Thursday, May 16, 2019 / by Michael Picciuto
Is a Las Vegas investment property still a decent real estate investment? If you are looking to buy Las Vegas investment properties, then you must read this. These things make Las Vegas real estate market stand out when it comes to choosing a place to invest in 2019 and beyond. Las Vegas real estate market provides an excellent opportunity for investors and home buyers.
Homebuyers and investors in Las Vegas are expressing confidence in the stable housing prices and the number of available housing units on the market. New businesses are actually being created at a much faster rate than the national average. Las Vegas rental properties near these new businesses will benefit greatly due to increasing tenant pool and the general improvement in economic activity that they bring.
We have already discussed the Las Vegas housing market forecast for answers on why to put resources into this robust market in 2019.
Here are a few evidence-based reasons why to invest in the Las Vegas investment properties for cash flow.
1. Prices Are Low Relative to Recent Highs
There have been articles claiming that Las Vegas is ready for another bust. However, prices are actually declining somewhat as new housing stock comes onto the market. This explains why the inventory of unsold existing homes doubled at the end of 2018. Yet the demographic trends that keep the Las Vegas housing market so hot aren’t stopping. This means that the Las Vegas real estate market is seeing a lull with a guarantee prices will start to rise. The Las Vegas housing market 2019 is a great place for a real estate investment. It remains relatively affordable than the expensive seller markets in the US.
2. Deals Remain Available
When people lose their jobs in great numbers, home prices crash as they did in Las Vegas a decade or so ago. Homes went from an average price over $300,000 to less than $150,000. Home prices have recovered, though due to inflation, they remain well below historic peaks. Likewise, Las Vegas foreclosure rates have fallen but they remain high by national standards. Around one in a thousand homes is foreclosed on each month.
3. Renters Remain Locked Out of the Housing Market
While homes are being built, many people are unable to afford them. This is because the developers who survived the Great Recession are maximizing their profits by building luxury homes, not the affordable homes that the many want. For those who can afford Las Vegas investment properties, this guarantees a large rental population that isn’t going to be able to afford the new upscale properties that are coming onto the market.
4, Nevada Is the Ultimate, Low Tax Locale
While those who own Las Vegas investment properties will need to pay their mortgage if they don’t pay cash for the property and ongoing expenses like maintenance and insurance, Nevada offers very low taxes. There is no state income tax. The average overall property tax rate is just under 1%. The state property tax is 0.77%, while the county property tax is rarely above 0.25%. For example, the total Clark County property tax bill is 0.96%, yielding a $2400 property tax bill on a $250,000 home.
5. Geography Limits How Much Las Vegas Can Expand
The wide open deserts around Las Vegas actually constrain the Las Vegas real estate market. The federal government owns the vast majority of the state. The Clark County government asked the federal government to allow them to take over 38,000 acres of land and start building housing. The Nevada Congressional delegation has to ask the Bureau of Land Management, and they may take years to give their permission if they ever do. This means that Las Vegas is surrounded by a lot of open land, but it cannot simply expand to meet demand. This will continue to drive up prices in the Las Vegas housing market.
6. Housing Prices Are Rising Slowly but Surely
We don’t think the Las Vegas housing market is set up for a bust because it isn’t overheating. For example, the median single family home’s price was just under $300,000 in the summer of 2018, a 3.2% increase over the prior year. That’s a healthy growth rate, whereas double digit price increases are unhealthy. This rate is actually skewed up by the number of new luxury homes coming onto the market and the constant churn at the high end of the market.
7. Rents Are On the Rise, Too
During the Great Recession, Las Vegas went from a fifth of its residents renting to nearly two fifths. As the job market and personal credit improved, the area is back to having around 19% of residents rent. However, rents are on the rise. The average apartment rents for around a $1300 dollars, whereas the 2008 rental rate was around $900. You can of course charge much more for a three or four bedroom single family home than an apartment.
Unlike some areas, the Las Vegas housing market isn’t going to see a sharp decline in rents due to new construction. The vacancy rate for apartments was around 7% at the end of 2018. This rate is skewed by the large number of luxury apartments sitting vacant while affordable units are snapped up.
Wages in the area, for example, haven’t risen in tandem with housing prices, pushing many to rent whatever properties they can find that fits their budget. This may prevent prices in the Las Vegas real estate market from going too high but won’t prevent them from rising along with the rate of inflation.
8. California’s Loss Is Nevada’s Gain
A $300,000 median price may be steep if you’re coming from the heartland where a mid-market home costs $150,000 to $200,000. However, tax refugees from California flooding into Nevada find that same house to be an outright bargain compared to the $600,000 price for a comparable property in Los Angeles. Southern Nevada is one of the cheaper metropolitan areas in the United States, and it is a fraction of the cost of living in California on nearly every front.
This explains why you see so many California license plates in Vegas and why it costs $120 to rent a moving truck to go from Vegas to San Francisco but $2000 to come to Las Vegas.
As per the data by Lasvegasrealestate.org, the luxury home market has really expanded as 30% of buyers are moving from California to take advantage of Las Vegas’ low cost of living. Even the most expensive custom homes from builders such as Blue Heron are found to be a bargain for out of state buyers and investors. Possibly are second largest market is retiree buyers in 55+ Communities and enjoying the weather, health care and activities that only Las Vegas can combine in one city at a value not matched in any major city anywhere in the USA.
9. Las Vegas Is Landlord Friendly
Unlike many other Western states, the Las Vegas real estate market is landlord friendly. It isn’t difficult to evict non-paying tenants from Las Vegas investment properties. In general, they have five days from the date rent is due to “cure” the problem or eviction can begin. The same time frame is used to correct issues like lease violations, after which the person can be evicted. After those five days, the case can go to courts, and these are landlord friendly.
Rulings typically arrive same day, after which point the tenant has one day to leave the premises. Landlords don’t have to pay interest on deposits. There are no limits on late fees, though the late fees due must be spelled out in the rental agreement. There is no payment grace period set by state law. All of this adds up to the Las Vegas real estate market being a paradise for landlords.
10. The Job Market Attracts People
The Las Vegas job rate has ranged half a point to a full point above the national unemployment rate. However, that’s better than the unemployment rate in Arizona, Salinas, or the San Fernando Valley. And it is places like that sending de facto refugees to Las Vegas. The diverse economy of Las Vegas includes low skill but good paying jobs in entertainment, hospitality and services.
Every job killing regulation in California drives businesses to Oregon and Nevada, too, taking jobs with them. This explains why future job growth for the next ten years is expected to be nearly 40%, well over the 33% expected for the nation as a whole. A growing supply of jobs will propel demand for the Las Vegas housing market.