Vegas, Bakersfield or Phoenix for Buy & Hold?

Buying & Selling Real Estate

Vegas, Bakersfield or Phoenix for Buy & Hold?

Daniel Smilansky

Real Estate Investor · Los Angeles, CA · Member since 2013 · 28 posts · 4 votes

Hi Everyone,

I am new to BiggerPockets, and like many others, I have fallen in love with the lively community and wealth of information. Everyone seems to be very helpful and I hope I can pay it forward! After paying off lots of debt and establishing myself financially, I began exploring the stock market last year, and I quickly found out that the stock market enables the rich to get richer, yet does not service those looking to build wealth nearly as well as I thought.

Aside from my own tech entrepreneurial adventures (I am a web developer), I wanted to give real estate a shot and see what it was all about. A month ago, I stumbled upon the Vegas AirBnB article that went viral and I became even more intrigued (http://mashable.com/2013/11/04/bought-apartment-rent-airbnb/).

I ended up finding bigger pockets through google and I immediately read the beginner's guide to real estate investing. From there, I created a plan, and my goal is to purchase rental properties in order to implement a buy & hold strategy in secondary and tertiary cities that are rapidly growing.

Being from Los Angeles, there are not many great buy & hold properties in my immediate area, and I am open to doing heavy research on out-of-area properties. Although I am not opposed to areas like Charlotte, Dallas, Houston or Memphis, I would prefer somewhere closer, if possible, such Phoenix, Las Vegas or Bakersfield.

Not sure if it is inappropriate to share finances here, but I have 40k saved up and another 15k in retirement accounts at my disposal. I also have 780+ credit. Can anyone suggest markets to explore? My research has been limited to Zillow thus far since I don't have access to the MLS. Also, can anyone suggest ways for discovering properties? I believe I will start contacting real estate agents in a few markets to see what is out there, but any referrals to reputable ones would be more than welcomed!

Also, I would be happy to exchange expertise as I am heavily involved in the tech space and can offer quite a bit of advice in that area. Thanks in advance!

Cheers,

Daniel

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Most Popular Reply

Investor · Westminster, CO · Member since 2009 · 1k+ posts · 1k+ votes

11y

Daniel

There is lots of good advice on here and lots of good information. BUT, before you write that first Deposit Money check along with an offer, you really need to think through, AND WRITE DOWN, what you want. I own 25 rental doors (23 houses and 1 duplex) in six different states. I have also owned rentals in Orange County, LA County and Riverside County during my investment career.

When I say write down what you want, I am talking about potential income, potential appreciation, types of properties you feel comfortable owning, areas you would want to own in, and on and on. For instance, would you take a 6% return on a house that has a 90% chance of good appreciation or do you want a 12% return on a house that has a 25% chance of good appreciation? Some investors on BP want a 20-25% return BUT they know there is ZERO percent chance of appreciation. (They also carry a sidearm to collect rent and make repairs) There are others on BP that accept a 2-3% return but are banking on extensive appreciation (also known as rolling the dice). But most investors on BP find a middle ground that they enjoy. The middle being 6-15% return with a 70-80 percent chance of good appreciation.

I am not sure why Ali and Philip are having words, they are both successful in their niche. But doing any research and you will find that Las Vegas can be a complicated market. Sure there are deals, but I have known investors who also lost their shirt in the market crash in 08-09. I looked into Las Vegas and even talked with Philip about it and decided to wait it out. One of the problems with Las Vegas is that the entire economy is not very well diversified. It is heavily reliant on tourism.

When you look at markets like Phoenix, Dallas, Memphis, Oklahoma City and others, you will find a much more diversified economy. And just like stocks, look at a 10 and 20 years "Average Cost of Home" for each market. Compare that to a chart of New Businesses and a Chart of Number of Employees added. You don't like to see wild swings as that means you are in for one heck of a roller coaster ride! Warren Buffet did not get rich investing in Microsoft, Apple and Google. He got rich investing in Coca Cola, Wells Fargo, American Express and BNSF Railroad. How boring can you get!!!!

If I were in the buying frame of mind today, I would be looking at Atlanta, Kansas City, Indianapolis or Oklahoma City. But I bought several houses last year so I am letting the dust settle before charging ahead again!

You asked about Bakersfield. I do not own in Bakersfield but I do own in Visalia, Tulare and Fresno. You can do OK there, buying for 75,000 to 100,000 and get $795 to $995 for rent. But they would most likely be class B properties and might require more repair work than a class A property.

But remember, the most important thing is to decide what YOU want. You need to have a very strong opinion on what will work best for YOU. After that, then you do your research to find the BEST fit for your parameters. There is an old saying, "If you do not STAND for something, you will FALL for anything!" There are a lot of "snake oil" real estate sales people out there, they talk a good talk, but are just full of hot air. Talk to the successful investors, research, research, RESEARCH and take those baby steps. You will be glad you did!

See this reply in the discussion

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Phillip Dwyer
Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
12y
@Daniel Smilansky Welcome to BP! This site is such an amazing resource. I've found that by surfing the forums, you'll run across commentary about different markets that may not have been on your radar. Once you dial in, you can set up key word search alerts for areas of interest.

Regarding Vegas, I'd be careful of the short term/vacation rental business model. Most zoning and HOA rules don't allow for it. City officials have been cracking down, and fines can be very steep.
0 Reply
Tiger M.
property manager · Las Vegas, NV · Member since 2012 · 502 posts · 171 votes
12y
Welcome Daniel,

@Phillip Dwyer is a great contact for the Vegas market, he is also an appraiser(and we all hate them!! :-)).

My wife tells our kids not to buy anything unless it screams their name when shopping. Try the same thing with Real Estate and you will have less regrets and headaches.

I saw the article you mentioned. If you read the comments below there are some pretty good questions about viability and the comment Phillip made is spot on. You may want to stick to the tried and true fundamentals in investing before you hit the fringe.

Best to you!
0 Reply
Phillip Dwyer
Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
12y
@Tiger M. gives good advice. It's hard enough breaking into real estate with the basics. Through in a niche that has limited data to support the success, and you're making your hill to climb a lot steeper.
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Daniel Smilansky
OP
Real Estate Investor · Los Angeles, CA · Member since 2013 · 28 posts · 4 votes
12y
@Phillip Dwyer - Thank you for the advice and, I agree with what you say, hence why I decided to do more research on my own and will now steer away from the AirBnB model since my goal is to build a long-term strategy. I also read the comments and figured that zoning/HOA could conflict with that model.

Regarding the Vegas market as a whole, it appeals to me due to its close proximity and potential for cash cow properties. Could you shed any light on the current state of the market there and any recommendations for potential areas to target? Perhaps you can refer me to a real estate agent or broker?

@Tiger M. - Thanks for welcoming me, I hope to see you around the forums! I agree that the article sounded a bit inflated for what it was.
0 Reply
Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
Hey Daniel! Where in LA are you? I'm in Venice. You're right, nothing much to buy here if you want returns.

Unfortunately though, Vegas and Phoenix definitely won't be your most profitable markets either. Vegas is notoriously bad for transient tenants which do a huge number on your vacancies and turnovers, both of which can cost a fortune. Phoenix tapped out about 2 years ago for good returns there. Bakersfield, I can't say for sure but of the 3, I'd say that is your better bet. But then you have the issue of CA laws which are incredibly unfriendly to landlords.

Remember, while you can drive to any of those cities, you can fly just as fast to any others too. I only buy out-of-state personally and even when I've had bad property managers, I've never had to visit a property or the location for any reason (other than if I'm just around and want to stop in). So I wouldn't limit yourself to the less profitable markets if you are planning to buy out of LA already.
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Phillip Dwyer
Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
12y
@Ali Boone What data do you have to support your comments about the Vegas market? This sounds like when you were talking about the Detroit market, but didn't have any data then either. Just saying...

@Daniel Smilansky There are several Vegas area pros on this site that can help you. @Tiger M. and I are friendly competitors that work with investors on both acquisitions and management. There are others as well like Robert Adams that help with acquisitions.

Prices rose fast here over the past two years, but rents have kept pace. As a result the awesome returns of 2010-11 are no more. However, there is opportunity in any market if you look hard enough. For sale inventory was at about a 1 month supply in May of this year on average for the valley, but has doubled since that time. The last two months have seen little change, and I think it dipped a little for the last month. Feel free to reach out with additional questions. Best of luck!
0 Reply
Joe O
Investor · Las Vegas, NV · Member since 2011 · 92 posts · 25 votes
12y
@Phillip Dwyer meant to say "rents have not kept pace," I'm sure.
0 Reply
Phillip Dwyer
Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
12y
@Joe O Thanks for catching that! I wish what I wrote in the previous post was true though.
0 Reply
Joe O
Investor · Las Vegas, NV · Member since 2011 · 92 posts · 25 votes
12y
Hah, you and me both. ;)
0 Reply
Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
Sorry @Phillip Dwyer, I don't have published data to offer you. I'd have to spend some time digging it up and because I'm not trying to convince anyone to stay out of any particular market (because it doesn't affect me one way or the other where people invest), I don't care to invest the time to prove a point. I get the majority of my data from talking to investors who have invested in particular markets and hearing their feedback. I don't go off just one person's opinion either, I go off trends.

I have no ties for or against any one market. If Vegas, Detroit, Phoenix, Bakersfield or anywhere else proves to be advantageous and worth it, then rock on and I'll even check it out for myself. Currently, however, none of those markets are worth it right now in my opinion. That doesn't mean there are no good deals there, but there are a lot of markets way more advantageous. But if you like them, do your thing. If you look back at the article I wrote about Detroit, I say in there that I'm totally up for hearing more pros about it and considering it as a market to invest in. No one could give me that though, so for now I'm staying out of Detroit. Just like Vegas.
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Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
12y
both vegas and detroit were at the top of 2013 appreciation list. Bakersfield and Pheonix were close behind. Bakersfield is looking at another double digit appreciation for 2014. Vegas is near that % as well. If you can do Vegas it could be hot with right pocket. I have run test ads for renters in Vegas and Bakersfield and I can tell you in the right location in Vegas it will rent in 24hours. If not right location it could be a couple months.
0 Reply
Derek W.
Investor · Kern county Riverside County, CA · Member since 2008 · 494 posts · 261 votes
12y
In all my brilliance, I know that Bakersfield is closer to LA than Phoenix or Vegas. But there aren't any deals here in Bakersfield...
0 Reply
Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
12y
I live in LA too. Against the most pros advice, I am out of state but very well researched and covering PM basis.
0 Reply
Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
12y
turns out the chinese are buying hundreds of properties at a time in Detroit. Anything that is decent, multi million downtown buildings, sfr , commercial.

Pretty much anythjng with a roof and plumbing.

They believe in the city and are holding for centuries.
0 Reply
Marco SantarelliPro Member
Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
12y
Hi @Daniel Smilansky,

Welcome to BiggerPockets!

Glad to hear that you want to get started in real estate investing. It's a great time to be building your real estate portfolio.

Be sure to check out my 10 Rules of Successful Real Estate Investing, and post any questions you have here in the forums.

Continues success!
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Eric Black
Rental Property Investor · Where we are parked · Member since 2013 · 584 posts · 178 votes
12y
@Derek W. Are you trying to keep people out of Bakersfield? :)

I am working on a deal there now. I agree they are not as plentiful as they used to be but I would not say that there are no deals.
0 Reply
Derek W.
Investor · Kern county Riverside County, CA · Member since 2008 · 494 posts · 261 votes
12y
@eric black Yes, that was sarcasm. We need to keep it a secret that I recently bought a duplex for $30,000 that rents for $1,500 gross rent per month, and have been doing that for years.
1 Reply
Arthur Garcia
Specialist · San Dimas, CA · Member since 2011 · 350 posts · 122 votes
12y
@Daniel Smilansky - I have my entire portfolio in Bako. That market is a very strong preformer, especially for Buy and Hold. However, just like every other market, you need to do your HW. There are low priced houses in the hood and there are low priced houses in good working class areas - knowing which property is in which area takes effort on your part.

I know a lot of LA investors buy out of state. I don't knock it, but I love the fact that this market is close and that I can pop up there as needed. If you do buy up there, I wouldn't reccomend managing rentals from LA. You can find property manager who will handle the your property for $60-$100 a door, depending on your portfolio size. The return on my time isn't worth it for me, especially if you factor in gas, time wasted in commute, etc.

There are still deals (I'm working on a few right now), but like every other market with low inventory, you just have to fight a little harder, margins are a little thinner, so I wouldn't advise trying to flip if you have never done it, as you will likely lose money. However, you could easily buy a few nice buy and hold rentals in a good area with the capital you have on hand.

PM me, if you have questions or you want to talk further.

I hope my .02 helps.
1 Reply
Phillip Dwyer
Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
12y
@Ali Boone Everyone is entitled to an opinion. That's what makes forums like this fun. Still, many people look to the forums for good information, and giving advice about a market in which you have no holdings or little experience doesn't live up to the spirit of BP.
1 Reply
Dean Suzuki
Investor · Mission Viejo, CA · Member since 2013 · 48 posts · 14 votes
12y
Welcome Aboard Daniel.

I'm a buy and hold investor, live in SoCal, and work in the Tech field as well. I purchased three SFR in Phoenix in 2011. However since then, the market has rapidly appreciated and the numbers are harder to make work. So, I started looking at multi-unit this year. I recently purchased a couple of fourplexes in Phoenix and the numbers work. There are agents on BP that specialize in Phoenix so you could reach out to them.

I just listened to @Arthur Garcia podcast (BP006) and his investing in the Inland Empire so that maybe another place to look at.

Thanks,

Dean
0 Reply
Account Closed
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
12y
There are still good deals in Vegas if you have cash and can be closed in a hurry all you need to do is look.

Joe Gore
0 Reply
Scott E.
Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
12y
Originally posted by @Dean Suzuki:
Welcome Aboard Daniel.
I'm a buy and hold investor, live in SoCal, and work in the Tech field as well. I purchased three SFR in Phoenix in 2011. However since then, the market has rapidly appreciated and the numbers are harder to make work. So, I started looking at multi-unit this year. I recently purchased a couple of fourplexes in Phoenix and the numbers work. There are agents on BP that specialize in Phoenix so you could reach out to them.

I just listened to @Arthur Garcia podcast (BP006) and his investing in the Inland Empire so that maybe another place to look at.

Thanks,

Dean

Hi Dean -

Can you please share those Phoenix agents usernames? I'd like to follow their posts and reach out..
0 Reply
Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
@Phillip Dwyer

I am solely an out-of-state buy and hold investor. I have never once bought my properties on a casual opinion or because 'someone said so'. I have worked closely with market experts since day one. They do extensive research on all potential markets (including written data), they have bought and held in the various markets themselves and had a variety of experiences in all of them. So, as I said, I could dig up the research behind my "opinion", but because I'm not trying to convince anyone to not invest in Vegas, I'm not interested in investing that time unless someone were to ask for me to expand on my thoughts.

If you're really wanting to get technical about it, every single person on this website is essentially giving an "opinion". Even written statistics online or in newspapers can be skewed, so even if someone busts out a whole slew of written data, it still doesn't necessarily constitute fact. If I find 10 articles from reputable sources telling me that a particular market is awesome but I've talked to 5-10 professional (and successful (which is key)) investors who tell me they've had bad experiences there or that reality doesn't match the written data, I'm going to listen to those investors all day long.

I'm also a lot more apt to listen to people who aren't tied to any one market themselves. Their opinions will be much less biased about where to invest. Someone who runs a company in one market, of course they are going to say their market is awesome.
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Jake Kucheck
Residential Real Estate Agent · Costa Mesa, CA · Member since 2008 · 1k+ posts · 380 votes
12y
Probably the most obvious answer to the Vegas/Phoenix question is that you might be able to find deals, but you'll certainly have lots of competition. You don't have to "do studies", you simply have to review the quarterly earnings of the publicly traded REITs that buy SFRs- all of them are heavy in Phoenix and most in Vegas as well. If you're buying in the same price points as the big money, you'll run into trouble. If you're buying below or above, then you're probably fine. Their average aggregated cost per unit and average rents, along with vacancy rates, are right their in the earnings reports too, so if you do invest in these markets, it will give you a pretty good measuring stick for whether or not you're doing a good job. Hint: If your numbers are anything like theirs, you are NOT doing a good job.

As for Bakersfield, if @Derek W. is finding duplexes at a 32% cap rate all day, then you should probably jump in head first. I'm guessing, though, that this may have to do more with Derek's ability and less to do with what is typical of that market. That isn't to say you couldn't learn those same skills, and eventually find those sorts of deals, but it does mean those results may not be "typical".

As a slightly less zealous defender of out of state stuff than @Ali Boone , I guess I'll also say that I don't really care where the houses are, as long as the numbers are right. After all, when most people talk about what they would do once they achieve their version of financial independence/freedom/nirvana, they almost always mention being able to travel more. Yet when that is part of the path to getting them there... it is somehow frowned upon. Counter-intuitive, to say the least.
2 Reply
Chrystal T.
Alhambra, CA · Member since 2015 · 28 posts · 6 votes
11y
Originally posted by @Daniel Smilansky:

Hi Everyone,

I am new to BiggerPockets, and like many others, I have fallen in love with the lively community and wealth of information. Everyone seems to be very helpful and I hope I can pay it forward! After paying off lots of debt and establishing myself financially, I began exploring the stock market last year, and I quickly found out that the stock market enables the rich to get richer, yet does not service those looking to build wealth nearly as well as I thought.

Aside from my own tech entrepreneurial adventures (I am a web developer), I wanted to give real estate a shot and see what it was all about. A month ago, I stumbled upon the Vegas AirBnB article that went viral and I became even more intrigued (http://mashable.com/2013/11/04/bought-apartment-rent-airbnb/).

I ended up finding bigger pockets through google and I immediately read the beginner's guide to real estate investing. From there, I created a plan, and my goal is to purchase rental properties in order to implement a buy & hold strategy in secondary and tertiary cities that are rapidly growing.

Being from Los Angeles, there are not many great buy & hold properties in my immediate area, and I am open to doing heavy research on out-of-area properties. Although I am not opposed to areas like Charlotte, Dallas, Houston or Memphis, I would prefer somewhere closer, if possible, such Phoenix, Las Vegas or Bakersfield.

Not sure if it is inappropriate to share finances here, but I have 40k saved up and another 15k in retirement accounts at my disposal. I also have 780+ credit. Can anyone suggest markets to explore? My research has been limited to Zillow thus far since I don't have access to the MLS. Also, can anyone suggest ways for discovering properties? I believe I will start contacting real estate agents in a few markets to see what is out there, but any referrals to reputable ones would be more than welcomed!

Also, I would be happy to exchange expertise as I am heavily involved in the tech space and can offer quite a bit of advice in that area. Thanks in advance!

Cheers,

Daniel

Coming from a family that invests in both Las Vegas and Bakersfield, I personally prefer Bakersfield. Numbers definitely look a lot better, and Vegas seems to be a market entirely created by investors.
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