Las Vegas Single Family Rental Growth

[Eric Fernwood]

General statistical data available through the Las Vegas MLS and others do not include rental information. So, we developed our own capability to extract and display SFR rental data for the area we target and a property profile that rents well to our target tenant pool. Below are a few interesting charts.

Note that the data is NOT for the entire Las Vegas metro, it is only for single family homes < 3000SqFt and rented for < $2,000 in the area that we target.

As you can see, single family rental rates rose about 5%, even as the rental inventory built up towards the end of the year. This shows that rental demand remains strong.

Las Vegas remains an excellent investment location.

[Eric Fernwood]

Hello @Account Closed

Rent to price ratios can be deceiving. Below is an example of two (actual) properties. One is in Las Vegas and one in Austin TX. Note, we own a home in Las Vegas and one in Austin. So, I have a pretty good understanding of both locations.

* Note: I used the same association fee for both properties to keep things "apples to apples". The property in Las Vegas actually does not have a HOA.

If I compute the rent/price ratio, the Austin property is the clear winner:

• Austin: $,1700 x 12 / $252,500 = 8.1%
• Las Vegas: $1,490 x 12 / $255,000 = 7.0%

However, rent ratios do not take into account differences in property taxes, state income taxes, insurance or anything else. Below I estimated the return for both properties. To provide a realistic comparison, I made the following assumption for both properties.

• 20% down
• 4.5% rate
• 30 year term
• 3% closing cost
• 8% property management
• 0% state income tax. Neither Texas or Nevada have a personal state income tax.

Below are the formulas I use for ROI and cash flow:

• ROI = (Income - DebtService - ManagementFee - Insurance - RETax - PeriodicFees) x (1 - StateIncomeTax) / ( DownPayment + ClosingCosts)
• Cash Flow = (Income - DebtService - ManagementFee - Insurance - RETax - PeriodicFees) x (1 - StateIncomeTax)

Calculations for the Austin property:

• ROI = (1700 * 12 - 1024 * 12 - 1700 * 12 * 8% - 1625 - 6022 - 41 * 12) / (3% * 252500 + 20% * 252500) = -2.9%
• Cash Flow = (1700 * 12 - 1024 * 12 - 1700 * 12 * 8% - 1625 - 6022 - 41 * 12) = -$1,659/Yr. or -139/Mo.

Calculations for the Las Vegas property:

• ROI = (1490 * 12 - 1033 * 12 - 1490 * 12 * 8% - 450 - 1511 - 41 * 12) / (3% * 255000 + 20% * 255000) = 2.7%
• Cash Flow = (1490 * 12 - 1033 * 12 - 1490 * 12 * 8% - 450 - 1511 - 41 * 12) = +$1,600/Yr. or $133/Mo.

Even though the Austin property is the clear winner based on the rent/price ratio, it is an absolute loser when you do a real world calculation. You must include all significant recurring costs when you are comparing properties. Simplistic calculations like rent to price ratio frequently produce invalid results.

In today's market, only 1 out of every 800 - 1000 properties in Las Vegas is a good investment. For the properties we target, we expect a rent of $1500-​$1600 for a $260k-$265k home with <$10k rehab. These properties provide a balance of cash flow and appreciation growth thanks to Las Vegas' outstanding economic outlook for the foreseeable future.