Where to Invest Next?

Question

One of our users, buyandselllv, posed the question:

Where to invest next?

He was interested in finding out about good areas to look at to find rental property.  I realize it is a broad question, but wanted to re-post it, as the first conversation took a direction far from where it was intended.

Thoughts?

Joshua Dorkin · Answer

Great answer, Scott!  Anyone else?

Richard Warren · Answer

a) Gaming and hotel related is definitely the #1 industry, followed by construction.  After that you have a number of industries as the area has grown beyond the 2 million mark (counting illegals).  The state is always near the top of the charts in employment, granted most jobs are not high end glamor jobs but anyone who wants to work can find it for the most part.

b) The hotel construction is the most visible and is what the tourist see.  However there are massive infrastructure projects going on with almost every roadway having some project going on.  Infrastructure spending is expected to top 5 billion over the next several years.

c)  Vegas has become a major destination for retirees because of no state income tax, the weather and plenty of things to spend their entertainment dollar on.  Businesses are moving here because of the “business friendly” nature of Nevada.

d) Land is extremely limited.  It may look like there is a lot but much of it can’t be built on, some estimates have the available supply at about 7 years based on current pace of building.

NOTE: I wasn’t calling your thoughts herd mentality, just the idea of people hopping on the next bandwagon and looking for the next great area.  Wherever you are there is money to be made, you just need to see the opportunity and jump on it.

Long term I am very bullish on this area, short term is another matter.

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Scott Miller · Answer

That's what I love about this forum, it's members and moderators---regardless what side of the coin I'm on, I can't help but learn in the process...

Thanks for the education and correcting my "from the cockpit" impressions.

Regards,

Scott Miller

Michael Rossi · Answer

I wouldn't call that negative, it's just truthful.

Mike

N/A N/A · Answer

I have to agree with Rehab, all of those things are in place!  I would have guessed our average age to be much older than 30's.  I don't know of too many cities that have 3 Sun City communities and then some!

I like the "idea" of finding diamonds in our own yards.  Does that book, or any other book, have some suggestions on how to find a good position in a "Las Vegas Real Estate" market as an Investor today?  I would really love to hear what it might be.

As a Realtor here, I am struggling to find a "positive" for buyers or sellers.  We hear a lot of fluff, but I can't find anything to substanciate why an investor would buy or sell today... no one walks away feeling a win-win, just some are hurt less than others.  If you can rent a $350k house for $1,300-$1,500 an month, why would you buy a home now?

I know that sounds negative, and I hate to be that person, but even I don't see an immediate, or even near future, solution :)

Scott Miller · Answer

You know me, I got to stick my nose where it doesn't belong...

Although I only go to Vegas a few times a year (for the last 10 or so years) what I know about Vegas I can fit in a thimble (what I know about Vegas, stays in the Vegas if you know what I mean... :D)

These are my passing observations (feel free to rip them apart if I'm wrong):

a.  Employer Trend:  Correct me if I wrong, but isn't the gambling industry (and all its subsidiary business units like entertainment, hospitality, etc.) the largest employer in Vegas (most likely followed by construction and then the convention industries)---if this is the case, the industry isn't known for employee enrichment/income advancement.  
b.  Infrastructure Trend:  The one consistent improvement I see everytime I visit (and I do mean everytime) is that there is always a casino being built/remodeled (I imagine that this is a perpetual event)---this isn't infrastructure in my opinion.  
c.  College Kid Trend:  You conceded.
d.  Boomer Trend:  Before I started originating reverse mortgages, I made it a point to do age demographics for every state in the country for purposes of target marketing---according to my research, the median age in Vegas is 34.5....There is no considerable concentration of boomers in Vegas (and 30 somethings aren't known for considerable networths either).  
e.  Limited Land Trend:  I concede I can't argue this point but I see alot of undeveloped brown stuff that goes on for miles when I fly into Vegas.

You guys might call my thoughts "herd mentality"---I simply call it "following the money" and I have a hard time grasping how that could foil anyone's profit plans.  My comments boil down to the age old laws of supply and demand---supply (lack of land that is) and demand (presence of wealth or future growth) are economic principles that can't be disputed.

Regards,

Scott Miller

Scott Miller · Answer

I should further clarify that my opinions are deeply rooted in commercial real estate trends/markets and that they might not convert well in the residential rental market business model.

Regards,

Scott Miller

Ryan Webber · Answer

Technically speaking, I agree with Mike.

Now in a more general sense of the whole topic I always hate to see people getting caught up in the grass is greener mentality.  I think everyone should learn to make money in their own backyard before they start looking for greener pastures.  Now obviously not all strategies will work in all markets, but I think the whole mentality of going somewhere else to invest is 9 times out of 10 a personal deficiency and not a market issue.

There's a little book called Acres of Diamonds that explains this clearly.  The basis of it being that a cattle rancher set on finding diamonds in the Middle East sells his ranch to go prospecting across the globe.  He comes back years later broke and desolate to find that diamonds were found on his very own, former, ranch.  Supposedly it became one of the largest diamond mines in the United States.

Richard Warren · Answer

With the exception of the college town, you just described Las Vegas.  Yet we are awash in homes for sale.  We have over 23,000 SFH for sale and 40% of them are vacant.  Days on market is over 1 year and very little is moving except the low end of the market and houses that are priced in the stratosphere (there was an article in today’s paper about a home that sold for over $1,000/ sq ft).   The wannabe investors who flocked to this market have left with their tails between their legs.  We are the #1 foreclosure market in the country and a great number of people are upside down on their mortgages.  The long-term outlook is excellent but we are going to have a rough market here until all of the supply gets absorbed.  Wholesalers have a tough time because there is no equity in the homes and banks are not eager to do short sales. So demographics are a good place to start but they don’t tell the whole story.

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Richard Warren · Answer

Exactly correct.  That is contrarian thinking at it’s best.  Sell when everyone else is buying and buy when everyone else is selling.  In the equities markets the “smart money” will do just that, in the early stages of a boom they will go along with the herd but then jump off the bandwagon as soon as it gets crowded.  A great book on this herd mentality is Extraordinary Popular Delusions & the Madness of Crowds by Charles Mackay, and it was written in 1841!

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