Vegas Prices Continue to Soar

[Phillip Dwyer]

I just read an article that shows Vegas is poised to meet the previous pricing peak very soon.  Here's the link: GLVAR reports

[Marty True]

Looks like a great time to be a developer!

[Phillip Dwyer]

@Marty True If you bought the land a few years ago, it would be great to be a developer.

[Nicholas Hernaez]

Does anyone think it's still feasible to invest in single family homes for buy and hold rentals within the city or even up north? 

I'm a beginning investor looking for my first property. I'd like to keep it simple and find something turn key, but nothing I've seen even comes close to the 1 percent rule.

[Phillip Dwyer]

1% rule is out. 

[Terry Lao]

@Phillip Dwyer

I predicted May'18 median price to be $294k, and year over year at 17.6%. Actual number was $295k and 18%. 

Below is my forecast for remainder of the year, and will pass pre-recession high of $315k, Jun'06. Even know this information ahead of time, it is highly competitive in purchasing RE. I'm getting outbidded, multiple offers on interested properties, and any potential deals are in contract in 24 hours.

Is that what you are seeing?

Terry

[Marty True]

I think there are some deals to be had and can get in the 1% (+) rule... 

Non-owner occupied SFR's that are off-market and have a bit of deferred maintenance or outdated, with low rents or less than great tenants. Those are the properties that I believe can be great deals. With regards to turnkey SFR's for rentals, I agree that it is difficult and hard to get the 1% rule.

Personally my strategy, regardless of market/region is to not compete with homebuyers for assets. So I typically look for properties that they're passing up.

[Phillip Dwyer]

@Terry Lao Anything under the median moves very quickly.  I recently helped a seller where the property was priced 15-20k above comps at 245k.  We had multiple offers over list and it actually appraised.  

[Phillip Dwyer]

@Marty True  I would agree that it's possible to get obtain the 1% rule if you look for off-market opportunities.  For the most part though, the majority of mls listings won't hit that mark.   

[Marty True]

Well, I've spent the last couple weeks deep diving the current Las Vegas market and after meeting with multiple realtors and looking at various angles/sub-markets, there simply are no "deals" to be had from the current MLS.

Off-market deals are even hard to find or create simply because home prices are reaching an all time peak and homeowners that aren't really thinking of selling are not interested in offers because their worried they wouldn't be able to find replacement housing that they can afford.

So for me, back to my primary and favorite class - Commercial - there are deals to be made and deals to be had. I'll be focusing on commercial opportunities here for now.

[Bill B.]

Yup. Just another 20% up and the prices will be as high as they were 10 years ago. 

Might get there this year, but probably 2019. They’re building less than 1/3rd as many new homes and there’s less and less land available inside the 215. Vegas residents hate to drive. They think 10 miles is  across town. 

[J.M. M.]

Paid $140k for a 2BR/2BA condo in December. Off Rainbow & Oakey. We found it on Craigslist of all places. Completely furnished. Solid ‘B’ property. Redfin now says $172k. Yes, things are moving and quickly but driving around I see many opportunities. Has anyone tried ‘cold calling’ on some of the more dilapidated SFH out there? With 20% projected growth in population over next 3-5 years, its only going to get more difficult finding great deals but persistence and being immediately ready to make solid offers (cash or financing on hand) will pay off.

[Jon Lee]

I have been advising the investors in my group who want to buy and hold to start looking into other markets (i.e. plan ahead, build a "boots on the ground team", and find properties that make sense for your ROI). It's actually easier to find properties in other markets than it is here now unfortunately.

[Terry Lao]

@Jon Lee

Your boots on ground and conduct LV meet up group, and advising other markets. Does that mean for the people, like myself, who are holding property.........to hold or sell? 

I'm vested in LV, and watch many reports, like the soon to be released GLVAR sales report for Jun'18. May'18 median SFR was $295k. I'm thinking 300k for Jun'18. Still continued low inventory, and low sales, but year over year at 16.5%.

What are you doing with your personal holding?

Terry

[Jake Langley]

Nothing here in Vegas meets the 1% rule.  I am looking in other markets across the country.

[Jon Lee]

The properties we hold in Vegas are short term hold that will be sold within 12 months (it's a strategy that I dont have time to discuss on the forums).  My long term properties are out of state (KS, IN).

Investors should develop boots on the ground for acquisition out of state.

[Account Closed]

For curiosity, if not investing in Las Vegas, which market is better than Las Vegas?
Or which market meet 1% rule?

Thank you

[Bill B.]

Some day I’m going to make a “copy and paste” why I wish people would stop worrying about the 1% rule that has almost nothing to do with any market where houses cost over $150k. 

1) $300k house that rents for $2900 and costs $2200 in payments with seller will let you have it with $10k down. ‘Sorry can’t buy it, doesn’t meet the 1% rule”

2) $50k house that rents $550 a month and payments are only $500 and you can get in with only $5k down. “Sweet, I’ll take 20 since it meets the 1% rule...”

Go the other way...

3) $5 million dollar house, rents for $50k/month. Payments are $60k/month but you can get in for only $10k down, ON A $5 MILLION DOLLAR HOUSE, SWEET DEAL!  And it meets the 1% rule. 

Ps. Don’t forget, the same people who bring you the 1% rules say you should expect 1/2 the rent to be spent on expenses other than the mortgage payment. So if it doesn’t cash-flow at 1/2 rent after expenses you shouldn’t buy it either. 

[Jon Lee]

@Account Closed....I don't focus on the 1% rule.   Other markets that might make sense all depends on what the investor is looking to do.   Some look for familiarity of a market (did they live there; do they have family there, etc.).  For some it's what drives the economy (industry, college town, seat of government, etc.).  There are other considerations to take into account in many places that give great returns.  Some folks want to focus on AirBnB and other short term type rentals; the 1% rule doesn't translate for that.  

[Jon Lee]

Also @Account Closed...there are many places in the Midwest; Plain States, and down South that could be great opportunities for investors.  

[Kyle Reynolds]

Listening to talk radio recently, I’ve been hearing a lot of interesting information for two sections of the valley...

First is that North Las Vegas has plans to develop their downtown (Lake Mead & Las Vegas Blvd area). Currently looking for primary residence and noted some serious rehab of older homes in this area; might be deals there to buy & hold awaiting the downtown development .

Second is Maryland Pkwy light rail being proposed; that could potentially bring great value to properties nearby as if that does happen, it will be a busy corridor.

[Bill B.]

Ps. Don’t forget to check out the “opportunity zones” if you’re buying anything in the Vegas valley to hold 5 years or more. Tax free appreciation. 

[Martin L.]

@Kyle Reynolds I personally have reservations about the North side. Everyone always talks about growth and opportunities there, my sister moved out there a few years back (Aliante) talking about how great it would be and all the development, etc...

She had to buy new Christmas and Halloween decorations every year because they were continually getting stolen from her yard. It's not in the war zone, but it was all "close enough" that they could just pop over, rob a couple houses, and then pop back to their hoods. After a few years of problems in her area, she moved back to the Southwest.

I'm not saying that there isn't opportunity in NLV.  There is. Prices have always been far more affordable for relatively new properties in great condition... but I wouldn't want to live out there, and I buy places that I would personally want to live. It doesn't let me ramp up as quickly as many here, but there are few headaches.

[Robert Adams]

I agree the 1% rule is not applicable in Vegas. Even if you buy an off market property with deferred maintenance and less than quality tenants...once you account for rehab and vacancies due to higher tenant turn over you will be less than 1%. That is more so for other areas of the country. 

The 50% rule Bill was referring to can be used in Vegas as a very rough rule of thumb but before purchasing any property you should get the actual fixed costs and use reasonable estimates for variables like vacancy and repairs. Once you have a property inspected you can get a much better estimate for repair costs as you will know if it has been properly maintained or if there is a lot of deferred maintenance. Typically in Vegas if it passes the 50% rule the actual figures will be even better (although this is not always the case). The 50% rule tends to be more conservative than the actual numbers. 

[Jay Hinrichs]

Originally posted by @Robert Adams:

I agree the 1% rule is not applicable in Vegas. Even if you buy an off market property with deferred maintenance and less than quality tenants...once you account for rehab and vacancies due to higher tenant turn over you will be less than 1%. That is more so for other areas of the country. 

The 50% rule Bill was referring to can be used in Vegas as a very rough rule of thumb but before purchasing any property you should get the actual fixed costs and use reasonable estimates for variables like vacancy and repairs. Once you have a property inspected you can get a much better estimate for repair costs as you will know if it has been properly maintained or if there is a lot of deferred maintenance. Typically in Vegas if it passes the 50% rule the actual figures will be even better (although this is not always the case). The 50% rule tends to be more conservative than the actual numbers. 

I personally like the 50% rule those who go into the tulles on these little rentals I think totally over think it..  if your numbers work at 50% your probably good if you do a little better hey great pay a little extra on your mortgage.. if you do worse then you should sell  :) as its a money pit...

[Robert Adams]

@Jay I agree, but I still like to get into the actual numbers before putting ink to paper. I just like the 50% rule as a quick estimate when comparing a high volume of properties against each other. Much less time than getting into the nitty gritty on a long list of homes that most likely won't come to fruition.