Las Vegas in the next 10 years will explode!

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Las Vegas in the next 10 years will explode!

Adam Jaken
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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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.  

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  • Robert AdamsBusiness Member
    Real Estate Broker · Henderson, NV · Member since 2009 · 1k+ posts · 373 votes
    9y

    I was referring to the original post that was talking about retuns: "The price to return aspect is 5-6% in A neighborhoods."

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  • Robert AdamsBusiness Member
    Real Estate Broker · Henderson, NV · Member since 2009 · 1k+ posts · 373 votes
    9y

    @Bill R. I do see where the conversation switched from returns to cashflow then back to returns so I apologize for the confusion. There is a lot going on in this thread.

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  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    9y
    Originally posted by @Robert Adams:

    @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.

    For sure you Vegas guys have a better grasp on these tea leaves. Perhaps this might seem like the SFV circa 60s & 70s. Eventually some infill re established opps will happen and some pockets might show signs already. Depending maybe on transportation and how bad traffic gets overtime could be something buyers and renters consider more. From a far Vegas seems very 60s, 70s LA ish right now. Give that 40 50 years and exact location becomes more important almost more than anything else...that is proximity to the most high paying jobs, entertainment, etc... 

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  • Bill R.
    Henderson, NV · Member since 2014 · 111 posts · 163 votes
    9y

    @Matt R.  Although I have spent the vast majority of my life living in So Cal, including the SFV, unfortunately I was far too young in the 1970's to have had any memories of what the real estate market was like  :-) 

    I can say that I think one of the major differences is that LA always had a somewhat diversified economic base.  Aerospace, entertainment, tourism, etc.  Vegas is too heavily dominated by the tourism industry which is why it is so boom and bust. 

    Maybe LA and the SFV used to be like that back in the 60's and 70's with big government aerospace contracts and such but, like I said, I'm too young to remember any of that.  

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  • Breynan Hammons
    Real Estate Broker · Las Vegas, NV · Member since 2014 · 46 posts · 26 votes
    9y
    Robert Adams - just curious why you would use 2008 "Peak Prices" as a measurement when those prices were completely artificially inflated. I hear this argument from many agents in the market and don't understand why anyone would use numbers that shouldn't have existed in the first place as a indicator. Could you provide some insight on your thoughts there. Thanks Bill Leonard - I think you're on point with comments above.
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  • Breynan Hammons
    Real Estate Broker · Las Vegas, NV · Member since 2014 · 46 posts · 26 votes
    9y
    Sorry correction Bill R. Your thoughts above I thought were on point.
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  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    9y
    Originally posted by @Bill R.:

    @Matt R.  Although I have spent the vast majority of my life living in So Cal, including the SFV, unfortunately I was far too young in the 1970's to have had any memories of what the real estate market was like  :-) 

    I can say that I think one of the major differences is that LA always had a somewhat diversified economic base.  Aerospace, entertainment, tourism, etc.  Vegas is too heavily dominated by the tourism industry which is why it is so boom and bust. 

    Maybe LA and the SFV used to be like that back in the 60's and 70's with big government aerospace contracts and such but, like I said, I'm too young to remember any of that.  

    For sure comparing green apples to red apples considering LA , SFV is another unique animal. However, I can see some significant similarities. I was still just a kid back then so this is merely researchable for me. Vegas is diversifying organically. Not on the level of LA because that is unique worldwide but still I expect this organics to grow. Eventually and maybe in our lifetimes these two markets almost connect physically. Figure a certain percentage of the movers and shakers in Vegas...were OG SF valley REI dudes, 2nd generation.

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  • Robert AdamsBusiness Member
    Real Estate Broker · Henderson, NV · Member since 2009 · 1k+ posts · 373 votes
    9y

    @Breynan Hammons I was simply stating the values have risen a lot since the bottom but we are still not at the prices of 2008 and that the market has many differences now vs then. This is why I also mentioned:

    "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."

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  • Robert AdamsBusiness Member
    Real Estate Broker · Henderson, NV · Member since 2009 · 1k+ posts · 373 votes
    9y

    @Matt R. it will definitely be interesting to watch the city grow and change over the long haul. Vegas is still an infant compared to some major cities so it will be interesting to see the growth and changes that come along with it.

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  • Adam Jaken
    OP
    Investor · Woodland Hills, CA · Member since 2016 · 51 posts · 12 votes
    9y
    Robert Adams I agree it is very exciting to be in the game at this point. Just today the city met to discuss the pros and cons of public funding for the awesome stadium they want to build. This week hey have to come up with an answer and i hope it is YESSSS!! The next step would be the NFL to approve Raiders going to LV and from what u have read 2/3rd of the NFL owners are kinda for it. #RaiderstoLV
    1Reply
  • Adam Jaken
    OP
    Investor · Woodland Hills, CA · Member since 2016 · 51 posts · 12 votes
    9y
    What i have read*
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  • Kathy Stewart
    Rental Property Investor · Dallas, TX · Member since 2015 · 243 posts · 70 votes
    9y

    I just heard the opposite about LV as well as California, with frothiness in both markets and sustainability in question. On the other hand, good deals can always be found by the saavy investor doing careful due diligence. I live in California and own only my primary residence. My investments are in Lubbock and Dallas, Texas.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Kathy Stewart  while you can't really compare vegas to Texas. I think Texas is a very tough place to buy and hold and Vegas is much better  reason:

    1. expansive soils in TExas you its not if you will have foundation issues its when.

    2. As we all know property tax's are sky HIGH and many investors who get their new tax bill find out they are not cash flowing at all.

    3. Hail and Wind.. when your roof gets destroyed by hail you have to pay your deductible.. again not if but when..

    I can see it for locals because I am a firm believer in investing locally when you can.... but there are many areas of the country I think that are far superior to Texas for buy and hold and Vegas is one.

    Vegas has none of those issues.  there is no state income tax like Texas.. And its certainly a heck of a lot more fun to visit your property in Vegas as opposed to going to Lubbock... But its whatever floats your boat right.. and if you have a great ground partner that can mitigate things as well.

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  • Andrey Y.
    Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
    9y
    Originally posted by @Robert Adams:

    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.

    Interesting that you have a different viewpoint than most in the thread. Then I look up and see "Real Estate Broker".. ahhh well that makes sense. I took an honest look at B+/A areas in Las Vegas visiting last year, and there is no way any of those properties "cash flow", by any calculation. Definitely not any of the 'on market' properties. I know there is a conflict of interest/bias going on here but lets call a spade a spade. Include repairs, PM, CapEx and there is no monthly cash flow or even break even scenario, unless you are doing a total gut.

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  • Robert AdamsBusiness Member
    Real Estate Broker · Henderson, NV · Member since 2009 · 1k+ posts · 373 votes
    9y

    @Andrey I  think you are saying that I am saying that you can find properties that will create positive cash flow because I have a conflict of interest because I am trying to push a sale. is this what you are saying?

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