Vegas or Phoenix?

Question

I have about 100K in savings which I've been thinking about investing in real estate.  I"ve been doing some research and it seems like buying real estate in Vegas or Phoenix is a good deal these days.

I've contacted local investment agens in both cities and they have recommended SFH, cash transaction.  I'm leaning towards Vegas since I can buy a nice SFH around 80-100 K.

Or I can use the money as down peyment on my first house here in Portland, but that will result in no cash flow and a lot of work for me!

Any Advice would be appreciated

Don Konipol · Answer

I personally believe that all the hype about guessing the best city to invest in is just that - hype and guessing.  If anyone told me that the one bedroom Central Park West co-op I could have purchased in NYC in 1976 for $38,500 would sell for $1.1 Million in 2007 I would have thought them crazy.  Meanwhile, the smart money was buying a $38,500 condo in Houston that year, now worth almost $95,000.

Unless your local market is so high priced that a positive cash flow is just impossible, you are best off investing where you live and can acquire an in depth knowledge of the local area, politics, zoning, tax structure, neighborhood changes etc.  Competing with local Las Vegas or Phoenix investors while you are "out of town" is going to bat with a strike or two against you.  You might still get a hit - but the odds have been changed, and not in your favor.

Mark H. · Answer

Setting an arbitrary "year built" limit knocks out a lot of great properties in Phoenix.  A local investor might tell you about the massive hailstorm we had in Phoenix a while back that resulted in huge insurance payouts for roofs & a/c units.

So many of those older homes got "free" roofs & Hvac systems.  Would you rather own a far-flung home with a 12 year old roof & a/c, or an older home, closer to jobs & services with a one year old roof & a/c?

Many out-of-state investors went insane over the "deals"  on those newer homes way out in the desert & skipped over the ones that were where people want to live.  Older homes here generally have much bigger lots, and theyre much less likely to have an HOA, which adds to your bottom line, cause hoa's aren't free.

As for there being nothing under $100k in a "safe" area, that isn't true, deals are still closing under $100k, there's just very little product out there right now.  "safe" houses didn't double in value, there just aren't many for sale.

Mark H. · Answer

As someone who currently lives in Phoenix & owns a couple of rentals here, i think "smoke & mirrors"  is a pretty ignorant description of our current situation.  And I bristle when people lump "Vegas & Phoenix" together, anyone who has flown into both cities at night wouldn't compare them or lump them together.

They're both in the desert, but Phoenix dwarfs Vegas in size & scale.

As for flying into town and "scoring" a "deal", I expect the locals will eat your lunch in Phoenix, Vegas, Detroit, Cleveland, Atlanta, or the middle of Iowa, should you try it there.   There are plenty of people looking to make a fast buck at the expense of small investors in every city.  The odds were with out-of-towners last year in Phoenix, this year, not so much.  That doesn't mean that "smoke and mirrors" was involved, it means there were some really good deals here, and not enough money flying around to snap those deals up.

Xing Zhu · Answer

I'd also like to get answer to this question.
I guess Phoenix is a safer bet. The Vegas has annoying uncertainties such as AB284. On the other hand, Las Vegas is an international destination with vast potential if the economies of its neighbor states improve.
I do what people do in Vegas: I gamble!

Bruce E. · Answer

You might want to find a nice 2-3 BR 4 plexe in Portland.  Needs to be owner occupied for a 3% down FHA loan.  Do not rent to relatives or friends and learn the basics of income property ownership at home.

Lisa Goodwin · Answer

Don Konipol

Ideally I'd want to invest in my local market, but there is absolutely nothing available in my price range.

I'm looking for a SFH 2000 or newer, in Portland metro ... I've been looking!  That's what is steering me towards investing in other states.

Jeff S. · Answer

Lisa, most on here would advise against HOAs. There have been so many financial problems with owners of condos that in any group of condos you will find a percentage, sometimes a large one, that are having problems paying dues. Unless you are very aware of how condominiums operate and are expert on a particular project, you are better off avoiding for now IMO.

Lisa Goodwin · Answer

My goal is to get a 7-10% in cash flow (after taxes, HOA, managemtn, etc) and when the time is right, sell and move the money closer to home.

Lisa Goodwin · Answer

I can't buy a reasonable SFH in a good neighborhood in Phoenix for 100K.  With my budget, I can buy a property in high crime neighborhood in Phoeinx  ... will get less than ideal tenants ... etc

If I had 150K, I'd consider Phoenix

I'm new and don't have much knowledge ... trying to use good judgement and common sense :)

Jeff S. · Answer

Hi Lisa, glad to see a fellow Portlander here as we are few. Welcome.

Interesting comments from Jake about those markets. The thing I notice is that rents seem to be dropping and vacancy is higher than in comparable areas.

There is a lot to absorb on this site.  Look forward to hearing more about your thoughts.

Vegas or Phoenix?

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