Las Vegas in the next 10 years will explode!

Buying & Selling Real Estate

Las Vegas in the next 10 years will explode!

Investor · Woodland Hills, CA · Member since 2016 · 51 posts · 12 votes

Hi guys and a happy Saturday to you all.  I think there is a huge opportunity in Las Vegas right now especially with what is set to arise in the horizon. Here is a list of all things I have seen going on in Las Vegas.   Las Vegas will have its first major national sports team (NHL). Faraday Future is a new electric car company that is building a huge manufacturing facility, (not putting a lot of emphasis on this because it can possibly flop you know like Fisker). Another huge thing that possibly will happen is Las Vegas will get a stadium built and have their first NFL team. (again not really relying on this either because it has not happened yet but they are in talks).  There are a few new hotel projects planned on the strip and if those pan out successfully I can see a lot more development in the future. (10 years from now). WYNN announced it will build a man made lake and a new tower by 2020. Genting Resorts is most likely going to build a new resort called Resorts World.  Downtown LV also seems to have a lot of revitalization even though it has its very slum parts it seems like it is headed in the right direction.  Nevada will be voting in November to legalize marijuana usage for any one over 21 years of age and looking at Colorado and the HUGE tax/business benefits it has brought to them. If this passes it is a potential opportunity for huge growth.  One thing that is kind of scaring me is that these huge companies are building apartment buildings and track homes all over the Las Vegas valley. I don't know if this is a good thing or bad thing. I just hope they don't over build like last time and have to much inventory on hand which will end up pushing down prices. (coupled with bad loans)  Also if interest rates move up (which i think will happen when the new president comes in to office) that will also push down home prices, but in general now is a a great time to buy i think. The price to return aspect is 5-6% in A neighborhoods.  I would appreciate any feedback on any of the points i have made. (negative or positive) :)  Thank you all for taking the time to read my post and providing feedback, you guys are awesome!  Have a great day and god bless!!

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Henderson, NV · Member since 2014 · 111 posts · 163 votes

9y

I think there are a lot of different factors being discussed here. Some are related and some aren't.

@Francis Rusnak: Vegas is going to be a tough market unless you're willing to rehab. Unfortunately, you're several years too late to the market to be able to walk into A and B neighborhoods and pick them up for pennies on the dollar. Institutional investors have already picked over many of the best deals years ago. And what's left has a bunch of competition even if you're looking to rehab so unless you're sending postcards and yellow letters it's going to be difficult to find anything in the MLS that cash flows or that can even be bought and rehabbed to cash flow.

Not impossible. Just difficult. Even if you're trying to buy short sales and foreclosures there's a ton of competition.

There's no inventory on the market right now. Maybe an agent can give some stats but I think existing home inventory is around 3 month supply. Healthy is considered 6 months.

@Matt R.: Yes, they keep building A neighborhoods, so if you buy A today it likely will be the B neighborhood of tomorrow. Unlike a lot of other places, you rarely see someone buy an old property and strip it down to the sticks. It does happen but it's difficult because so much of the map is controlled by HOAs. Who wants to take an old home to the sticks and have to rebuild a house that looks exactly like all of the other homes in the neighborhood? It just doesn't make sense.

Most of the A and B areas are master planned communities. Even the custom homes aren't really custom.

You can find non-HOA controlled properties but most are currently in pretty rough areas. They tend to be the older parts of Vegas. While there are pockets of nicer neighborhoods within those older areas would you rather have something in a nice, new A neighborhood surrounded by other A neighborhoods or start building an A neighborhood in the middle of a C neighborhood?

With so much relatively cheap dirt available, it's rare to see anybody go back and fix up the old parts.

Not saying you can't find total rehabs happening or that you can't find pockets of stuff going on but it's just very difficult to find. Developers just keep building these huge master communities with cookie cutter homes and people keep scooping them up.

And everyone talks about the BLM (government) land keeping things in check but there's still so much unused land. Literally there is nothing for 2 or 3 miles on Las Vegas Blvd, the world famous Strip, from South Point to the M Casino (the price of the raw land is too high to build anything other than high income generating properties like casinos but nobody is building casinos). To the east you have thousands of acres of empty land and then Lake Las Vegas and multi-million dollar properties. To the North you have North Las Vegas which still has tons of buildable land. And Summerlin just keeps growing to the north-west with A neighborhoods.

There's no shortage of land and there won't be for a long, long, long time. There's just too much of it.

@David Faulkner Agree that Vegas has tended to have a boom or bust cycle but they do seem to be trying to diversify. As more and more tourist income comes from non-gaming activities at least it's less dependent on gambling. Of course, it's still highly dependent on tourism in general which can be very boom or bust.

In terms of attracting other major industries, you've got the Tesla stuff going on in northern-NV but that doesn't really help the Vegas economy much.

Real future growth will be highly dependent on Vegas attracting industry other than tourism related businesses. What that is, I don't know.

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Kevin Manz
HVAC Tech · Fort Wayne, IN · Member since 2015 · 423 posts · 223 votes
9y
Is Vegas real Estate crazy expensive now?
0 Reply
Breynan Hammons
Real Estate Broker · Las Vegas, NV · Member since 2014 · 46 posts · 26 votes
9y
Vegas prices are nearly back to what they were before the crash. Some people think this is great however I've been here a number of years and the prices we had at "peak" were caused by bad loans. So is this really a good thing???... There are a number of things going on in the market include A LOT of new construction. I just ask where is the job growth? Where is the population growth to support on the "new" construction? Just my opinion but Vegas is overpriced again ready for a bust.
4 Reply
Julie MarquezPro Member
Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes
9y
@Breynan Hammons Is the new construction you see commercial or residential, or all? Are there still a lot of foreclosures being processed?
0 Reply
Breynan Hammons
Real Estate Broker · Las Vegas, NV · Member since 2014 · 46 posts · 26 votes
9y
Julie Marquez we have a ton commercial but your national builders are doing a lot of new home construction as well. On the commercial, side large multi unit apartment complexes and retail strip mall additions.
1 Reply
Brent M.
Investor · Hayward, CA · Member since 2015 · 83 posts · 72 votes
9y
Sold four of my properties in Vegas this year. The appreciation was nice, but I still see it as a boom and bust, tourism driven town. Rents have been sticky even while prices doubled....
1 Reply
Mary K.Pro Member
Investor · Ocala, FL · Member since 2015 · 157 posts · 88 votes
9y
@B would you advise to invest or not, then, in LV? I remember before the bust..it was crazy all the construction, where would the jobs come from to warrant all those LV homes? Job growth is top priority for me in looking for opportunities.
0 Reply
Adam Jaken
OP
Investor · Woodland Hills, CA · Member since 2016 · 51 posts · 12 votes
9y
@Julie Marquez All the new construction is in both, but more in new homes. Why do you ask?
There are no new actual hotels but every thing is in the pipeline and depending on outcome of the election things are going to take place.
0 Reply
Adam Jaken
OP
Investor · Woodland Hills, CA · Member since 2016 · 51 posts · 12 votes
9y
@Mary K. Here is a great article on job growth and the different path vegas is taking for the future.
https://www.google.com/amp/www.fool.com/amp/invest...
0 Reply
Adam Jaken
OP
Investor · Woodland Hills, CA · Member since 2016 · 51 posts · 12 votes
9y
@Brent M. Nice! Congrats to you,that's great to hear a fellow investor made some money!
0 Reply
Andrew E.
Investor · Member since 2016 · 54 posts · 21 votes
9y
Adam,
That's a great idea if they approve the Raiders NFL team to move to Las Vegas in the special session next week that's some real potential. Sandoval is looking for growth in Nevada, northern and southern. Las Vegas has grown a ton in the pat years, I was part of a research project in college on assessing the las vegas airport will be at capacity soon and they are building one far south and project the city will expand to that point. Almost like the Denver airport except the city has not reached it yet. Looks like las vegas has more job growth besides just the casinos. Reno is doing the same thing steering away from the casino industry and more towards technology. Good luck, hope for high profits in the high desert.
1 Reply
Francis Rusnak
Flipper/Rehabber · Chicago, IL · Member since 2016 · 123 posts · 38 votes
9y
I've been running the numbers on A and B-class neighborhoods in Vegas on the bigger pocket's rental income calculator and the majority have negative cash flow. Def over priced.
0 Reply
Adam Jaken
OP
Investor · Woodland Hills, CA · Member since 2016 · 51 posts · 12 votes
9y
Francis Rusnak How are you running your numbers and how is it over priced?
0 Reply
Francis Rusnak
Flipper/Rehabber · Chicago, IL · Member since 2016 · 123 posts · 38 votes
9y
Adam, I'm accounting for all the side details like vacancy (10%), repairs (8), cap-x (8) and property management (8.5). Of course not everyone is going to use property management but the numbers aren't adding up on a lot of A-B neighborhoods. This is assuming I'm getting the properties for about 80% of the purchase price (negotiation from foreclosure/short sale).
I believe you said you have all you're properties paid off and I've got one here in Vegas that is paid off too, but if I had a mortgage on it I'm certain I would be negative cash flowing if I don't ignore maintenance and cap-x since the house isn't new.
Are you seeing differently?
0 Reply
Adam Jaken
OP
Investor · Woodland Hills, CA · Member since 2016 · 51 posts · 12 votes
9y
Francis Rusnak I can see what you mean, no your right.
0 Reply
Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
9y
Vegas is one very different animal from what I can tell. Yes there are tons of things in the works and some pockets will be great. When I check for prices, typically they are below previous peaks. Then it seems there is tons of stock that are priced about the same as 20 years ago. There seems to be an endless supply of newer better as far as residential renters property choices. There are still many thousands of undeveloped acres it appears. I know there is the one BP guy who states it is surrounded by gov lands and that limits supply but within that space there is still much room to go. This might take decades to actually fill up. Job growth and population growth still look strong for future though. So it is growing but they can build new stock anytime to match. So the demand is there, check that box. The supply side seems endless for a long time.
3 Reply
David Faulkner
Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
9y
You mean explode like it did in 2004 or explode like it did in 2009? I could see a case and historical record for either and eventually both :)
1 Reply
Adam Jaken
OP
Investor · Woodland Hills, CA · Member since 2016 · 51 posts · 12 votes
9y
David Faulkner hi David that is exactly what i'm talking about. Can you please expand on your thoughts? In what ways do you see the city growing and having a boom and in what cases would you see the city crashing ? Thank you
0 Reply
David Faulkner
Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
9y
Originally posted by @Adam Jaken:

David Faulkner hi David that is exactly what i'm talking about. Can you please expand on your thoughts? In what ways do you see the city growing and having a boom and in what cases would you see the city crashing ?
Thank you
Vegas is a boom or bust town ... it always has been and I suspect it always will be for the foreseeable future. The busts follow the booms, which in turn leads to the next bust ... it is the nature of the beast. It has been booming for awhile now ... how much longer and higher it will continue to go boom before it goes bust and how far and deep the eventual bust will last is anyone's guess, and I believe it to be a fool's errand to try to predict such things IMO. So, if you are going to invest there, I think it best to NOT assume it will continue to boom as it has over the short term, make sure the deal makes sense today, and has some extra "insulation" to cushion you in case it goes bust so that you are not forced to sell or lose the property then. If you want to make some assumptions about the long term future state, and you plan on holding a LONG time (10+ years), then I suggest you look at historical pricing and rents to determine average appreciation rates over the last 10, 20, 30 years which would cover several boom/bust cycles.
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Joe Bertolino
Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes
9y
My issue with LV is that there is virtually no barrier to entry for developers or builders. How much is your property going to appreciate if land is cheap and in high supply, labor is fairly cheap and regulation/zoning is nearly non existent?
0 Reply
David Algava
Saint Petersburg, FL · Member since 2015 · 22 posts · 7 votes
9y
I would be concerned about the sheer volume of vacant land available in nearby Las Vegas area. If you drive 15 - 20 miles out, you can buy land at like $10k - $30k an acre. If house prices / rents ever get too high in Las Vegas, what's stopping people from moving 15 miles away?
0 Reply
Bill R.
Henderson, NV · Member since 2014 · 111 posts · 163 votes
9y
I think there are a lot of different factors being discussed here. Some are related and some aren't.
@Francis Rusnak: Vegas is going to be a tough market unless you're willing to rehab. Unfortunately, you're several years too late to the market to be able to walk into A and B neighborhoods and pick them up for pennies on the dollar. Institutional investors have already picked over many of the best deals years ago. And what's left has a bunch of competition even if you're looking to rehab so unless you're sending postcards and yellow letters it's going to be difficult to find anything in the MLS that cash flows or that can even be bought and rehabbed to cash flow.
Not impossible. Just difficult. Even if you're trying to buy short sales and foreclosures there's a ton of competition.
There's no inventory on the market right now. Maybe an agent can give some stats but I think existing home inventory is around 3 month supply. Healthy is considered 6 months.
@Matt R.: Yes, they keep building A neighborhoods, so if you buy A today it likely will be the B neighborhood of tomorrow. Unlike a lot of other places, you rarely see someone buy an old property and strip it down to the sticks. It does happen but it's difficult because so much of the map is controlled by HOAs. Who wants to take an old home to the sticks and have to rebuild a house that looks exactly like all of the other homes in the neighborhood? It just doesn't make sense.
Most of the A and B areas are master planned communities. Even the custom homes aren't really custom.
You can find non-HOA controlled properties but most are currently in pretty rough areas. They tend to be the older parts of Vegas. While there are pockets of nicer neighborhoods within those older areas would you rather have something in a nice, new A neighborhood surrounded by other A neighborhoods or start building an A neighborhood in the middle of a C neighborhood?
With so much relatively cheap dirt available, it's rare to see anybody go back and fix up the old parts.
Not saying you can't find total rehabs happening or that you can't find pockets of stuff going on but it's just very difficult to find. Developers just keep building these huge master communities with cookie cutter homes and people keep scooping them up.
And everyone talks about the BLM (government) land keeping things in check but there's still so much unused land. Literally there is nothing for 2 or 3 miles on Las Vegas Blvd, the world famous Strip, from South Point to the M Casino (the price of the raw land is too high to build anything other than high income generating properties like casinos but nobody is building casinos). To the east you have thousands of acres of empty land and then Lake Las Vegas and multi-million dollar properties. To the North you have North Las Vegas which still has tons of buildable land. And Summerlin just keeps growing to the north-west with A neighborhoods.
There's no shortage of land and there won't be for a long, long, long time. There's just too much of it.
@David Faulkner Agree that Vegas has tended to have a boom or bust cycle but they do seem to be trying to diversify. As more and more tourist income comes from non-gaming activities at least it's less dependent on gambling. Of course, it's still highly dependent on tourism in general which can be very boom or bust.
In terms of attracting other major industries, you've got the Tesla stuff going on in northern-NV but that doesn't really help the Vegas economy much.
Real future growth will be highly dependent on Vegas attracting industry other than tourism related businesses. What that is, I don't know.
6 Reply
Robert AdamsBusiness Member
Real Estate Broker · Henderson, NV · Member since 2009 · 1k+ posts · 373 votes
9y
There are several items in this thread I would like to address.
-Negative cashflowing properties. I think it is inaccurate to say it is hard to find homes that will create positive cashflow even after calulating all of the listed expenses, vacancies etc. We find positive cash flow producing properties all the time. It is more of a question how high of returns are you looking for. You will make less on "A class" areas but they will still be positive. The other areas will produce higher returns but then you have other issues to deal with which lowers the return in the end.
-Prices being back to the highs of 2008. This is inaccurate as well. Home values are still below the peak. We have gained a lot of the lost value from the recession but we are still not back to the values we had before. We are also not as leveraged as we were, no doc loans and stated loans are gone. Owners now have skin in the game with down payments, proof to repay the loan has been provided, many bought cash etc.
-Construction. There is a ton of new construction on new homes right now (I will leave the commercial numbers to the commercial guys). I do not think we should be passing out so many building permits but it has helped keep prices lower as they spread out the demand over a larger supply.
-Inventory. 90% Traditional Sales. 7% Short Sales. 3% REOs. The inventory levels have been in the same range give or take 500 listings for several years now. We have bounced around 2.5 to 3 months supply for a few years. In another thread someone was telling me there was a huge wave of foreclosures coming. NOD's have been bouncing 500 a month for several years now as well. The latest figures we have is for July. With only 429 NOD's filed I do not see any huge increase in REO inventory coming. If this skyrockets I would tend to say the REO inventory would be increasing but at this time I do not see any reason to believe such an influx is coming.
-Land Cost and Supply. Someone stated that land is very cheap and has an abundant supply. Since the market turned in 2011 and then we had insanely low inventory shortage in 2013, it created an opportunity for builders and they jump on it. They bought so much land it drove up the price of land and also decreased the land inventory greatly. Part of the reason why new builds are so expensive is due to the very high land costs we currently have here (high compared to 5 years ago). Most of the raw land is owned by the BLM. If they choose to sell it and how much of it they are willing to sell would have a direct impact on pricing and inventory. So really this could change at anytime.
[email protected]702-349-9175
The Adams Team at Rothwell Gornt Companies4.970 Reviews
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Bill R.
Henderson, NV · Member since 2014 · 111 posts · 163 votes
9y
@Robert Adams: Not questioning your experiences but what do you define as an "Class A" level area? Is that Summerlin? Southern Highlands? Just trying to get an idea about what we're talking about.
In what I would consider to be a Class A area, minimum home price is going to be $250K up. Mortgage, HOA, taxes, insurance will run you $1400 with 20% down. If you can get $1700 rent on a $250K home, you would be doing pretty good. So that's $300 to cover vacancies, management, incidental repairs, etc. Nowhere near the 50% rule. You'll never positive cash flow that.
Let's say that you find a rehab opportunity with an ARV of $250K and you can buy it at the 70% rule which is $175K minus rehab fees (let's say $20K) which puts you at $155K. Your mortgage (plus yadda yadda) would be around $1000. Assuming the 50% rule for operating expenses such as vacancies, management, capex, incidental repairs, etc, you're still short as your mortgage would need to be $850 just to break even.
Like I said, would be interested in hearing what you consider Class A because maybe I'm just looking at a different segment.
Yes, in what I consider to be B- and C level areas you can positive cash flow.
I tend to agree with @Brent M. in that rents are not moving at the same clip as property values in the A and upper-B levels. I mean, I can look at my own home which has appreciated in value about 20% in the last few years but if I had to rent it I don't think I could get any more for it than I could have when I bought it.
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Robert AdamsBusiness Member
Real Estate Broker · Henderson, NV · Member since 2009 · 1k+ posts · 373 votes
9y
@Bill R. I will not categorize certain areas as a, b, c, etc due to antisteering laws agents have to abide by. I am sure others will chime in as to what these areas would include.
The problem with the figures being calculated is factoring debt service in the calculations. It should be calculated without debt service to calculate the return. If you choose to leverage your funds with debt service then that is a different story.
In regard to rents, rents were staying the same as prices shot up from 2012 to 2015. This caused returns to lower. Over the last 6 months or so rental rates have been on the rise. This has helped returns.
I would also like to mention that if you are buying properties under $250k on MLS it will be VERY difficult to get them for 80% of FMV as most are selling within weeks if not days for 95% - 100% of FMV. The lower price ranges are on fire and with lending becoming easier to obtain on condos and hoa's in litigation I would expect those to continue to sell quickly and for top dollar.
Hope this is helpful.
[email protected]702-349-9175
The Adams Team at Rothwell Gornt Companies4.970 Reviews
Website View Page
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Bill R.
Henderson, NV · Member since 2014 · 111 posts · 163 votes
9y
@Robert Adams: Not to be pedantic but you're saying that the problem with the figures is that I'm factoring in debt service into the return calculations. I'm not. I'm not saying anything about return at all. Return and cash flow are, as I'm sure you know, two separate measurements and the discussion has been thus far about cash flow.
Factoring in debt service to cash flow is mandatory since cash flow is defined as total income - total expenses and debt service would be an expense.
https://www.biggerpockets.com/renewsblog/2010/06/3...
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