Hello,
I'm currently looking at a new build townhome in Las Vegas (Inspirada in Henderson, actually.)
The house is around $330K. It's looking like monthly expenses (including mortgage) will be around $2K per month and rental comps are right around $2100. I'm planning on holding for 10-15 years for retirement so I don't need a ton of cash flow in the near term. Hoping it appreciates while someone else pays down the mortgage.
As I'm a newbie, I'm sure I'm missing some (probably several) things when analyzing this deal. So, does anyone have any quick tips or advice on if I should move forward? Or, what else I need to know before moving forward?
Thanks in advance
You can’t ask me. I don’t believe in investing for cashflow if you NEED the cashflow. One broken appliance means no cash flow. One month’s vacancy or lack of payment for a month, an eviction, the make ready and then more vacancy, there’s a couple years of cashflow, maybe more.
One of my best investments was negative $800/mo cashflow until it was paid off. They all provide massive cashflow over time, but if positive $200 or negative$200 determines if you can afford a deal, I don’t think you can afford a deal.
Think of it this way. If you break exactly even with 20% down for 30 years. And you get 5% appreciation. Your property will double twice by the time you pay it off. That’s 2000%. But if you’re breaking even at the beginning, by year 15 your rent has doubled by year 30 it too has quadrupled. You won’t just be breaking even after 5-10 years. To me these are retirement accounts. Your 401k doesn’t cashflow and yet every expert will tell you that you need one. There is no easier way to retire than buy and hold quality homes, especially in states with no income tax, low property tax, cheap insurance, almost zero exterior maintenance, and no weather events.
In 13 years I turned $305k into almost $5million in real estate equity, producing $250k/yr in income by buying a rental and a new primary every year for 6 years. That's 12 properties. No buying and selling, no flipping, heck, not even by buying beat up unwanted properties. These were all on the MLS bought with a realtor. That's with a PM that allows me to spend less than an hour a month working on my rentals. And this was done before BP, podcasts, and all the free help that comes with it. I didn't know ANYONE that owned 1 rental, or even 2 homes. I was just sick in my stock portfolio going up and down outside of my control. Sometimes more in a day than I'd make working for 3 months. I never made more than $60k working and wouldn't have had health insurance if I hadn't married a nurse. If I can do it, literally anyone is smart enough to do it. Unless that 2 year degree I got at the community college in just e or 4 years was really the difference. Floor hockey, bowling, and so on.
I’ve never bought a townhome but a new home build in Las Vegas probably requires you to finish the backyard within 1 year for about $10k, and includes Sid/lids of about $20k (this was $160/mo for 20 or 30 years on DR Horton new builds up by Aliante.) But 1 or both of these may not apply to townhomes.
Also check with Hoa to make sure rentals are allowed, I would bet only 30+ days if any are allowed. Find out if the number or percent are capped. If it’s an in demand neighborhood with waiting lists they usually go with homeowners first. Don’t be surprised about property taxes either. I own several homes worth north of $500k but hv]ave owned them long enough the rate caps have kept me in the $2,400-$2,800 range. I was quoted $7,200 for the $600k new home.
Generally speaking, I wouldn't go for a new build as an investor because too many things can go wrong like the construction being delayed, slow permit process and quality of work not being done as promised. Why build from scratch vs buy one that you could renovate to your liking? There is risk in that as well but it is much less. Some neighborhoods only allow a certain percentage of rentals in a community, which can lead to a waiting list. Just make sure you are ready for that. Also, remember HOA fees almost always go up so you'll need to make sure you can still cashflow in future years and have enough set aside for any assessments.
I’ve never bought a townhome but a new home build in Las Vegas probably requires you to finish the backyard within 1 year for about $10k, and includes Sid/lids of about $20k (this was $160/mo for 20 or 30 years on DR Horton new builds up by Aliante.) But 1 or both of these may not apply to townhomes.
Also check with Hoa to make sure rentals are allowed, I would bet only 30+ days if any are allowed. Find out if the number or percent are capped. If it’s an in demand neighborhood with waiting lists they usually go with homeowners first. Don’t be surprised about property taxes either. I own several homes worth north of $500k but hv]ave owned them long enough the rate caps have kept me in the $2,400-$2,800 range. I was quoted $7,200 for the $600k new home.
Hey Bill. Thanks for the response. I'll look into the yard but I don't think there is one - maybe just a small patio.
There are SID/LIDS but I thought they said something like $3K. I'll make sure to double check.
HOA does allow rentals - no short term of course. But I'm looking to rent to families as the unit is near great schools (for Vegas at least.)
The rent just barely covers the mortgage. This does not factor in vacancy, repairs (hopefully minimal due to new construction, etc). My main question is, am I cutting it too close?
You can’t ask me. I don’t believe in investing for cashflow if you NEED the cashflow. One broken appliance means no cash flow. One month’s vacancy or lack of payment for a month, an eviction, the make ready and then more vacancy, there’s a couple years of cashflow, maybe more.
One of my best investments was negative $800/mo cashflow until it was paid off. They all provide massive cashflow over time, but if positive $200 or negative$200 determines if you can afford a deal, I don’t think you can afford a deal.
Think of it this way. If you break exactly even with 20% down for 30 years. And you get 5% appreciation. Your property will double twice by the time you pay it off. That’s 2000%. But if you’re breaking even at the beginning, by year 15 your rent has doubled by year 30 it too has quadrupled. You won’t just be breaking even after 5-10 years. To me these are retirement accounts. Your 401k doesn’t cashflow and yet every expert will tell you that you need one. There is no easier way to retire than buy and hold quality homes, especially in states with no income tax, low property tax, cheap insurance, almost zero exterior maintenance, and no weather events.
In 13 years I turned $305k into almost $5million in real estate equity, producing $250k/yr in income by buying a rental and a new primary every year for 6 years. That's 12 properties. No buying and selling, no flipping, heck, not even by buying beat up unwanted properties. These were all on the MLS bought with a realtor. That's with a PM that allows me to spend less than an hour a month working on my rentals. And this was done before BP, podcasts, and all the free help that comes with it. I didn't know ANYONE that owned 1 rental, or even 2 homes. I was just sick in my stock portfolio going up and down outside of my control. Sometimes more in a day than I'd make working for 3 months. I never made more than $60k working and wouldn't have had health insurance if I hadn't married a nurse. If I can do it, literally anyone is smart enough to do it. Unless that 2 year degree I got at the community college in just e or 4 years was really the difference. Floor hockey, bowling, and so on.
Hello,
I'm currently looking at a new build townhome in Las Vegas (Inspirada in Henderson, actually.)
The house is around $330K. It's looking like monthly expenses (including mortgage) will be around $2K per month and rental comps are right around $2100. I'm planning on holding for 10-15 years for retirement so I don't need a ton of cash flow in the near term. Hoping it appreciates while someone else pays down the mortgage.
As I'm a newbie, I'm sure I'm missing some (probably several) things when analyzing this deal. So, does anyone have any quick tips or advice on if I should move forward? Or, what else I need to know before moving forward?
Thanks in advance
Well from an investment standpoint its terrible. From a, hey just want the rent to pay down my mortgage so when I retire in 10- 15 years, its ok. Now keep in mind everything everywhere is overpriced, so this may actually depreciate. However, if your plan is to live in it for 20 years then who cares ,
@Will M. I've helped lots of investors/first time home buyers with your exact goals buy new builds here in Vegas. @Bill B. hit the nail on the head. Contrary to several other comments and a majority of advice in the traditional BP community, you are not going to make $$$ off of cash flow. Vegas is an APPRECIATION game!! Buy and hold, rent it out, and pull equity/sell later down the line. Vegas will always have a demand. With people moving in, sports investing, Hollywood moving here, continued investment, etc your home will appreciate PLUS rental rates will increase. The game is in the long term in Vegas.
The new builds offer some great incentives including inspirada communities. I was speaking with a builder from Inspirada yesterday and have my eyes on that area. Please shoot me a message and we can talk more specifics - I can help you run numbers and discuss new build details.
With all this being said, these new builds are crushing the real estate game in Vegas, making it tough to compete with resales when they offer lower rates and closing costs/rate buydowns.
I agree with Bill. I have often burnt my hands multiple times due to costs from Eviction, vacancy, ransacked home, or many other horror stories.
Ultimately it depends upon your ability to take a hit and the cushion in your financial situation.
If you have a cushion that you can take a hit for, say, six months due to Eviction, that does not matter.