Las Vegas for buy and hold?

33 Replies

I figured I would save everyone the Vegas/Casino puns and get right to the point. I've been looking at the Las Vegas market for SFH and multi-family buy and hold. How are you guys and gals liking the market right now for buy and hold in Vegas?

If anyone is currently working with good property management and agent/brokers can you share your experience; I'd love to connect and learn more about the market.

I’ve had a really good experience with Brian Hartsell at key property in Henderson for years. I love buy and hold in Vegas but I bought a dozen home between 2010 and 2014 when they were at least 25% cheaper. I just wanted enough to retire and didn’t have any desire to become an empire. This allows me to clear about $120k/yr before capx. Which in Vegas with 12 homes is usually limited to 1-2 water heaters. An old house in Vegas is usually less than 20 years old. Figure a couple, $2-300 ac repairs and 1-2 appliances. 

There are probably better, heck much better places, but vegas has been very good for what I wanted. Just don’t come looking for small multiplexes, we don’t do them well. 

-Bill

I’ve done hundreds of deals in Vegas. I love the town, but that market is ridiculously expensive- IMO it is insanely overinflated right now and when it crashes it will be a blood bath.
Example: I bought a foreclosure 3/2 in 2011 for 65k off Cheyenne and the Blvd. (foreclosure amount was 97k). I rehabbed for 12k, rented to the same lady at $950 for more than 5 years. Finally Kicked out the renter, rehabbed again ($6k) and sold in 2017 for 135k on a fha loan to a first time home buyer.

You will have a very, very hard time finding that kind of deal right now, even in the hood. I would advise any of my friends to sit tight. Correction will come to that town, and when it does there will be stooooopid amounts of money to be made, again.

@Blair Poelman one could also argue that 2011 prices were way under valued.  Given all of the population growth projections for the Vegas metro, I think it's hard to call this the top of the market now.  Still, cap rates are super low, so I see your point.

@Bill Brandt

What do you mean by: 

Just don’t come looking for small multiplexes, we don’t do them well.


What do you mean by Don't do Them well? They construction? The Value? Please explain.

@Jennifer Matsumoto

@Bill Brandt
Going out on limb, " Just don't come looking for small multi-plexes, we don't do them well". Most multi-plexes (2-4 units) are in C-D neighborhoods and are older, built before 1980, and in limited supply compared to SFR and Condo/Townhome. A search on Redfin will show about 136 (63 listings and 73 pending).

However, there are still good 4plexes that will cashflow, but you have to know where to look.

Terry

I am not sure about apreciation future of Las Vegas, because 1. Weather is too hot in summer 2. There is no good school in the area, I could be wrong. But most my friend who has kids at school age move out from there. They say is not a good place to have family. People without kids likes there.

@jennifer Matsumoto 

Jennifer, @Terry Lao hit it on the head. You probably will make as much or better money on fourplexes it's just a lot more work. I've bougth almost exlcusively 2-10 year old SFR, in b+ neighborhoods without flat roofs, with garages. The fourplexes here are pretty much the opposite of that.

Apartment rent here can run $900-$1100 easy here so when you offer someone a garage, a private yard, their own laundry and a couple thousand sf for a few hundred more they jump at it. In 11 years I once had a week long vacancy between tenants but the previous Tennants stayed 8 years and I replaced all flooring, appliances and paint. 

I like the idea of Fourplexes in MN or most of the Midwest even with the bad weather as my comparison. They are brick and in good neighborhoods. They looked the same 20 years old when bought  and 20 years later when sold. 

I love the Las Vegas market and would like to get in to multi, but it will probably have to be in the Midwest even if I hate the weather. They have more fourplexes in “suburbs”. If you want to do a fourplexes in Vegas connect with Terry I get the impression he’s doing it well here which is really saying something. 

@Bill Brandt

@Jennifer Matsumoto

Thanks for the compliment Bill. I got your invite in Las Vegas to talk shop, which I will take you up at some point down the road. I just submitted my application for HOA board on one of my 4plexs, and if selected will be in Las Vegas more often.

Looks like you are doing well with your SFR's, it's an accomplishment to net 10k per month. Net or gross?

The funny thing about multi's and SFR's, if you choose multi's its about cashflow, if you choose SFR's it is about appreciation. I'm in the cashflow camp, thus chose multi's. However, it has turned out that though the cashflow's are good to the tune of 10-14% ROI. The appreciation is at least 10-20% in appreciation per year.

Terry

@Terry Lao

I bought every SFR with 25% down with the requirement that they cash flow from day one after Managment of 8%.

Rent is about $180k $10,000 net income. Cash flow about $7700. but the “Win” is when it shows up as pretty darn close to a taxable loss after depreciation and  “general expenses” phones, internet, newspaper, electronics. Things I MIGHT have even if I didn’t have rentals. My wife still has 2-3 years left at the hospital as an RN. I quit “working” 10 years ago at 40 as I never made as much her anyway. 

Numbers above don’t include cash flow negative but income positive Minnesota lake front future retirement home with $440/mo hoa and 15 year loan. Far and away my most expensive property. (It adds a lot of depreciation expense.)

@Terry Lao

@Bill Brandt

Nice. You mentioned that your position is buy and hold. The "win" is tax shelter and close to negative on schedule E. 

Will you ever sell? The last downturn recession 2008 took Las Vegas values down 50%. Then opportunity arose in 2010 when hit rock bottom. I'm thinking market for 2018 is safe and still appreciating. Peak maybe 2019-2020, or when Raiders finish building their stadium. 

I'm thinking maybe sell at peak. Build warchest. Buy at low again.

Terry

I’d have so much depreciation recapture and capital gains it would be a real gut punch. That’s when I’d hope to have a partner for a 20-50 unit building. (Selling all would be millions). The alternative view is Vegas prices have only dropped more than 5% once in it’s history. A 10% drop doesn’t scare me, even 20% would only take 2-4 years to recover. And if I’m just using the cash flow it doesn’t really matter what they’re worth. If I can’t get more cash flow for dollars invested I don’t think you could “scare” me in to selling to avoid price drop. 

Is there anyone on the planet that thinks vegas properties will be worth less in 20 years than they are now? Remember, prices have to drop by more than your ROE per year just to make your extra work worth nothing.   (Before selling costs and taxes) if you’re off by as a little as 2 years they better drop way more than 20%. What if they keep going up when do you buy back in? Oh yeah, and your new loans if you can get them are going to be higher interest rates. 

If you ask me today I’d say 80% chance I hold them until I die, only exchanging as depreciation runs out. 15% chance I exchange in to the afore mentioned multi, likely not in Las Vegas unless there are properties I don’t know about here. 5% I do something stoopid/crazy that I can’t even think of now. 

Last note as I was about to hit post. I was suddenly hit with the thought as Nevada slowly becomes California. (People run from California to Vegas then slowly change Nevada in to what they ran away from for some reason.) if the government here started coming after long term small landlords the way they are just piling on short term (Airbnb and vrbo) people that could push me out fo vegas market. Did you see the lady being hit with $65,000 in fines? She applied for a license, they denied her on a technicality, told her to re-apply. And then told her sorry, someone else within 600 feet is already doing it so you can’t. Ps here’s your fine. How about the $20 million lawsuit the Hoa lost that has $2 million in insurance. Will the homeowners have to come up with the other $18 million? Would my umbrella liability policy protect me for my portion if ti happened to me? Sorry if there’s are too many topics in one post. Feel free to read and ignore. :-)

@Bill Brandt @Terry Lao

Thanks so much for your advise and comments. I know that you both have acquired a good number of properties in Vegas... may I ask what years you bought them? 

Bill, If it was 5-6 years ago... Did I miss the opportunity? I know that Realtor.com says that there is still growth this year...

I like the idea of the SFR and less maintenance on newer homes... but I was really wanting to move away from the SFR and get some Multis. I don't really have a good reason beside I thought they cash flowed better and easier to maintain one building (In theory). But B + neighborhoods are nice. That's mainly what I own now... and C or below makes me a little nervous.

In your experience are all of those older Multi Units built in 1980/1981 going to be in C/D neighborhoods?

Another question... There is so much vacant Land in Vegas... is anyone worried about the supply and the fact that they are still building?  

@terry Lao @jennifermatsumoto

1 in 1999 and 1 in 2001. Both of which almost tripled 6-8 years then dropped to about 90% of purchase price.

1 in 2009, 1 in 2010, 4 in 2011, 1 in 2012, 1 in 2013, 2 in 2015 and my primary in 2014. All of these have done nothing but appreciate. The 2009-2013 properties all doubled or more by 2015. The 2015's and primary are up maybe 30%. But none of these were bought with any skill or direct marketing or any magic. I made tons of offers on "dirty, empty, abused" MLS listings. Usually only about 10% less than listing price. I regret to this day the 4 I didn't buy at list price that have of course more than doubled in a few years. But I knew I had just bought "the same house" for $5000 less in better shape. So I lost $100's of thousand to save $5's of thousands.

You’ll have to ask Terry if I’m correct that there are no small multis,in good neighborhoods that are less than 30 years old, but I haven’t seen them. There was a super sweet multi at Durango and 215 (north side) that sat empty for 5 years after being built but I could never find anyone to talk to about it. But it looked closer to 20 units than 4. They are also building 3 massive multis by the Centenial library up north. 

There is empty land but it’s $140k for a 1/2 acre lot. Before you for utilities and if you happen to be the last empty parcel on the street you’ve just invited the curbing, sidewalks, sewers to be built and assessed to you and your neighbors, welcome to the area. Almost all the land for developers is being sold by the BLM. So it’s farther and farther out and more and more expensive. They’re really pushing the south west valley since that used to be barren wasteland. If the cheapest thing they can build, (excluding 3 story 1400sf disasters), is costing them $300k and selling for almost $400k with zero upgrades, landscaping, appliances, etc, I just don’t see it as an impact. They sold 3400 new homes last year and they were excited. That’s one month’s worth of sales. 

If you lived in the Midwest I’d say you have better returns there don’t buy in Vegas, but you have bad weather and little appreciation. Living in California I really don’t see you have many if any better options than Vegas. You could talk about Phoenix or anywhere else in Arizona but I consider them vegas without the shows, the restaurants, the gambling, the tourists, the excitement, and they tack on state income tax. You can probably fly to vegas for $50? Drive for the fun of it? Write off the trips. 

In conclusion: yes, you shoulda bought 5 years ago, but that’s true of just about every market in America. 

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@Jennifer Matsumoto

@Bill Brandt

I bought my 4plexes, (1) in 2013, (1) in 2014, and (1) 2016. Also, I sold one and did a condo flip. 

Most multi's (2-4) are in C-D neighborhoods. However, there are duplexs and 4plexs in B neighborhoods like Spring Valley near Chinatown. A few north east of 95, somewhat near Summerlin. A few near Henderson. However, in the B neighborhoods, your rents for 2 bed 2 bath could fetch 800-850, but you will be paying over $400k. The value 4plexs are near the strip, for $250-300k. New duplexs are being built in south Summerline, but those start at $430k. 

If you have a multi built in the 1980's, that is good. Most are built in 50-60-70's, and most in C-D neighborhoods.

You would think that there is a lot of land in Las Vegas, and that is true. However, most is government. Only small portion is private. Thus, you are seeing higher and higher prices for lots.

Yes, you did miss the opportunity. However, there is a hidden gem that most do not know, or do not crunch the numbers. Las Vegas is about 20% below pre-recession highs for median price SFR. Current median SFR is $275k as of Feb'18. High was $341k in Aug'06. I think median will hit $300k at Dec'18.

I was at open house this past weekend in Anaheim. List 610k. Bought 500k. Remodel costs 50k. Flip will net 40-50k when sold. If you bought a 4plex for $270k, financed at 25% down or $67k. That same 4plex should reach 300k at Dec'18. If sold after one year to avoid short term capital gain, you would net 30k plus cashflows for investment of 67k, which is about 50% ROI. That Anaheim flip would be 10% ROI.

Terry

Clark County is fortunately one of the few in NV who report real estate data for direct mail lists.

There are over 18,000 absentee owners with property in the county. (high equity, up to $300,000).

7,367 were built in 2000 or later. Most are single family.

If you want to look at Owner Occupied Seniors, there are 8,558 (age 60-89, 20+ year ownership, high equity, home value up to $300,000, single family)

Of these, 2065 have low Financial Stability Scores.

Message me with your email address if you want to see the full reports.

Great thread everyone! 

@Phillip Dwyer @Blair Poelman I second both of your positions in that there will be a correction as well as 2011 prices were drastically undervalue. I would go even further to say that the downturn here locally is still a ways off and you can miss out on making a lot of money by sitting on the side lines for the next year or 2 (as there is zero signs of slow down over the next 12 months from all the indicators I follow). Furthermore, I don't think we will ever see 2010 prices in our lifetime again. That was the result of a global economic meltdown due to a perfect storm. The sticks and nails cost more to builld homes than the homes were selling for after that crash. I do believe the market will soften again as it always does but I do not think it will get hit as hard as the last bubble.

@Liz C. You think appreciation is based off of wheather and temperature? This is ridiculous. Not to mentiuon many people move here directly because of the wheather. You know how many people move here to get away from the snow? School ratings do affect families but there are many good schools and if it is a concern for a buyer they tend to research the zoning and buy where the rating are the highest. They also have private school options etc. As Vegas grows we are becoming more and more family friendly. When I was born here in Vegas in 1979 I was one of a very small percentage of our population that was actually a "Vegas Native". Now people have kids here all the time and the term "Vegas Native" is becoming common place. All 4 of my kids were born here. We are not just a desert and the Las Vegas Strip.  We are a community of families, doctors, teachers, professionals, business owners, and we stick together in the hardest of times (remember most recently the Oct 1 shooting #VegasStrong). My point is we are a community not just a place to party in the desert.

@Terry Lao   "I'm thinking market for 2018 is safe and still appreciating. Peak maybe 2019-2020, or when Raiders finish building their stadium." I agree with this and this is my plan as well. 

@Bill Brandt what are your thoughts on your holdings if not only prices drop but then in turn rental rates drop again as well and your cash flow decreases as a result? would you still want to ride it out or liquidate? Just curious on your thoughts on this.

Account Closed You think prices will go as low as 2010 again in the next crash? 

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@Robert Adams

Account Closed

Thanks for the info terry. I’d love to see some of your properties and even areas/buildings you’d consider next time you’re in town. Keep me in mind if you find something a little larger you’re interested in. 

Ps. Clark county was second fastest growing county behind maricopa (Phoenix)

Here's an almost fool proof way of downturn in the real estate market. Case Shiller top 20 index is largest 20 cities metros. These reports are usually a month or two in coming out. My niche is Las Vegas so I hone in on monthly numbers from GLVAR as they come out. The below chart shows ALL 20 cities increasing for Nov'17, year over year. If one city starts to show a negative, then there might be a second or third. This could be the beginning of a downturn. However, for now, ALL are positive increases.

Note. The #1 and #2, are Seattle and Las Vegas, and routinely change places.

Terry

@Terry Lao

Hey Terry,

On the way to lunch today I noticed a couple different blocks and blocks of small multis on Decatur. Then I remembered to talking about joining the HoA for your fourplex. Is that the kind of fourplex you own? One of 10-50 identical ones in a group? If so, how is it different than owning a traditional stand alone fourplex? (What does the Hoa cost and what do they do for you? Any additional differences.) to be honest I never looked at that kind of fourplex only stand alone. 

Thanks

-B

@Bill Brandt

I've owned both, stand alone and with HOA. The stand alone does not have HOA fee which is about $650 per month. For that $650, you get grounds maintenance, should get water, sewer, trash, group umbrella policy. There is some benefit of HOA, but better on cashflow if not, and you take care of grounds yourself. My other 4plex has HOA, but includes, gated community, pool, includes water, trash, sewer, and 24 hour patrolled security. Larger communities like 100+ can afford extras due to large size and efficiently run.

I like 4plexes because of the "neat package" of financing almost identical to a SFR. It is when you have 5 units, then it becomes commercial and it becomes a whole different animal.

Terry

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