Real estate prices have fallen more than 70% in Las Vegas, and now aggressive investors are returning to the market to snap up bargain properties. Real estate experts are touting the strong cash flow potential that Las Vegas properties now offer. Still, I’ve found that of the dozens of potential Las Vegas real estate investors I talk to every week, most share the same concern: Will I be able to find tenants for my investment properties? This is a great question. Exactly how strong is the rental market in Las Vegas? How long will it take to rent your investment home or condo? What is the vacancy rate in Las Vegas?
Rental vacancy rates are released annually and I’m still waiting to see the 2009 data. But vacancy rates don’t tell the whole story. Because rental vacancy statistics are heavily skewed toward apartment buildings, a high rental vacancy rate for a particular city does not mean that rental houses and condos necessarily experience high vacancy rates. With Las Vegas foreclosure rates leading the nation for the past two years, many families who were used to living in houses are losing their homes. These families search for rental houses and condos to find a new home that fits their lifestyle. So even as overall vacancy rates in Las Vegas have been high, we’ve continued to see strong demand for rental homes and condos. My personal experience has also followed this trend. In the 80+ homes and condos I’ve helped investors purchase in the past year alone, we’re currently close to a 95% occupancy rate.
It’s true that median rents have gone down in Las Vegas in the last two years. But rents have fallen only about 20%, while house and condo prices have plummeted more than 70% from the highs of three years ago. This disparity has created a huge cash flow opportunity for investors now entering the deflated market. Homes that used to go for $300,000 now sell for $100,000 and rent for up to $1,300 per month. Condos that cost $225,000 in 2007 can be purchased for $59,000 and rent for $900 a month. Homes and condos are experiencing tremendous cash flow that is well above the 1% rule. (Rentals must equal at least 1% of the purchase price to be cash flow positive.)
In the last year, I’ve sold to a lot of investors, but one in particular has done something that I think I’ll see a lot more of this year. He pulled about a million dollars out of the stock market, bought 10 single-family homes (all around $100,000) and cash is flowing tremendously right now. Average rents for his properties are $1150 per month and now all of his houses are rented. If you look at his investment numbers in particular: rental income minus taxes, homeowners association pay, insurance, minor maintenance and property management…he makes about $800 per month, per house . Multiply this by your 10 properties and you’ll get close to $8000 per month in profit. This equates to just under 10% annual return on investment. I don’t know of anyone right now who is earning 10% per year on their stock portfolio. And these figures don’t even take into account the appreciation you’ll receive year after year for your properties as the market continues to recover. Nor does it take into account the tremendous tax benefits that come from investing in real estate. Once the appreciation kicks in over the next few years and rents continue to rise, this guy is going to look like a genius.
This gentleman took a calculated risk and faced his fears about the rental market and feels great about it right now. (Amir, you are my hero). Now that he has reached his goal of 10 houses, he plans to buy 10 more over the next year.
If you would like more information on the Las Vegas rental real estate market or to invest in Las Vegas property, please contact me.
Glenn Plantone
702-769-9872
[email protected]