Investing in Las Vegas?

Buying & Selling Real Estate
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Investing in Las Vegas?

Will F.
Investor · Los Angeles County, CA · Member since 2012 · 962 posts · 279 votes

I've brought this up before. About a year ago I was looking at apartments in Las Vegas to purchase, but most of the replies I got were that the market is too pessimistic.

I was looking to buy and hold for 5-10+ years (possibly longer). I also already have experience with 1-4 unit and some small commercial properties here in Los Angeles.

Anyways what do you think of purchasing Las Vegas houses or 2-4 unit properties versus apartment buildings?

Why I'm asking again? Well I came upon 2 articles this week:

http://trends.truliablog.com/2013/05/trulia-bubble-watch/
this one puts Las Vegas as #1 in "undervalued" markets

http://www.theatlanticcities.com/housing/2012/03/where-buy-and-where-rent-now/1545/
This article doesn't show it in top 10 but marks Las Vegas as affordable.

Would it make sense to invest out of state? I'm in the metro Los Angeles area where housing is not so affordable and there's not great value or ROI on investment properties for buy and hold.

If not Las Vegas where would you recommend near the Los Angeles area? Inland Empire/Riverside?

Any other ideas are appreciated

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Troy Fisher
Specialist · Kirkland, WA · Member since 2013 · 1k+ posts · 817 votes
13y

Will F. , current list prices for 4-plexes are running $160k. At rents running between 400-600 you do the math. I stopped buying when they went above 115k. Anything less than 140k I've found needs extensive rehab.

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  • Joe Delia
    Involved In Real Estate · Rochester Hills, MI · Member since 2010 · 812 posts · 178 votes
    13y

    Vegas is still very under water and its rental market is soft.

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  • Marco Santarelli
    Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
    13y

    Hi Will F.

    Las Vegas is soft right now, and there are still reported high levels of foreclosures in the pipeline. It's a market that will eventually turn around and be "on the radar" as a prime market to invest in, but today you may be on the leading edge of that market move.

    Although the median single family home price in Las Vegas has increased steadily over the last 9 months, and is currently at $155,438 (as of May 17 2013), the market is still a "buyer's market". And there are over 10,400 properties on the market as of today.

    I think the window of opportunity will be open for year to come, and you are near the trough of the market cycle there.

    Originally posted by Will F.:
    Would it make sense to invest out of state? I'm in the metro Los Angeles area where housing is not so affordable and there's not great value or ROI on investment properties for buy and hold.

    I too am in SoCal, so for those of us that live in an expensive market (like California, New York, New Jersey, etc) we are sometimes "forced" to invest out-of-state in order to get favorable cash-flow and rates of return.

    There are many great markets around the U.S. to choose from where you can get double-digit cap rates, and property values are between $50,000 to $100,000. Compared to California, you can leverage your investment capital and purchase up to four times as many properties and with great cash-flows.

    As I say, "Live where you want. Invest where it makes sense!"

    Feel free to post any other questions you have.

    Continued success!

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  • Troy Fisher
    Specialist · Kirkland, WA · Member since 2013 · 1k+ posts · 817 votes
    13y

    Vegas, what to say. Here's what I've heard on SFH: deals are hard, cash is king and prices are above great cash flow. Here's what I know: the median 4plex price allows for little to know cash flow now. 160-180k does not support the $500-$600/rents I am getting. Apartments, we've had some big institutional sales lately but if you are looking for smaller properties, you aren't going to find many that make sense. Mid-sized 20-50 units might still be available but the rental market is still soft.

    Phillip Dwyer might be able to provide more info.

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  • Phillip Dwyer
    Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
    13y

    Some good info on here. The inventory numbers Marco posted are way off though. There's only about 3300 listings available for sfr, and it's not a buyer's market here. We have about a month supply of listings right now. Sure, there are a ton of people still underwater, and foreclosures could ramp up in the future.

    Troy is spot on. As some of the construction starts to ramp back up on the northern end of the Strip, it's possible some of those 10-30 unit properties will see higher occupancy.

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  • Marco Santarelli
    Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
    13y

    Hi Phillip Dwyer: According to The Department of Numbers, and other sources, there were about 16,709 single family AND condo homes listed for sale in Las Vegas as of May 20, 2013. Could '3300' be the monthly sales?

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  • Phillip Dwyer
    Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
    13y

    Marco those stats are likely including pending sales. The number I posted is available listings on MLS for sfr. Even if you add condos and town homes it will be much less than the 10,400 from your previous post.

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  • Marco Santarelli
    Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
    13y
    Originally posted by Phillip Dwyer:
    Marco those stats are likely including pending sales. The number I posted is available listings on MLS for sfr. Even if you add condos and town homes it will be much less than the 10,400 from your previous post.

    Hi Phillip,

    I think you may be right regarding those numbers. I've been trying to find a breakdown of the data, but I can't find anything so far. If that's the case, then you're correct in it being a seller's market. (I'm going to keep researching this for my own knowledge.)

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  • Robert Wright
    Renter · Las Vegas, NV · Member since 2013 · 19 posts · 1 vote
    13y

    Based on my discussions, it is a sellers market. Prices seem high to list. The few buyers I've talked with have not had much success with their offers.

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  • Will F.
    OP
    Investor · Los Angeles County, CA · Member since 2012 · 962 posts · 279 votes
    13y

    Thank you for the input. OK so a couple said soft and most have said its a sellers market.

    What do you all think of the article putting Las vegas at the top of the list of "Markets Where Home Prices Most Undervalued" ? From the article: "Prices are most undervalued today in Las Vegas and Detroit, even after their price gains in the past year. "

    Could it be an undervalued market and still be a sellers market? Could properties be worth more than they are selling for?

    How many days on market do 1-4 unit properties take?

    Could you purchase property there, have it cash flow descently and expect it to appreciate well in 10 or more years?

    In LA it is ridiculous because things here sell in less than a week and things definitely do not cash flow especially if smaller properties.

    I would consider a mid sized apartment with good cash flow in vegas.

    If not Las Vegas, what other markets would you consider investing if you are in Los Angeles.

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  • Phillip Dwyer
    Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
    13y

    Hi Will,
    I'm not in a spot where I can pull average days on market. However, I can tell you that its often a matter of a day or two for sfr. 2-4 takes significantly longer.
    You'll have to send me a pm with the numbers you have to work with, so I can give you a better idea on what's feasible.

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  • Troy Fisher
    Specialist · Kirkland, WA · Member since 2013 · 1k+ posts · 817 votes
    13y

    Will F. , current list prices for 4-plexes are running $160k. At rents running between 400-600 you do the math. I stopped buying when they went above 115k. Anything less than 140k I've found needs extensive rehab.

    1Reply
  • Marco Santarelli
    Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
    13y
    Originally posted by Will F.:
    In LA it is ridiculous because things here sell in less than a week and things definitely do not cash flow especially if smaller properties.

    If not Las Vegas, what other markets would you consider investing if you are in Los Angeles.

    Hi Will,

    That's a good question and one that I answer almost every day. Start by taking a look at my "2013 Housing Market Forecast" for some ideas and a frame of reference. I could recommend many other markets outside LA with lower price points that produce much more favorable returns and cash flow.

    The numbers in many parts of California simply do not make sense from a return on investment perspective.

    Also, ask yourself if you prefer a market with strong cash flow, or a market with strong appreciation potential. Although there are hybrid markets, one will usually dominate the other.

    Continued success!

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  • Marco Santarelli
    Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
    13y

    Hi Will F.,

    One more quick thing: Here's an article I just posted that you might find interesting on California's current housing market:

    The State of California's Housing Market

    Continued success!

    0Reply
  • Will F.
    OP
    Investor · Los Angeles County, CA · Member since 2012 · 962 posts · 279 votes
    13y

    Thanks Phillip, Marco and Troy. Good to get info from people in the market.

    Troy:

    That sounds pretty descent in comparison to the areas of LA (right now Long Beach and the South Bay) where you get a 4-plex for about $500k and get rents of around $1000 a month. This is for rent ready buildings.

    Did anyone read the articles? They claim that Las vegas is one of the most undervalued markets still.

    I think this is different than if its a sellers market. I mean there's low inventory here in LA too. I want to know if I will get a good ROI. That is if the rents cover all the expenses and building cash flow. I suppose they do compared to where I'm looking in Los Angeles.

    If I buy and hold these properties for 20 years would that be a good investment? Perhaps I need to get better goals and numbers.

    Anyone know of any other SouthWest markets that are good for investing? What are markets that are better than Las Vegas or Los Angeles?

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  • Marco Santarelli
    Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
    13y

    Will: Phoenix has been great -- if you can find some good properties there. We've had a real challenge lately since inventory levels have dropped forcing us to start a 'Priority List'.

    Las Vegas is a good choice as well if you're planning to stay in the SW. You may want to consider moving East a little to Texas.

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  • Victor B.
    Los Angeles, CA · Member since 2013 · 52 posts · 4 votes
    13y

    Great post! Thank you guys for all the input.

    Hi Will,

    I'm in the same boat as you. I live in Los Angeles and I'm currently seeking an investment property out of state for the same reasons you outlined above. As Marco mentioned, Texas is another good alternative. Looking at the Macro picture many of the metropolitan areas in Texas have a much lower unemployment rate than Las Vegas (331).

    http://www.bls.gov/web/metro/laummtrk.htm

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  • Shari Posey
    Residential Real Estate Agent · Long Beach, CA · Member since 2008 · 432 posts · 63 votes
    13y

    I've been waiting for short sale approval since January on a crappy townhome in Vegas. I bid on dozens and this is a good deal in my perspective (3BR/2BA $43k purchase price, HOA $200, $5k to fix up, rent for $850). Now I find out squatters have been living there, are gone now but will probably be back since the door jams are busted. I've never had this problem in Long Beach. I think I'm about ready to give up some cash flow to invest closer to home.

    Will F.--Where are you finding $500k 4-plexes in LB that rent for $1000 per unit?

    0Reply
  • Lukasz K.
    Banker · Las Vegas, NV · Member since 2013 · 13 posts · 1 vote
    13y

    I've been browsing these forums for a few weeks now lately educating myself on wholesale and other interesting topics. Personally I come from a hard money, VC/PE background and am in the process of restructuring my organization to get involved in all aspects of real estate as I see tremendous opportunity for the future, anyhow with that said.

    I recently relocated to Vegas 6 months ago and have been trying to soak in all the information about the current real estate climate out here. The metrics that I'll be targeting for my buy-and hold investors out here are going to be 125k-185k properties with 8-13% cash-flows. This is very realistic based on my initial research and experience out here. I've been in talks with the group that I'm actually renting my home from and just as an example since its kinda real world because its my personal rental. They picked this up for 150k or so at a foreclosure auction and I'm paying 1350 rent puts them at 9% or so... This is probably not totally accurate but Zillow puts a zestimate @ 185k. There have been recent sales in the area supporting those numbers also. A home a few doors down the road recently about a month ago went up for rent @ 1500 and rented in a few weeks from what I see.

    I've always operated in an out of the box fashion and I try to identify a niche and play within its limits.

    I'm in the process of obtaining a RE license out here and I'll tell you the key to this market (in my eyes) is law firm relationships for pre-MLS listed properties and auctions so you can get them before they hit MLS, because once they hit MLS out here - from talking with local realtors it turns into a huge mess. Again this is boots on the ground in Vegas, from someone that is not terribly experienced in its market so far these are just my initial observations so please... just take it as information. You have to stay in the good areas and be patient for the right deals to come along to hit these marks.

    - Luke

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  • Shane Tomas
    Involved In Real Estate · Los Angeles, CA · Member since 2013 · 8 posts · 0 votes
    13y

    As everybody here said the market is soft, and it’s a seller's market. I think one of the issues to take under consideration is the rental issue. There is not a lot of interest in renting. With that said, in popular areas there are still renters that are looking. If you can get your properties in great locations in Las Vegas you can have a great deal for 5-10 years.
    Shane.

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  • Will F.
    OP
    Investor · Los Angeles County, CA · Member since 2012 · 962 posts · 279 votes
    13y

    Thanks Marco, Victor, Shari, Lukasz, Shane.

    Shari Posey : "Will F.--Where are you finding $500k 4-plexes in LB that rent for $1000 per unit? "
    Forgive me, more like $600k 4 plexes that rent for $900 per unit in the lower income areas of Long Beach (West and North. The nicer areas of Long Beach can be $650k+ for a duplex that rents for $1700.
    Is this more correct for Long Beach? What areas of Long Beach do you think are best for investment?
    I've actually been searching for just something that will cash flow in long beach, but with the 50% rule none of them even come near cash flowing. In the North and West I see some that are a little better investments.

    Shane Tomas You say the market is Soft and a seller's market? I thought a soft market means its a buyer's market and there are a lot more sellers than buyers so prices would be decreasing.

    Are prices decreasing or increasing in vegas? I would assume if the inventory is so low as people have said above the prices would be increasing?

    Lukasz: How's the research going?

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  • Shari Posey
    Residential Real Estate Agent · Long Beach, CA · Member since 2008 · 432 posts · 63 votes
    13y

    Will F--$650k for a 4-plex in North LB is more like it. There really isn't anything in LB that works with the 50% rule. There really aren't many good investments in LB right now--I wish there were. The few that there are are not all that great and are being bought with all cash.

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  • Will F.
    OP
    Investor · Los Angeles County, CA · Member since 2012 · 962 posts · 279 votes
    13y

    Yeah Sheri, Long Beach/ LA I can't find anything that cashflow using the 50% rule. Whereas in Vegas it seems like I can (based on a couple quick searches, so don't quote me on this). Perhaps they barely cashflow if vacancies are high. Also I do realize that rents are going down in Vegas so that's something I should consider

    http://www.forbes.com/sites/morganbrennan/2013/06/13/the-most-overvalued-and-undervalued-housing-markets-in-the-u-s/

    This is yet another article that states Las Vegas is an undervalued market for housing. Perhaps its still an OK time to get into it. Obviously not as great as 2011, but I wish I had just gone with my gut about a year ago when I initially found interest in the market.

    They also list Atlanta, Chicago, and Orlando as other undervalued markets.

    The article is based largely on data from a firm Fitch Ratings, which claims that the local economy in Vegas should support higher RE values.

    So what do you all think about the 50% and 2 % guideline for RE in Vegas? What are some areas

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  • Marco Santarelli
    Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
    13y
    Originally posted by Will F.:
    So what do you all think about the 50% and 2% guideline for RE in Vegas?

    Keep in mind that the “2% rule” is simply a general rule of thumb, and it commonly applies to investors who buy-fix-and-hold properties. It’s easier to achieve a 2% rent-to-value (R/V) ratio when you acquire a distressed property and put up the capital to rehab it, lowering your cost basis versus buying a turn-key property.

    The other challenge in finding a high R/V ratio property today, even for rehabbers, is that many markets have tightened and inventory levels are low, pushing up property prices and thereby lowering the R/V ratios. It's important to keep your expectations in check when considering various markets and properties.

    Continued success!

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  • Patricia Franciulli
    Las Vegas, NV · Member since 2012 · 251 posts · 9 votes
    13y

    My experience is Las Vegas right now is that its a buy and hold time. There is no room for flips unless you buy high end properties and then fix / flip. Why too many cash buyers with high offers, but horrible I mean ( TERRIBLE) tenants that will take a lot of your time with their drama plus no payment. Even section 8 sucks here. They will take the voucher away for little reason. You will have a hard time doing evictions and arguments with tenants and contractors. Most of the contractors here (even licensed) drink beer on the job. I had to fire many because of that. Its just crazy.. Will drive you crazy..

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  • Dustin H.
    Real Estate Investor · Dubai, Dubai · Member since 2013 · 19 posts · 4 votes
    13y

    I just sold two circa 100 unit complexes in Vegas. My reasoning for this was that there are too many single-family rentals on the market, So it is fairly obvious that from a (qualified) prospective tenant's point of view, the value proposition is just not there for paying $600 a month for two-bedroom apartment versus $800 per month for two-bedroom house. I was seeing this first hand in softening rents in order to fill the vacants, or alternatively, accepting less than qualified tenants, so I thought it was best to sell.

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