A friend of mine recently bought in Las Vegas. He sent over some zillow pages where condos with $800-$900 current rent are asking around $100K. This is yielding about 9%! Even with $170-$200 HOA this seems too good to be true. If I were a renter, why would I pay $800 to rent a condo which, if I buy and fully finance, the monthly mortgage payment is only $600?
Can pros educate me on what I am missing?
Links available if not against any policy; but examples are easily found.
Arlington, VA · Member since 2015 · 60 posts · 100 votes
7y
Originally posted by @Account Closed:
Just look at the numbers on Zillow.
The HOA in Pirate Cove complex is $142.
Las Vegas has very low property tax rate. The $100k condo has estimate yearly property tax of only $400 per year. $20 to $25 monthly insurance.
Most investor prefer 30 years instead of 15 years mortgages to have more leverage. You guys do your own math using $142 monthly HOA and $34 monthly property tax.
Ok, I'll bite.
1000 gross rents
-142 monthly HOA
-34 property tax
-25 insurance
-100 maintenance/capex
-50 vacancy
-0 property management, which you will be doing yourself
___________________________________________
$650/mo, or 7.8k a year, or 5.5% rreturn on your 140k invested... but you will also be doing all of your own showings and dealing with all of your tenants as a part-time property manager, and you're opening yourself up to the prospect of a special assessment wiping out YEARS of profits, all for a return that is strictly less than what an S&P500 index fund would return to you on average.
NB that these numbers are based on an extremely conservative vacancy rate and low low low maintenance figures and an HOA that never increases...
Still a bad deal, IMHO, and I would encourage you to consider other options.
Arlington, VA · Member since 2015 · 60 posts · 100 votes
7y
Originally posted by @Account Closed:
Just look at the numbers on Zillow.
The HOA in Pirate Cove complex is $142.
Las Vegas has very low property tax rate. The $100k condo has estimate yearly property tax of only $400 per year. $20 to $25 monthly insurance.
Most investor prefer 30 years instead of 15 years mortgages to have more leverage. You guys do your own math using $142 monthly HOA and $34 monthly property tax.
Ok, I'll bite.
1000 gross rents
-142 monthly HOA
-34 property tax
-25 insurance
-100 maintenance/capex
-50 vacancy
-0 property management, which you will be doing yourself
___________________________________________
$650/mo, or 7.8k a year, or 5.5% rreturn on your 140k invested... but you will also be doing all of your own showings and dealing with all of your tenants as a part-time property manager, and you're opening yourself up to the prospect of a special assessment wiping out YEARS of profits, all for a return that is strictly less than what an S&P500 index fund would return to you on average.
NB that these numbers are based on an extremely conservative vacancy rate and low low low maintenance figures and an HOA that never increases...
Still a bad deal, IMHO, and I would encourage you to consider other options.
Realtor · Las Vegas, NV · Member since 2018 · 218 posts · 147 votes
7y
@Account Closed
Thats simple, youre correct, there are no class "B" areas in Vegas where the current numbers will be better than these examples shown.. And these examples are the BEST current examples in this price point in the Vegas Valley..
In my class A neighborhood, houses sell for $500-600k and rent for $1900-2900.. These are more common numbers to expect in many of the better areas
I am trying to put together a cash flow projection, and hope to get some info on Vegas area property management rate.
Will Vegas area management company take just one property at $800 rent per month (using the example I have been using)? If so, what would be the fee? Or is there a minimum aggregate rent for it to a worthy relationship?
I ask because applying what I pay now to my local management company that would be somewhat of a small net amount.
Rental Property Investor · Park City, UT · Member since 2019 · 84 posts · 149 votes
7y
Originally posted by @Account Closed:
Example of a neighborhood I’m interested in, one bed condo is asking for $140k, I can rent it at $1000. 8.6% is not too bad. I’m happy with the 8.6% because the tenants are great.
What's the return after taxes, HOA, maintenance & repairs, vacancy, etc? I'm guessing about 5% which isn't bad provided you don't have to carry a mortgage. The only downside to condos is that you have to pay HOA dues even if your condo isn't rented, so it goes from an income source to an expense really quickly. Not to mention, as we've learned from the past, Vegas is particularly sensitive to economic downturns.
The way homes have been sitting on the market lately, I bet you could get them for less than $100k.
Zillow does not have rental comps - only the asking prices and NOT the actual rented price. Asking price is not a comp. That’s just what people hope to get for rent.
Yes you are correct; some are asking $95K. I rounded up just for ease of calculating, and even at that slightly inflated base the return is over 9% pre-property tax, which is much higher than the 2-3% pre-property tax yield around SF.
Which begs the question: Why aren't more investors jumping on these? Why do these properties sit on the market? Renters may not be calculating or don't want to commit to a place, but investors around the country should be very acute about profit opportunities...
Condos in Las Vegas often come with rental restrictions. If there are already a lot of rentals in the community, they may not allow more at the present time. You have to find out the HOA's rental rules before buying a condo as a rental here.
I am trying to put together a cash flow projection, and hope to get some info on Vegas area property management rate.
Will Vegas area management company take just one property at $800 rent per month (using the example I have been using)? If so, what would be the fee? Or is there a minimum aggregate rent for it to a worthy relationship?
I ask because applying what I pay now to my local management company that would be somewhat of a small net amount.
There is no “standard” PM fee. Anyone who tells you otherwise is full of it. Lol
You could expect 8-10% from probably most better companies. Note the other fees and services make a difference so don’t just look at the percentage.
Some companies will have a monthly fee minimum to accept. I accept $800 rentals no problem.