Additional expenses for short term rental properties in Las Vegas

32 Replies

Hi, I am interested in buying an investment property in Las Vegas. I am debating between short (short and B&B) and long-term rentals as well as finding the right location. I recently read that the City created strict regulations and increased owner fees when it comes to short term rentals. My question is, how much of a difference would I need to pay in permits, taxes and licenses for a short-term in comparison to a regular long-term rental property? 

They're also increasing their regulations. I'd recommend long term rentals. Less turnover and less headache.

Antoine Martel

That will be very specific to the market - I'd recommend looking up the laws and permits required for Las Vegas specifically.  I don't know the requirements well, but I know LV controls STRs very closely.  I'm sure a bit of Googling can take you to the appropriate city and county websites.

As for expenses for short term vs. long term, I don't know of any city/county that requires special permits etc. for LTRs (but that's also not my focus, so don't take my word for it).  STRs generally have a lot of expenses that LTRs don't - permits and taxes are one, of course, but don't forget things like utilities (I'm sure power bills in Las Vegas are no joke) and of course furnishing the property.  

So, to answer your question, I'd look at the fees/licenses/permits to be an expense for an STR that you wouldn't have with a LTR. How much more of an expense that will be, I don't know - so do you due diligence before you make any moves. Good luck!

It could probably be done if you live in the same city. But I see you live in Cali and are trying to run a STR in Las Vegas.

My two words of advice:  Forget It

LucasCarl could probably do it, but they have experience running a remote STR.

Las Vegas has made it rather difficult to get licensed as a vacation rental, and has stepped up enforcement.  If you are considering going this route, there’s lots of research and homework to be done. 

@Alexandra Gomez

Once news comes out like the Raiders moving and building $1.9B stadium, you are already late to the game, and the market has took into account the news. The key is to be one step ahead of the game. 

Now, if you want to still invest, then you need to take into account all that has happened already, and then decide. 

Here's another piece of information that you already missed.

https://www.biggerpockets.com/forums/712/topics/51...

Terry

Originally posted by @Terry Lao :

@Alexandra Gomez

Once news comes out like the Raiders moving and building $1.9B stadium, you are already late to the game, and the market has took into account the news. The key is to be one step ahead of the game. 

Now, if you want to still invest, then you need to take into account all that has happened already, and then decide. 

Here's another piece of information that you already missed.

https://www.biggerpockets.com/forums/712/topics/51...

Terry

Correct.

We finalized our purchase  3 weeks before the raiders closed. and prices had already increased during our closing period.

that said, lots of growth to be had over the next few years here. Lots of appreciation still to be captured.

Also, As someone above posted there is lots of system risk with airBnB in Vegas. Similar to the taxi lobby is making it difficult for Uber to operate near the casinos, the hotels are making it difficult for AirBnb to operate as well. lots of regulation (and changing), and increased costs. You should consider and mitigate these market specific risks.

Alexander Felice

VEGAS is very protective of their biggest investment, HOTELS!   they hate short-term rentals, and will do whatever they can to stop you.    BUT, there are so many, there's really no way to stop people.

I have lived in Vegas 11 years, I'd vote long-term rentals.  I see lots of long term upside with buying and holding!

@Terry Lao Thanks for sending that link. So despite being late in the game as most of properties already increased in value and having very little room for Short Term Rental due to the regulations, would you say that Las Vegas is one of the best cities to invest in Real State for LTR? Do you anticipate the properties to continue increasing in value for a few more years or do you think they have reached the peak already? 

@Alexandra Gomez

I bought my 4plexs Mar'13, Dec'14, and Apr'16. I have doubled, and tripled my money at this point. I had arguments with my wife who did not want to invest. Now, she sees how much she made, she changed her tune. The general strategy is to buy low and sell high. See value when others do not. 

Now, with that said, I do believe there is still value in Las Vegas. You have to crunch the numbers and see if the bottom line makes sense. Decide if you are more cash flow (multi units) or appreciation (SFR).

The Realtor.com forecast is for 2018. The reason for LV ranking so high is because the city took the biggest hit during the 2008 recession. While most cities like Los Angeles, recovered their peak, and past their peak, Las Vegas has not. LV has only recovered about 70% of their peak. There is still plenty of room for growth. The other factor affecting Las Vegas is people like you and me who live in Southern California, and see outrageous prices, then head to LV and see bargains all over the place.

Terry

@Alexandra Gomez

I think Las Vegas has another 2-3 years  of growth and appreciation. I like to point to 2020 as it coincides with the Raiders finishing their $1.9B stadium. There will lots of jobs for the construction of the stadium, and they will want to stay close to strip for work and fun. 

Here's a diagram of the real estate cycle. If you can pinpoint where the down turn will be, then you are in the right city (betting term) to invest.

Also, the reason I invested in LV is because I got tired of losing at casinos, and tried real estate instead.

Terry

@Terry Lao your last comment made my day! Real State is better than gambling for sure!

And thanks for the diagram, it helped me a lot to understand the dynamics. I will continue my research and most likely will go for LTR. Considering both (cash flow and appreciation) circumstances, could you please give me your top 5 neighborhoods in LV that you suggest I look at?

Thanks! 

@Alexandra Gomez

The diagram below is for multi-units (2-4), and I liked the 4plexs. Most 4plexs are not in good areas, mostly C-D type neighborhoods, but need to crunch the numbers. I highlighted the areas I like, but not much available. Also, most are older built in 1960-1980. The ones I purchased are built in 1977 and 1984. 

According to Redfin, only 65 available. Multis are cashflow.

The second chart is for single family residence, and I'm only like one area, Summerlin. Some say the new part, South Summerlin. SFR for appreciation, but maybe get plus/minus 100 on cashflow. Looks like 350 homes available.

Terry

@Alexandra Gomez

here's other information that you may or may not be aware of. You need to evaluate your finances as to how credit worthy you are to obtain a loan. Unless you are planning to pay all cash, you will more than like need a loan. Most investments for SFR require 20% down, while multi-units require 25% down. Also, to obtain the best rates you need fico of 740 or higher. W2 income is best, and easily verifiable with paycheck stubs and 2 years Fed tax return. I consider the loan/mortgage as the most importance part of the real estate purchase.

Now, here is the bad news. Las Vegas has gotten very competitive, both from owner occupied and investors. If you are trying for 3.5% down FHA, you will lose to others bidding who put more down like 10, 20, or 25%. Those putting 25% down will lose to all cash offers, as cash is king.

I'm putting 20-25% and losing to all cash offers. However, the all cash investor knows that he beats all comers unless bidding against another all cash offer. The investor also knows that he has built into the contract 10 day due diligence period, meaning can back out for any reason up to day 10. Therefore, he has lost nothing by winning the bid, and then backing out. 

So let's see how well you know your finances, what is your fico score? 

Terry

To answer your actual question, Las Vegas has different Zones that absolutely prohibit STR, the areas that technically allow it require a business license and a yearly operating license that costs $500. The SUP application process is rather slow and has low approval rates.

I live in Las Vegas and own two SFR here, and my Company offers amongst others STR Property-management + Cleaning Services, most of our clients operate without the required license and are at risk, as the City increased the licensing enforcement.

@Terry Lao Are you currently looking into partnering? 

I could potentially do 20 to 25% but I definitely see the advantage that cash offers have. And my FICO score is pretty good, def higher than 740

@Stephan Kraus Thanks, I sent you a message. Despite all the risks and most likely inclined to go for Long Term at this point, I would still like to talk property managers/realtors who have experience with STRs. 

Anytime, always open for Questions and new Connections :) 

@Alexandra Gomez

I don't mind answering your questions, especially with financing, as I was in mortgage banking for almost 5 years. I did a lot of loans for people while in mortgage banking, and seen a lot of situations where people had underwriting issues. It is best to go over any potential issues in advance. Remember when I said, best to be one step ahead. Well, best to be one step ahead of the underwriters. For example, If you don't have your 20-25% down in a bank for at least 3 months, then when the underwriter asks for 3 months bank statements, you just can move 50k into a bank account. There is a average balance and a current balance on your statement. If bank asks for 3 months bank statements, then move all your money from your mattress 6 months ahead.

Also, for 2-4 units, your can use 75% of current leases to offset against PITI (principal, interest, taxes, insurance), and HOA. If it is a SFR, you can use 75% of lease or if empty, the average rent of the zip code.

Sorry, I had a bad experience with a partnership, and that was with a good friend, or used to be good friend, which is a whole another story.

Terry

@Terry Lao right now the money is in a mutual funds account. It is money that I can take out anytime. Do you think this would be an issue?

@Alexandra Gomez

Mutual fund is okay, and online will give you access to print statements when needed. If it is 401K which is also okay, and you can borrow up to 50%, and interest paid goes back to your account.

To be taken seriously by selling agent when you present offer, agent will ask you for pre-qualify letter and proof of funds for the 20-25% down. The pre-qualify letter comes from talking with a loan officer at mortgage company. Letter will state how much you loan you qualify for, at what interest rate for say 30 year loan, and PITI amounts.

I personally can show proof of funds easily by going online and just print current statements. My pre-qualification letter is generated by me and can print any amount at any time. However, I do call my loan officer and let her know that I am doing this. I've done over 10 loans with the person, so she knows my routine.

When you have the financial set. The next step is find property and talk with selling agent to get information that would not get normally. There's a way to get this confidential information.

Terry

@Terry Lao That is good to know. Another concern I have is that I just started taking an unpaid family leave at work because I am taking care of a relative who's ill. I won't have income from my work for the months of December and January (unless I stop the leave and return to work) but I am still employed and can show proof of it. The leave started 5 days ago. I am aware that some financial institutions require the paystubs for the last 2 months, do you think is good to apply for a pre-approval now that I am able to show paystubs for the last two months? For how long is a pre approval good for? and can it be extended if I don't close any deal within the period of its validity?

Thanks!

That is good to know. Another concern I have is that I just started taking an unpaid family leave at work because I am taking care of a relative who's ill. I won't have income from my work for the months of December and January (unless I stop the leave and return to work) but I am still employed and can show proof of it. The leave started 5 days ago. I am aware that some financial institutions require the paystubs for the last 2 months, do you think is good to apply for a pre-approval now that I am able to show paystubs for the last two months? For how long is a pre approval good for? and can it be extended if I don't close any deal within the period of its validity?

Thanks! @Terry Lao

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