimum, be sure to take the following
factors into account:
Price-to-rent-ratio – How low is the purchase price and how high is the market rent?
Often expressed as a “Gross Rent Multiplier” this calculation is a good first indicator
about the potential cash flow margin.
Expenses – Carefully itemize out all your fixed monthly expenses--the property taxes,
insurance, homeowner’s association fee, property management fee and other costs.
Then subtract these from your gross monthly rental income, and don’t forget to factor in
an estimate for inevitable future vacancy and repairs. Since different markets have

different property tax rates and other expenses, this will give you a more precise view of
your potential net monthly cash flow.
Demand drivers – Always look at the trends that relate to demand for the rental
property you are buying, such as population growth, job growth, % of the population that
rents, etc.
Supply side indicators – What is the local vacancy rate where you are looking to
purchase? What is the local market rent, how much available inventory is there in that
rent range, and how many days are comparable properties on the market before being
rented? Ask the same questions about home sales as well so you understand the resale
market before you are ready to exit.
Affordability – When evaluating a property in a particular market, consider whether
people living in the area will be able to afford rents you intend to charge, and whether
incomes are increasing to keep up with the rental increases. Also, look at how median
home prices compare to median incomes in the area where you are buying. Understand
whether the general population will likely be able to buy the property from you down the
road in the event that home prices increase.
The Maverick Approach to real estate investing takes these factors and others into
considerations when helping our clients identify properties with sound fundamentals. You should
always have multiple ways to profit from your rental property, and you should never rely on
market appreciation. If it happens, that is a bonus. If it doesn’t happen, smart investors who
bought based on real estate fundamentals still win.
About Maverick Investor Group
Maverick Investor Group specializes in serving individual real estate investors. We provide
private access to buying opportunities for turn-key real estate in the best real estate markets.
We leverage the collective buying power of our community to get each client front row access to
off-market income properties with tenants and local property management already in place.
For more information visit us at:
http://www.maverickinvestorgroup.com
702-940-6568