Buying Property in high Unemployment area/low population growth

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Buying Property in high Unemployment area/low population growth

Hung T Nguyen
Member since 2022 · 17 posts · 4 votes

I've read in numerous places not to buy/invest into a high unemployment area or low population growth area. 

But does that strategy actually apply to a well-known tourist attraction city? (For ex: Las Vegas)

There are always going to be tourists in this area and it's just a matter of time before it bounces back (imo).

So isn't this a great time to buy into that city? Isn't this buying into the dip? (Yes, I realize it could dip more, especially as this recession

is growing, but I'm happy with the housing prices now in that area, and I am paying cash and can weather out the storm. I am also going

to STR it out for cash flow).

Thoughts?

0Reply
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Most Popular Reply

Eric FernwoodBusiness Member
Realtor · Las Vegas, NV · Member since 2014 · 1k+ posts · 1k+ votes
4y

Hello @Hung T Nguyen,

If your goal is dependable passive income, location is your most important investment decision. The most important criteria is that pre-COVID rent growth exceeded the inflation rate. Unless the rent growth exceeds the inflation rate, you will not have the necessary additional dollars to continue buying the same goods and services you did in the past due to the effects of inflation. There are a few locations that meet this criteria. For example, since 2013, Las Vegas rent growth has far exceeded the inflation rate.

Location is only the first step in achieving dependable passive income. After location, the second most important investment decision is the tenant pool segment. Each tenant pool segment has different characteristics. For example, there are three major tenant pools in Las Vegas. They have an average length of stay of 1 year, >5 years, and 2 years. So selecting a tenant pool segment that stays long is important to have a reliable income and low vacancy cost.

Once you select a tenant pool, you buy properties that your target tenant pool is willing and able to rent. Thus, the tenant pool defines the characteristics (type, configuration, location, and rent range) of properties you buy. We’ve targeted a narrow tenant pool segment for the last 15 years. Below are our 15-year results from >450 properties:

  • Average rent growth of 8% since 2013.
  • Average appreciation of over 15% since 2013
  • The average tenant stay is over 5 years.
  • Only 5 evictions in 15 years
  • 2008 crash - Zero decline in rent and zero vacancies.
  • COVID - Almost no impact
  • Eviction moratorium - No impact
  • 2022 YoY rent growth 18%, appreciation 32%

We achieved these results through the combination of the right location, tenant pool, and property selection. And, even though the major employers in Las Vegas are tourism related, the tenant pool we target is not affected by a tourism slowdown. Low-paid, low-skilled workers primarily occupy the lower-cost properties in Las Vegas. Whenever there is a tourism slowdown, low-skilled workers are the first to be laid off and the last to be rehired.

If you follow the process steps below, your probability of acquiring dependable passive income properties is high.

https://www.lasvegasrealestateinvestmentgroup.com/nwassets/images/threeStepProcess20220818.png

Hung, I hope this helps.

[email protected]702-358-8884
FERNWOOD Team, KW VIP Realty520 Reviews
WebsiteView Page
2Reply
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6 Replies

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  • Taylor L.
    Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
    4y

    I don't invest there now, but I did just look for stats. From what I found in a brief search it looks like Vegas' population is still growing and the unemployment rate isn't currently skyrocketing. However I am not familiar with Vegas as a market and just did some brief digging due to this post. Data sources: https://www.macrotrends.net/ci... for population change and https://fred.stlouisfed.org/se... for unemployment

    My concerns about Vegas would be more related to its dependence on one industry. I prefer to invest in areas with a more diverse economy. That way we're far more likely to avoid massive sudden downturns due to the one industry that supports the city's economy falling apart.

    1Reply
  • Phillip Dwyer
    Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
    4y

    @Hung T Nguyen I'm not sure I understand where you're coming from.  Vegas has been one of the population growth leaders for sometime now. 

    0Reply
  • Samuel Toma
    Livermore, CA · Member since 2018 · 38 posts · 24 votes
    4y

    I also believe it is a good time to invest in Las Vegas. Although there isn't as strong population growth as some of the other "hot" cities, I think Vegas is poised to have significant growth as they continue to expand. They may always revolve around the casinos/hotels but they are also expanding past just hotels and entertainment. 

    Obviously getting an NHL and NFL team was big, but they are also lobbying for an MLB team and there are multiple arenas being built that could house an NBA team.

    https://www.si.com/nba/2022/03...

    If you follow the big money, there are a lot of groups buying up land and/or starting new projects

    https://www.buildcentral.com/t...

    And not to mention Elon investing pretty significantly into Vegas

    https://www.engadget.com/borin...

    I chose to focus on building a portfolio in Vegas based on where it is currently and future growth prospects. When I see all the investment and intentionality in improving the city, it only increases my confidence in investing there. 

    1Reply
  • Hung T Nguyen
    OP
    Member since 2022 · 17 posts · 4 votes
    4y
    Quote from @Phillip Dwyer:

    @Hung T Nguyen I'm not sure I understand where you're coming from.  Vegas has been one of the population growth leaders for sometime now. 


     It was just an example. Obviously it's growing, just not like other major metropolitans. https://www.reviewjournal.com/...

    0Reply
  • Andre Crabb
    Investor · Tampa, FL · Member since 2017 · 205 posts · 92 votes
    4y

    hey @Hung T Nguyen, analyzing questions like that is exactly what Lazyboots is built for. I'm happy to dive into the details of the area you're considering, and help you compare it to other cities you might be looking at.

    0Reply
  • Eric FernwoodBusiness Member
    Realtor · Las Vegas, NV · Member since 2014 · 1k+ posts · 1k+ votes
    4y

    Hello @Hung T Nguyen,

    If your goal is dependable passive income, location is your most important investment decision. The most important criteria is that pre-COVID rent growth exceeded the inflation rate. Unless the rent growth exceeds the inflation rate, you will not have the necessary additional dollars to continue buying the same goods and services you did in the past due to the effects of inflation. There are a few locations that meet this criteria. For example, since 2013, Las Vegas rent growth has far exceeded the inflation rate.

    Location is only the first step in achieving dependable passive income. After location, the second most important investment decision is the tenant pool segment. Each tenant pool segment has different characteristics. For example, there are three major tenant pools in Las Vegas. They have an average length of stay of 1 year, >5 years, and 2 years. So selecting a tenant pool segment that stays long is important to have a reliable income and low vacancy cost.

    Once you select a tenant pool, you buy properties that your target tenant pool is willing and able to rent. Thus, the tenant pool defines the characteristics (type, configuration, location, and rent range) of properties you buy. We’ve targeted a narrow tenant pool segment for the last 15 years. Below are our 15-year results from >450 properties:

    • Average rent growth of 8% since 2013.
    • Average appreciation of over 15% since 2013
    • The average tenant stay is over 5 years.
    • Only 5 evictions in 15 years
    • 2008 crash - Zero decline in rent and zero vacancies.
    • COVID - Almost no impact
    • Eviction moratorium - No impact
    • 2022 YoY rent growth 18%, appreciation 32%

    We achieved these results through the combination of the right location, tenant pool, and property selection. And, even though the major employers in Las Vegas are tourism related, the tenant pool we target is not affected by a tourism slowdown. Low-paid, low-skilled workers primarily occupy the lower-cost properties in Las Vegas. Whenever there is a tourism slowdown, low-skilled workers are the first to be laid off and the last to be rehired.

    If you follow the process steps below, your probability of acquiring dependable passive income properties is high.

    https://www.lasvegasrealestateinvestmentgroup.com/nwassets/images/threeStepProcess20220818.png

    Hung, I hope this helps.

    [email protected]702-358-8884
    FERNWOOD Team, KW VIP Realty520 Reviews
    WebsiteView Page
    2Reply
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