Las Vegas for real estate investment (as opposed to Los Angeles)

[Jonathan T.]

Hello!

I am new to this forum and real estate in general. I'll try to keep this posting as brief as I can but I feel I have to provide some background information. I am single, 40 years old, and have worked as a computer programmer for 17 years (currently working from home), and I have never owned a home before (always rented). I am currently living in Los Angeles (California) but may be moving to Las Vegas (NV) in the very near future.

I am not a wealthy, but I have saved a nice lump of cash and am making a good living. I can afford living in Los Angeles, even though it is very expensive. However, after looking for a home to buy for quite a while, I realized that the price of a nice condo in a good area in Los Angeles, can buy me 2-3 nice houses in Las Vegas. Living in Nevada will also save me state income tax. Just by moving to Las Vegas and renting an apartment, I will be saving 20K - 30K a year.

My plan is:

1. Move to Las Vegas and live there for 6 to 12 months (experience the seasons and weather).
2. During this time, I will familiarize myself with the area and properties (go to open houses), and continue to educate myself about real estate (mortgage process, tenant screening, networking, contractors, etc.)
3. After 6 to 12 months, if I still like living in Las Vegas, I plan to purchase a home to live in (putting 20% down). If I don't, I can always move back to Los Angeles. Part of me wanting to invest in Las Vegas is being 4-5 hours driving distance from friends in Los Angeles (weekend getaways).
4. Buy my first investment property - a single family house. Class A or A- house in a class A or A- neighborhood. I believe I can find such a property for 200K - 300K. The point here is not to maximize cash flow or ROI, but to attract good tenants to a relatively problem free property. As this will be my first investment property, it is imperative to have a positive experience and not to get discouraged by negative one. My strategy is buy and hold - no flipping of any sorts, rehab, or otherwise.
5. Use a real estate agent to find the tenant (I do work full time), but actively manage the property myself. This will be an invaluable lesson to build experience, deal with problems, and develop landlord to tenant relationship.
6. A few months after gaining experience with my first investment property, if I find that real estate investment is to my liking, buy a second investment property.
7. Repeat step 7 gradually over time while maintaining ample cash reserves and not get over leveraged. As I accumulate properties, ask myself how much is enough to reach my goal of:
   1. owning my home free and clear
   2. have enough cash reserves
   3. actively manage my properties (no property management)
   4. live of passive income while having peace of mind (to the maximum extent possible - hence class A properties). At this point I can retire, find a different job which pays less, work part time, do volunteer work, travel, etc. Peace of mind is much more important than maximizing ROI.

I believe that I can reach my goal in 5 to 10 years. As time passes, if I find that I enjoy real estate investing, I may shift to it as a full time "job", change my strategy of buy and hold, or other things that I currently cannot think of. For the near foreseeable future my daytime full time job is number one priority, though. I realize plans change if I end up having a family or a job situation.

Questions for confirmation:

1. Even though Los Angeles expensive, it doesn't mean one cannot invest there. However, the entry price is much higher than Las Vegas. Right?
2. Las Vegas is growing, but it does have transient population, more so than Los Angeles. There is a lot of construction going around and some people/families stay for a few years until the project is completed and then move on.
3. Is Las Vegas a viable investment area, able to generate 4% - 6% ROI? I believe it is.
4. If/when a recession occurs, it tends to hit Las Vegas much harder than other cities with more diverse employment/industry. This can and will hit real estate as well.

Thoughts and feedback are welcomed, especially from people who live in the area (Henderson included).