Investing in a Las Vegas Rental Home. Is it still a good bet?

Recent home price increases have slowed investment purchases.  However, recent home rent increases have caused investors to look into the Las Vegas home market again.  Here are some market facts for a median home;
  • March 2018 detached single family home median price; $280,000 (up 15% year over year)
  • March 2018 detached single family home median rent: $1493  (up 8% year over year)
  • March 2018 condo/t-home median price: $152,500 (up 29% Y over Y)
  • Market inventory of the median and under detached homes is 1.2 months.
  • It’s tough to find an under market home today.  Many fixers are selling retail due to market shortages.  
Rent to purchase price ratio is .5 to .6 gross
 
Recently one of my investors closed on a investment home @ $294,000 gross (blinds, washer/dryer added into gross acquisition price) 3 weeks ago and rented for $1675 the day I put it on the market.  That’s .56.  Factors that moved this house were updated flooring, paint, kitchen, home in gated community with a community pool and we are getting into pool season.
Older houses are in the .45 to .55 range but don’t have HOA costs with them typically.  The offset is higher annual maintenance.  Across our portfolio, average annual maintenance is just a shade under $500.
So why Vegas?  The not so sexy details; home construction and weather typically delivers lower maintenance expense and upkeep.  majority of our housing supply is less than 25 years old.  Large numbers in the service industry and the transiency of it provides a constant flow of tenants.  Also, large in-migration of residents each year keeps demand for rental housing constant.  This year projections are close to 70,000 new residents.  New supply of rental homes is at its lowest in recent years.  This is reflected in nationwide leading rent rate increases.  And its still below our historical trend.  There is room for more growth. AND…property taxes lower than 1% of home values.
The sexy details:  It’s Las Vegas!  Sun, fun, and nirvana for many.  Hockey has lit this town up.  Football will add to this.  The evolution of the casino industry from gambling to entertainment is world class.  Our economy continues to expand with the solar industry, server farms, distribution, credit company support, non-gaming tourism, hyperloop and electric car manufacturing.  We are among the tops for new small business start ups.  We are still more than 10% below our market peak – one of the last markets to still be below their market peak.  Owners love having a rental here to write off a trip to Vegas.  I am a cash flow person – believe the only reason to have a rental is for it to pay for itself.  With our upside on value growth compared to many markets, the returns are great when blended.
Why I’m qualified.  I’ve lived here since 1984.  I began my real estate career in 1992.  I own my own rental homes.  I personally manage 312 properties and oversee the management of more than 1600 detached homes, condos, and town homes.  My property management division is well staffed and is designed to serve owners who seek to not be involved in the management of their homes outside of big decisions affecting financial expectations.  Our fee is 8% of rent.  I have served investors for decades and was an integral part of growing a portfolio of homes for a large hedge fund in 2010 to 2014 from 1 to more than 2100 houses of which I personally managed 1/2 of their inventory until they established their own operations here.
Contact me to discuss your investment ideas.  Helping people build wealth is a passion.

Leave a Reply

Your email address will not be published. Required fields are marked *