Strategy/Advisor help needed for future investment in Las Vegas

[Christian Perez]

Hello BP community, 

I'm going to give some background information to help you guys understand my current platform and where I stand. I am a travel nurse currently working in San Diego up until April. I have my primary property in Las Vegas and have had it for two years now. Currently I'm making good money and have $60,000 to invest. I'm pretty hands on and can do some renovations. I don't mind house hacking or buying an investment property. The market that I'm looking at is Las Vegas because I know the market and would benefit in investing there because I have an uncle who is a construction worker. He has been doing that his whole life so he's very efficient and knowledgeable in building houses and the foundations that go along with it. Along with my uncle, I also have my father who is a handyman himself. Again, I'm a new upcoming REI who is seeking advice. This will be my first purchase into my future real estate investing. I'm here asking for advice in what is the best decision I can currently make in order to launch my real estate investing career. I will remain a travel nurse so I can continue to have cash to invest. I understand that it is impossible to foresee the market, I'm wondering if I should hold off later into the first quarter to see how the market trends, or should I take action now house hack or buy a property with a 20% down. (I don't mind house hacking in a duplex, triplex or a quad but the neighborhoods that these properties are not the best locations). The upside that I can see is that my job requires me to work 50 miles away from my residential home as a Travel RN. In Las Vegas, the market blooms slightly better than others when everyone is doing good, but it gets hit harder than other markets due to its tourism.

1) Who do you recommend I talk to in order to make the best decision including tax strategy and property purchase?

2) Should I wait to see where the market goes?

3) Should I seek out another market that is more stable?

4) If you were in my shoes what actions would you do?

5) Should I get an LLC?

- If I'm not asking the right question, please feel free to input the questions/answers I should be asking. 

Thanks for reading to the end, hope to hear from you soon

[Eric Fernwood]

Hello @Christian Perez,

Good questions. I divided my response into a few categories.

• Tax advice
• Litigation protection
• Where to invest?
• Las Vegas current situation
• Las Vegas long term rent and price drivers

Tax advice

I have little knowledge of taxes and such. If you DM me, I will reply with at least two tax people our clients work with.

Litigation protection

We have over 150 clients, and how they choose to protect themselves and their assets from litigation can be subdivided into the following. (Know that I am not an attorney or financial advisor. Take what is said below only as food for thought.

• Form an LLC - Nevada has a DIY business site: State of Nevada Business Formation. A number of our clients set up LLCs through this site. You will need a local agent. I am the local agent for many of our clients. Some clients have each property as a separate LLC. Others have two or more properties in each LLC.
• Umbrella policy + appropriate landlord insurance - A number of our clients combine landlord insurance and an umbrella policy. I have been told that you want the landlord coverage to match up with the umbrella policy.
• Do nothing - From the attorneys I’ve talked to, litigation is not as common as in other states. I am the local agent for many of our clients. My duties and abilities are a local mailing address. In 15+ years, I have never received a legal notice for our clients.
• Add your property manager to your landlord insurance. If someone does decide to sue you, I have heard that they will initially file against the property manager. The goal is to force the property manager to work with the litigant against the owner. If the property manager is included in your landlord's policy, this will not be the situation.

Where to invest and what to buy?

The goal of real estate investing is to get off and stay off the daily worker treadmill. The process is straightforward. Below are the three steps and their criteria.

If you want specifics, DM me.

Las Vegas Current Situation

How did our clients' properties perform in 2022? YoY rents increased by 4.5%, and prices were flat. At the end of 2022, price decreases wiped out most gains. I do not expect prices to continue to decline because inventory is falling. See the charts below from the MLS.

How do the current prices compare to peak 2006/2007 prices? See the chart below. The blue line shows $/SF without correcting for inflation. The green line is the 2006/2007 uncorrected $/SF. The red line is inflation-adjusted dollars. As you can see, the current $/SF is still below the inflation-corrected peak prices of 2006 and 2007.

What do I expect in 2023? The big factor will be interest rates. I see three interest rate scenarios.

• Interest rates rise significantly - Increased interest rates will choke off buyers, and I believe prices will decline. Not a lot, but some.
• Interest rates stay more-or-less the same - I expect prices to slowly increase.
• Interest rates decline - I expect prices and rent will rise rapidly. There is huge pent-up demand, and falling interest rates will trigger buyers and sellers.

If interest rates return to reasonable levels in 2023, I expect significant rent and price growth. I do not expect increases in 2023 will reach previous rates, but I expect significant increases. From 2013 through 2021, the average annual appreciation for the property profile we target was over 15%, and annual rent growth was over 8%.

Las Vegas Long Term Rent and Price Drivers

Why do I expect rents and prices to increase? The unique nature of Las Vegas. While there are multiple drivers for increasing rents and prices, I will mention only five.

Land shortage

Las Vegas is an island of privately owned land surrounded by an ocean of federal land (87.5% of Clark County is federally owned; 85% of the entire state is federally owned). At the end of 2019, the amount of vacant, buildable land in the Las Vegas Valley was less than 28,000 acres, of which 5,000 to 7,000 acres were not viable for residential development. The consumption rate is about 5,000 acres per year. See the animated GIF below. The areas in brown are federal land. The time-lapse only goes through 2020, but there was a lot of development in 2021 and 2022. The shortage of land, combined with the increasing population, almost guarantees that property prices and rents will continue to increase.

Pro-business government

With a low-regulation environment, streamlined licensing and approval processes, and favorable tax policies, the Nevada State and Clark County (Las Vegas metro) is a very business-friendly jurisdiction.

Population growth The population continues to grow at a sustainable rate of about 2.5% to 3%.

Jobs According to Glass Door and Monster, today, Las Vegas has between 26,000 and 31,000 open jobs. Jobs bring people, which will increase the demand for housing.

Growing There is over $22B under construction and more announced, which will create thousands of new well-paying jobs. All these new jobs will bring thousands to Las Vegas and continue to drive up prices and rents.

So, regardless of what happens in 2023, Las Vegas will continue to be an exceptional location for investors.

Christian, I hope this helps.