New Member from Las Vegas, NV

51 Replies

@Kristin Davey welcome to BP, it's great that you made the decision to invest in real estate. 

1. never let anyone tell you what is a good or bad idea, only you know what fits your situation

2. get clarity on exactly what you want to do

3. to get the clarity you need education.

Think of real estate as a marathon instead of a sprint. You don't have to jump into anything right now. Don't get wrapped up in the hype a lot of people spread about jumping off the cliff and building the plane on the way down. Most people overestimate what they can do in 12 months, and underestimate what they can do in 20 years.

 You can have all the parts of the plane in front of you, but if you never learned how to put them together you will hit the ground before you learn. 

Purchasing your first home is an investment. The national association of Realtors did a study and it concluded that someone who buys a home right now will have on average of a little under 50k in equity in 5 years. This is just a normal homeowner who has not even given one thought to investing in real estate. 

Based on the facts in your post I would lean more towards purchasing a home that is in turn key condition, enjoy the equity, and tax benefits while you educate yourself on other details of real estate. 

Education will bring clarity on the direction to take on your investing journey, and then you can go in that direction.

Feel free to reach out if you have any other questions. I lived in Las Vegas for about 8 years.

Originally posted by @Brandon L. :

@Kristin Davey welcome to BP, it's great that you made the decision to invest in real estate. 

1. never let anyone tell you what is a good or bad idea, only you know what fits your situation

2. get clarity on exactly what you want to do

3. to get the clarity you need education.

Think of real estate as a marathon instead of a sprint. You don't have to jump into anything right now. Don't get wrapped up in the hype a lot of people spread about jumping off the cliff and building the plane on the way down. Most people overestimate what they can do in 12 months, and underestimate what they can do in 20 years.

 You can have all the parts of the plane in front of you, but if you never learned how to put them together you will hit the ground before you learn. 

Purchasing your first home is an investment. The national association of Realtors did a study and it concluded that someone who buys a home right now will have on average of a little under 50k in equity in 5 years. This is just a normal homeowner who has not even given one thought to investing in real estate. 

Based on the facts in your post I would lean more towards purchasing a home that is in turn key condition, enjoy the equity, and tax benefits while you educate yourself on other details of real estate. 

Education will bring clarity on the direction to take on your investing journey, and then you can go in that direction.

Feel free to reach out if you have any other questions. I lived in Las Vegas for about 8 years.

Do you live in Vegas now? 

Or own properties out here currently?

Otherwise.... -_-

https://www.biggerpockets.com/forums/109/topics/55...

@Account Closed

@Jay Hinrichs

Wow, Lisa, you've only been member on BP for 1 day and seems to know it all. While others have been member for years. Education, knowledge, and living in Las Vegas are the keys to this market. I personally invested and love the Las Vegas market. For anyone in Southern California or Bay area, the median home price of $289k is a bargain.

Let's ask the guru of all gurus, Jay Hinrichs, also he lives in Las Vegas. Whether Las Vegas is still a good investment?

Terry

Originally posted by @Terry Lao :

https://www.biggerpockets.com/forums/109/topics/55...

@Lisa Nariyoshi @Bill Brandt @Brandon L.

@Jay Hinrichs

Wow, Lisa, you've only been member on BP for 1 day and seems to know it all. While others have been member for years. Education, knowledge, and living in Las Vegas are the keys to this market. I personally invested and love the Las Vegas market. For anyone in Southern California or Bay area, the median home price of $289k is a bargain.

Let's ask the guru of all gurus, Jay Hinrichs, also he lives in Las Vegas. Whether Las Vegas is still a good investment?

Terry

I have a home there to be close to my grand kids  and for tax purposes and to get out of Pac northwest winter doldrums..  WE have a lock and leave townhouse short walk to our kids and grandkids  does not get any better..  I think vegas has a lot of potential .. I have made money on the last 15 or so deals I did there  everyone made a profit and I can't say that about all markets I work and I work 14 .. 

Originally posted by @Account Closed :

Never ever look at a home as an investment-it will drive you Bonkers. 

We pretty much did when we came out here from the East Coast. Rolled dice and didn’t crap out. (weak pun intended)

Put 5% down, owner-occupied, and the place appreciated about 600% worth of what we put in (CoC ROI) since June 2016.

It was cash flowing it's first year as a rental, even with just 5% down. If we had 20% down it would be at nearly the 2% rule (Total Cash Flow / Total Yearly Expenses). This year it will cash flow at 1.1% because of early PMI drop + rent increase to market. (This is in Summerlin btw, not some boondocks location.)

I do agree with the majority if people on here. Average household income out here is being priced out of the nicer areas (Summerlin). Everything being put up for sale in nice areas has an insane number of investors coming in with strong offers, cash, etc. My agent’s last deal he said he had to beat out over 15 offers. I’ve been beat out myself in bidding wars with “best and final” - where in the end they tend to take cash anyways.

Lao loves him some multi-family. Not sure if he’s trying to offload his investments, haha. However, talk to property managers before you go that route - they know as well if not better than investors how it is. Many will outright refuse to work with them because of the quality of tenant.

After keeping an eye on the market for the past two years, and having lived here, I believe there are still two strong areas (non-Summerlin) in Vegas to still invest in right now. We’ll see if I’m right, but I plan to keep chucking cash at these areas whenever I get the chance.

@Account Closed

I invested in multi's in Las Vegas and will continue to look for multi's. There are current multi's that meet the 1% rule and those get snatched up quickly. Currently the market is red hot and lost in bidding wars, but the numbers are there. The general rule is SFR are more geared towards appreciation first and cashflow second. Multi's are cashflow first and appreciation second. However, those that own multi's for the past 2-3 years would have realized that the appreciation is way more than cashflow.

If the goal is ROI, the way to go is multi's, plain and simple.

Terry

Wow @Kristin Davey you stirred up a lot of opinions with your question. I have lived in Vegas for 23 years and closed 17 flips last year so have some thoughts on this if you want to connect. The fact is that good flips are getting very difficult to find for those of us that do it all the time. However as others have stated you have tools accessible to you as a first time home buyer that pro flippers do not. I pay 12%+ for my HML money where you can get it at much less....so deals that do not pencil out for me will pencil for you.

I love the idea of home hacking for your first one.   I am doing a hack now in Summerlin as I need to move out of my primary to do a 4 month renovation.   Instead of renting I bought a house for 530, invested 30 and will sell for at least 630.    Not great numbers, but I am living in a house for free for 4-6 months and should pocket a few thousand when done.    For you it could be moving every two years for a while....buy, live, fix, flip, and pocket tack free cap gains!   

Many years ago my biggest mistake was not jumping into this sooner.    I analyzed for years...then finally WROTE down the goal on my wall to own my first investment property in 3 months.   I met that goal...and has been a great journey ever since.

By the way, your design skills (assuming they are good) will play a key role in your success.    We have great designers and now stage every home...it makes a huge difference.  https://www.lvhomestaging.com/

Good luck

@Account Closed

I believe you've been saying that Las Vegas is not good investment since Jan'18, is that since Jan'18, the median price of home went up $29k. In Jan'18 median SFR was 265k, and now May'18 median SFR is 294k. That is up over 10% month to date. Pretty good ROI for 5 months. Project these numbers for 12 months, come December, should be over 320k and over 20%.

Not bad for someone who is " regurgitating statistic ". 

The problem with your don't buy Las Vegas belief and re-peating over and over, is that it is not correct when comparing the actual numbers. I guess you will be correct at some point, but not today. The saying a broken clock is still correct twice a day comes to mind.

Terry

@Account Closed

I am still buying. I put in multiple offers on 5 separate properties this year and got out bidded on all. The market is very competitive and rightfully so. 

I have a buy, hold, and sell strategy. I have sell target on my 4plexs at 300k for Dec'18, but that number has been reached last month, and now I re-evaluated the market, and things still look good. I will put another target of $325k, and see what happens when Dec'18 comes around.

Yes, interest rates are going up. I run the numbers on 5.375-5.5% 30 year fix, and already have that factored in.

Terry

@Account Closed

For someone who is an investor, you sure don't know what you are talking about. 

I'm making decisions based on data and forecast. If you cannot grasp the below chart, then you should stay out of real estate.

Terry

@Account Closed

The above chart shows median price of SFR going up. This is great for properties that I currently own. I have a target sell point, and if it reaches it, then either I can sell or re-valuate the market, and hold longer.

The 5 properties that I made offers on made sense from a cashflow perspective. Did I offer full list price? NO. I made offer lower than market but still made sense on paper.

To answer you question, yes.............you do buy and sell at same time............if the deal makes sense.

Here is a good example, I can buy a multi that needs work at a low price, fix, and flip, or hold if market is going up.

Do investors in the stock market buy and sell at the same time? 

If you do not look at all the possibilities, then you are short sighted and do not see what value there is.

Terry

Looks like Lisa's account got closed.

For any property I have a buy, hold, and sell strategy. I have done flips before and will continue if it is the best option.

For example, bought a condo for $32k in Las Vegas that need about $15k repairs. I knew going in that HOA did not allow rentals. I preferred to hold, but did not want to fight HOA, so best option was to flip.

Terry

For those that wondered what happened to Lisa, one of two things. She voluntarily could have closed her account due to being only a days old. Other possibility, the moderator closed her account due to trolling, or violation of Bigger Pockets policy.

Terry

Hello,

Great thread! Most of the posts seem to center around two topics:

  1. Can you still buy good investment properties in Las Vegas?
  2. What is the current state of the Las Vegas market and what is likely to happen in the foreseeable future?

I will address both topics starting with buying good investment properties.

Good Properties

Yes, we find them every day. However, they are not easy to find. Currently, good properties are about 1 in every 2000 available properties. You have to have the right tools and processes to find them. What real return (including all recurring costs and not including unrealized gain like principal pay down, etc.) can you expect with 25% down, 30 year fixed? Between 2% and 4%. Higher if you buy with cash.

Current Market Condition

The value of anything is determined by demand. For example, would you pay $100 for a half consumed bottle of water? No? Suppose you are lost in the Mohave desert and dying of thirst. You would be willing to pay $100, $1,000 or any amount of money for the same half consumed bottle of water. Such is the difference demand makes. The same is true with real estate. I look in some cities and a 1,500 SqFt single family home is selling for $15,000. The same house in some coastal cities in California would sell for $2,000,000 or more. Like the previous example, it’s the same house but different demand. So, let’s start by looking at the current Las Vegas real estate and rental demand situation today.

Current Demand

I will subdivide the demand question into sales and rentals.

Sales

The best demand barometers I know of for the current market is the trend of: days on market, $/SqFt and inventory.

Days on Market

Days on market is the number of days between when a property is listed and the date when the property is placed under contract. As you can see below, the days on market is currently about 15 days. This includes over priced properties that may well sit on the market for months or longer so 15 days is a very short period of time for real estate. The short days on market indicates a high level of demand.

$/SqFt

Price per SqFt ($/SqFt) is another indicator of demand. The chart below shows $/SqFt since 2008.

Note that while prices have increased since the bottom in 2011, we are still at about 80% of the 2007 peak prices. Also, Las Vegas has the further to go to reach pre-crash peak prices than any other major city.

Inventory

Inventory is measured in months of supply. A six month supply is considered balanced. As you can see below, current inventory levels are about 1.8 months of supply, which indicates a high level of demand.



Rentals

$/SqFt

The following data is for the entire MLS, not just the narrow property profile we target. As you can see, rents have steadily risen since 2013.



Rental Inventory

Over the last few months, total available rental properties has fallen. Below is the total number of rental properties available on the 18th of the month, by month, by type.

As you can see, rental inventory has decreased drastically since January. Note that we have not even entered the peak rental demand period of June through September.

Typically, time-to-rent is 2 to 3 weeks. Today, we are closer to 2-3 days.

Current Demand Summary

The numbers clearly indicate there is significant demand for both properties to purchase and properties to rent. Declining inventories in both sales and rentals indicate that property prices and rents will continue to increase, at least in the remainder of 2018. How about in the foreseeable future?

Future Demand

While no one can accurately predict the future, you can infer what a market is likely to do by looking at current and recent trends. Stock investors do this all the time. Fortunately, while stock prices can change almost instantaneously (sometimes due to seemingly unrelated events), real estate markets generally change very slowly, which makes trends easy to spot.

Purchase and rental demand is largely driven by:

  • Jobs - Real estate is no better than the jobs around them.
  • Population growth - More buyers means increasing demand.
  • Urban sprawl - If people are leaving an area, demand in that area will fall. This is true even if the population of the metro area is unchanged or growing.

Population growth

Las Vegas’ population grew by 2.2% in 2017. This is a healthy and sustainable growth rate. Nevada ranked 3rd in Atlas Van Lines annual migration report in terms of most popular states to move into. See the graph below. The numbers show what percentage of moves are inbound vs. outbound from the state. Greater than 50% indicates more people moved into the state than out of the state.

Below is a 2015 graphic (I was not able to find a more recent similar graphic) showing the top states from which people are moving to Nevada. Note that the population of Las Vegas is about 80% of the population of the state of Nevada so the majority of the new population is likely moving to Las Vegas. Note that while the numbers shown below may seem small if you compare them to the population of California, the total population of Las Vegas is approximately 2.3M so the number of people moving in has a big impact.


Jobs

Rental properties are no better than the jobs around it and Las Vegas is experiencing a lot of job growth. However, the quantity of jobs is only half of the story.

Job Quality

Job quality is almost as important as job quantity. For example, in many parts of the US high paying manufacturing jobs have gone away, such as the automotive manufacturing jobs for which the average pay was about $40/Hr plus benefits. Today, these same people are most likely working in the service sector. Services sector jobs typically pay between $11/Hr and $13/Hr. So, while the overall job quantity did not change, the quality did. If people are earning less, what they can afford to pay for rent will fall over time as well. What does this mean to you as a landlord?

The best metric I know of for determining overall job quality for an area is inflation adjusted per-capita income. See the chart below from the St Louis Federal reserve.

As you can see, per capita income continues to rise in Las Vegas which means quality is increasing.

Job Quantity

A good measurement is the rate of unemployment. As you can see below, unemployment is around 5%, which is great compared to what it was in 2010. How do the current number of jobs compare to pre-crash job numbers? In 2016, Nevada surpassed pre-recession employment levels with 70,000 fewer construction jobs. (Note: Las Vegas metro area is about 80% of the total state population.) Here is a report by the Federal Bureau of Labor Statistics on Las Vegas employment.

As the population of Las Vegas continues to grow, unless the number of jobs increases as well, unemployment will rise. Below is a chart showing the rate of unemployment for the metro area from the St Louis Federal reserve.

As you can see, despite the increase in population, unemployment continues to decline and per-capita income continues to increase. A very good combination for the future.

While it is hard to quantify the number of jobs generated by small to medium businesses, it is easy to quantify for large projects.

Major Projects

Below are some of the top projects under construction in Las Vegas. These projects create large numbers of both short term (mostly construction) jobs and long term employment once the projects are complete. And, every worker will need a place to live.

Other Sources Of Growth

Blue State Refugees

Since Nevada is adjacent to California, I will focus my remarks specifically on California. However, people who leave blue states due to the high cost of living will look at places like Las Vegas.

I’ve researched one segment off California population that will be greatly impacted by the 2018 Tax Act and rising prices and taxes and that is people living on a fixed income.

California has about 6M retired people. Due to the 2018 Tax Act, an unknown percentage will choose (or be forced) to leave the state and look for a lower cost of living. Las Vegas is a known location to the people of Los Angles and San Diego. The fact that it is only 4 hour drive away from friends and family is a major plus. Lets look at the numbers.

If 0.25% of the 6M retired people in California decide to move to Las Vegas and we assume that all are couples, the number of residences needed will be:

6M x 0.25% / 2 = 7,500

To put this in perspective, the total number of single-family homes sold in Las Vegas in 2017 was 34,659. If an incremental demand for an additional 7,500 residences occurs over the next coupled of years, demand will further increase sales and rental prices.

You might question whether this is only a short term situation because developers could just add thousands of new homes to meet the demand. The short answer is, “No.” The reason is a lack of available and desirable land.

Limited Land

Las Vegas is an island surrounded by federal land. See the map below. The areas in red are federal land.

See the gif below to see how the metro area has consumed the available land between 1984 and 2016.


Las Vegas is in a situation where:

  • Population is growing
  • Job quality and quantity is increasing
  • Unemployment is decreasing
  • Due to the low cost of living and no state income taxes, is very likely to attract a percentage of people seeking a lower cost of living

However, there is more to the story.

Corporate Expansion

The 2018 Tax Law reduced tax rates and encourages US corporations to expand operations within the US as opposed to overseas. Below is a small example of the factors that make Las Vegas a desirable location for businesses.

  • The fiber optic lines connecting the West and East coast run under Las Vegas Blvd.
  • Within 2 days driving distance to 20% of the population of the US, which is desirable for distribution centers.
  • Las Vegas is one of the few large metro areas with dual sources of electric power: Hoover Dam and California. This is a huge advantage for server farms, manufacturers and others who cannot afford to lose electrical power.
  • Relatively low energy cost. For example, below is a comparison between the statewide energy cost in California vs. Nevada.

  • No state income tax.
  • Nevada’s proximity to California is important for companies looking for new locations.
  • Nevada is a Right to Work state, along with 27 other states. For information on the benefits to employers, see this Wikipedia page.
  • Nevada is a business-friendly environment.

While Las Vegas is a desirable location for business expansion, what will drive large expansions? The reduced tax on repatriating funds that have been sitting in offshore accounts for years. Apple just made a $38B tax payment in order to repatriate their cash held overseas. Apple also announced plans to add 20,000 US jobs. Apple is only one of many companies who hold money overseas due to high US taxes (35%). With the 2018 tax changes, I believe more will follow Apple’s lead. Below is a list of the top 10 US companies that have funds stashed overseas.

The above are the biggest but only a small subset of the total number of US companies with overseas deposits. One article I read placed the total dollars sitting in offshore accounts at $3.1T!

If you suddenly inject close to $1T into the US economy and it is done efficiently (not by the government) this will have a huge impact on US growth. Companies will be looking to expand in the US and will be looking for new US locations. Las Vegas has enough advantages that a percentage of the expansions will be in Las Vegas, which will bring more people to the city, who will all need places to live.

Summary

Las Vegas continues to be an outstanding place to invest. However, good properties are difficult to find using traditional methods. As to the foreseeable future, if just a few of the opportunities I described above occur, Las Vegas should continue to expand for the foreseeable future.

Kinda sucks if good deals are “1 in 2000 available properties” and there are only 3600 available properties in Vegas. Once someone buys that one property they’ll all be gone. I know, those 3600 will turn over in a month or two, but that still means 1-2 good deals in the entire valley per month. Hope you’re not buying them. :-)

Ps. I don’t think many people really care about the price of electricity, but if they do. You accidentally put 8 cents for Nevada power. It did drop to 11cents (plus misc fees, effectively 12 cents) here in Vegas a few years ago but I don’t think it’s ever been 8. 

Thanks for the info. I Just wanted to help you make it more convincing for the guy/gal who’s still on the fence, you don’t need to convince me. 

1/2000 property is a good deal, does not mean all the other 1999/2000 properties are bad deals.

The 1999/2000 properties include bad deals, acceptable deals, market price deal, higher price renovation deals for owner-occupied etc.

:)

Hello @Bill Brandt and Account Closed

Thanks for the feedback. Some comments:

On 1/2000:

As of yesterday morning there are 5,971 available properties on the MLS. However, this is just a snapshot of a rapidly rolling inventory. Good properties are staying on the market for only a few days.

Bill: Are there one to 2 good deals per month? No, much more. It also depends on what you consider a good deal. We have a very well defined criteria for our client’s properties and we see 20 to 30 potentially good deals per month. Since we make offers based on return, we only get about 20% of that number.

I define a good deal as a property that meets the following three criteria:

  • Sustained profitability - The property must generate a positive cash flow today and into the foreseeable future.
  • Likely to appreciate over time - No one knows the future but some properties/locations are more likely to appreciate than others.
  • Located in an area where you can make money and business risks are low.

Do we buy just based on return? No. Remember that ROI and cash flow are only a snapshot in time, an estimate of how a property is likely to perform today. ROI tells you nothing about how the property is likely to perform in the future. We have a higher goal of long term profitability, not just profitability today. (Though it must cash flow positive today.) Another aspect of our property selection is the tenant pool the property targets. We select properties that "good" tenants are ready, willing and able to rent. We define a good tenant as someone who:

  • Has stable employment in a market segment that is very likely to be stable or improve over time.
  • Pays all of the rent on schedule
  • Is credit based, not cash based.
  • Takes care of the property
  • Does not cause problems with neighbors
  • Does not engage in illegal activities while on the property
  • Stays for multiple years

We also consider factors like rehab cost, rehab risk, accessibility to jobs, long term maintenance costs, time-to-rent, crime, age, construction, location, and average length of tenant stay in that area in that price range. In short, what looks good to us might be different from what looks good to you.

On $/KWH

The section of the article was titled Corporate Expansion so the rate specified is for commercial. I used the comparative commercial rate data from this site. The number they stated for Nevada is 8.09/KWH. For California, the number they stated is 14.66/KWH. I choose to use $0.08/KWH and $0.15KWH respectively using normal rules for rounding numbers.

I agree that individuals may or may not care much about energy costs. However, energy intensive companies care very much about the cost of energy. Energy cost is a fixed overhead for them. In some cases, energy (for example, data centers) is their single largest cost item. If they can significantly reduce their fixed operating cost by by moving to another state, they have and will continue to do so. Rob Roy’s designs are only one of the reasons Switch has grown so fast. The other “secret” to their success is that their data centers are located in areas with relatively low energy costs. But data centers are not the only companies that consume large amounts of energy.

If I did not address all your questions, please post followup questions.

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