Las Vegas annual rental yield > 9% - I must be missing something?

[Robert Hsiao]

A friend of mine recently bought in Las Vegas. He sent over some zillow pages where condos with $800-$900 current rent are asking around $100K. This is yielding about 9%! Even with $170-$200 HOA this seems too good to be true. If I were a renter, why would I pay $800 to rent a condo which, if I buy and fully finance, the monthly mortgage payment is only $600?

Can pros educate me on what I am missing?

Links available if not against any policy; but examples are easily found.

[Timothy M.]

Originally posted by @Account Closed:

Just look at the numbers on Zillow. 

The HOA in Pirate Cove complex is $142.

Las Vegas has very low property tax rate.  The $100k condo has estimate yearly property tax of only $400 per year.  $20 to $25 monthly insurance.

Most investor prefer 30 years instead of 15 years mortgages to have more leverage. You guys do your own math using $142 monthly HOA and $34 monthly property tax.

Ok, I'll bite.

1000 gross rents

-142 monthly HOA

-34 property tax

-25 insurance

-100 maintenance/capex

-50 vacancy

-0 property management, which you will be doing yourself

___________________________________________

$650/mo, or 7.8k a year, or 5.5% rreturn on your 140k invested... but you will also be doing all of your own showings and dealing with all of your tenants as a part-time property manager, and you're opening yourself up to the prospect of a special assessment wiping out YEARS of profits, all for a return that is strictly less than what an S&P500 index fund would return to you on average.

NB that these numbers are based on an extremely conservative vacancy rate and low low low maintenance figures and an HOA that never increases...

Still a bad deal, IMHO, and I would encourage you to consider other options.