Las Vegas????

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Woah! Great writeup! Thank you! Checking out your website now. We may have to set up a meeting next month to tour the city...I am curious to check out the different neighborhoods in LV.

@Eric Fernwood excellent very descriptive post and insight into the local Vegas market. I'll take you up on your offer to ride along and gain some knowledge before diving head first into the water here.

Hello @Daniel Cisneros ,

Thanks for the tag.

What We Are Seeing

Las Vegas is an island surrounded by federally owned land. There is little land for expansion, a growing job market, and an influx of people. Unless there is another "COVID Event", prices and rents will continue to increase at a rapid rate through 2021 and beyond. Unless California suddenly turns business and people-friendly, Las Vegas will have a long run of prosperity. Some specifics.

  • Prices rose 15.4% YoY in March 2021 (for the segment that we target. See charts below.), with median days on the market at 5. Properties that we target are typically going under contract in 1-2 days.
  • Rents rose 8.7% in March 2021 YoY with median days on the market at around 8. The average time on the market for most of our client's rentals is under seven days.
  • Both the sales and rental market have extremely low inventory (less than half a month).
  • We regularly close properties with a cash-on-cash return between 4% and 6% (6 last month), so good properties are available.
  • The average tenant stay (for ours and our clients' properties) is about five years, with an average turnover cost of about $500.
  • COVID - To date, out of the 190+ client properties we track (out of a total of > 220 properties), at some point during the last twelve months, ten tenants have had trouble paying the full rent on schedule. A relatively small percentage of the total. I expect most of these tenants will catch up on their rent. For example, one of the tenants paid close to $9,000 to bring their rent current. Paying $9,000 to catch up on the rent is a lot more expensive than moving. However, moving is not the issue; bad credit report is their fear. A negative hit on their credit will dog them for years. Plus, even if they wanted to move, no property manager would rent an A Class property to anyone with any black mark on their credit. So, eviction moratorium or not, credit risk is the primary control factor for our tenant pool. We've only had five evictions in the last 15+ years.
  • For Class C and Class B properties, it is a very different story. The landlords I talked to have a lot of tenants who have not paid the rent in months. The tenant pool for C and most B Class properties are lower-paid, lower-skilled workers. These are the first to be laid off during economic stress and the last to be rehired. This is one reason we do not recommend Class C and rarely B Class.

Supporting Information

First, the statistics.

The information below only concerns the narrow property profile/tenant pool we target. No data for any other property type is included. The typical property we target has the following characteristics:

  • Single family
  • Sale price < $400,000
  • Bedrooms: 3 to 4
  • Garage: 2 to 3
  • Stories: 1 or 2
  • Note that while the green area appears homogeneous, in actuality it is more like Swiss cheese.

Below you will find the statistics we generate each month.

Note: The charts below are based on data from the Greater Las Vegas Association of REALTORS (GLVAR) MLS.

Rental Statistics

Rentals - Median $/SF by Month

Median rental rates reached $1/SF in March, representing a 8.7% increase YoY. A phenomenal growth for rental rates.

Rentals - List to Contract Days by Month

There is very little rental inventory and what is available goes under contract in days.

Rentals - Availability by Month

This chart shows the average daily number of properties that were for rent in a particular month. As you can see, we are at about 40% of the level a year ago.

Rentals - Months of Supply

2 to 3 months is typical. Today we are at just 0.5 month of supply!

Sales Statistics

Median $/SF by Month

Prices have risen rapidly since February 2021 and March 2021 saw an amazing increase of 15.4% YoY!

Sales - List to Contract Days by Month

Accompanying the rapid price increase is the unprecedented low days on the market. Properties that we target are typically going under contract in 1-2 days.

Sales - Availability by Month

We are at less than 1/3 of the level a year ago just before the COVID hit.

Sales - Months of Supply

Six months supply is considered a balanced market. In March there was approximately 1/3 of one month!

Other Items of Interest

  • Google Data Center - Google is in the process of building a $600M data center in Henderson. They also announced that they will add a second $600M data center on the same site. Las Vegas will be one of 11 data centers worldwide. Even though they will not employ many people (100 to 150 employees at an average salary of $65,000), the presence of Google is huge. I believe that where Google goes, others will follow. And, it will be infrastructure, which is what I want for Las Vegas. I've seen companies lay off thousands of engineers and programmers at a time, but no one walks away from infrastructure.
  • Amazon announced three more centers in Las Vegas. Of special interest are two facilities: Merch by Amazon and Print on Demand. "Merch by Amazon allows brands and independent artists to create custom-printed apparel and electronics products. Print on Demand helps authors and publishers with on-demand publishing, helping to reduce upfront costs of printing for inventory." Amazon selecting Las Vegas for this type of infrastructure will bring others to Las Vegas as well.

The hospitality industry is still expanding:

  • Virgin Hotels just opened a new hotel/casino.
  • The First Atari Hotel Looks Like a Gamer's Fantasy — and It’s Opening in Las Vegas
  • The Boring Company plans to expand the existing underground transit system in Las Vegas.
  • Resorts World, a $7B hotel/casino is opening summer 2021.
  • The convention business is starting to rebound. At least one convention, 2021 World of Concrete, is schedule for June 2021.
  • Las Vegas was the second fastest-growing city in the US for 2020 - according to Updater. "Most people migrated [to Las Vegas] from cities like San Fransisco, Los Angeles, and Sacramento, Updater said."
  • California fuels Las Vegas growth - As California continues to make the state less desirable for both individuals and businesses, many are leaving the state. Leaving California has actually become a significant business. A portion of these companies and people will choose Las Vegas. Hopefully, the number of people moving to Las Vegas will not become the torrent that Boise is attempting to deal with.
  • Zillow is predicting a +10% increase in Las Vegas housing prices in 2021. Interestingly, in the summer of 2020 they predicted a 7% decrease for 2021.
  • Housing prices for Las Vegas are still well below 2006 peak prices. See the chart below. If you ignore inflation, prices have almost reached the 2006/2007 peak. However, inflation is real and must be considered. $143/SF in 2008 dollars is the same as $174/SF in 2020 dollars so there is still a long way to go.
  • Land shortage - The available land for development continues to dwindle. At the end of 2019, the amount of vacant buildable land in the Las Vegas Valley was less than 28,000 acres, of which 5,000 to 7,000 acres is not viable for residential development. (87.5% of Clark County is federally owned. 85% of the entire state is federally owned.) Consumption rate is about 5,000 acres/year. See the animated GIF below. The areas in brown are federal land. The time-lapse only goes through 2018 and there was a large amount of development in 2019 and 2020. The southwest part of the city is now the least developed and construction in the area is relentless. For example, the $400M Uncommons has broken ground - a $400M complex in southwest Las Vegas.

    Las Vegas is and will continue to be a great place to invest for buy and hold investors.

@Eric Fernwood

Impressive! Very good information I appreciate it all! if you don't mind can we set up a time to talk about properties you may have available. I'll send you direct messages with my info.

Thanks a lot for the great education you've provided!