Is Las Vegas a good place to invest in real estate in 2022?

[Jalen De Leon]

Hello everyone! I was wondering if there is anyone that invests in real estate in Las Vegas and would it be good to invest in 2022? I’m an aspiring Real Estate investor currently serving in the military overseas, and plan to get out and start investing in real estate once I come back state side. Was looking for some opinions on Las Vegas to see if it’s a good area to buy in 2022.

[Eric Fernwood]

Hello @Jalen De Leon,

Is Las Vegas a good place to invest in 2022?

It depends on your goals. If you were looking for a highly reliable long-term income stream, Las Vegas is one of the best places in the US. In this post, I will look at what's happening today and provide some insight into what is likely to happen in the foreseeable future.

What's Happening Today?

2008 vs. 2021

I see no similarity, despite the fear mongers in the press. Of course, fear sells, no one buys good news.

Where Is the Market Today?

Below is 13 month trailing statistics on all single family properties that conform to our property profile. Our property profile defines properties that our target tenant pool is willing and able to rent.

$/SF Rental Rate

Rental Monthly Inventory

Around 3 months of inventory is typical for this time of the year. Today, it is 0.4 months.

I can show more stats but I think you will agree that there is little to indicate a crash. The question is, will it continue?

What I Expect in the Foreseeable Future

Demand is what drives prices. When there is more demand than supply, prices rise until supply equals demand. So, what is driving demand in the Las Vegas metro area?

• Jobs - Today, there is about $20B in new construction, and another $5B to $7B has been announced. This new construction will create tens of thousands of additional jobs, which will result in more people moving to Las Vegas. More people will increase demand, which will increase prices and rents.
• California Exodus - Almost every day, I read another article about companies and people fleeing California. A percentage of the people fleeing California come to Las Vegas. This is especially true with the digital nomads. As more Californians flee, demand will continue to increase, which will increase prices and rents.
• Pro Business Environment - Nevada has no state income taxes, low property tax, low-cost property insurance, reasonable traffic, reasonable property prices, lower cost of just about everything. Las Vegas is investor-friendly. Evictions take less than 30 days and cost about $500. For our target tenant pool, we've had five evictions in the last 15 years. California commercial energy rate: $.2275/kWh. Nevada: $.1114/kWh. California is just over twice as expensive.

I could continue, but I think you can see that Las Vegas is a desirable place to live, especially when compared to California.

Risks

What do I see that could possibly slow down growth?

• California becomes the place for low cost business operations, personal freedom, and reasonable cost real estate. Not happening.
• Major terrorist event. There are much better places to make a statement against the US than Las Vegas. Very unlikely.

Concerns That I Hear

• Water - Today, between 70% and 80% of all water consumption is wasted on grass. It makes no sense to grow grass in the desert. If the situation becomes dire, implement a progressive water charge. Lawns will disappear rapidly. Alternatively, Las Vegas is about 300 miles away from a major source of water in northern Nevada. Almost all the land between Las Vegas and the water sources is federal, so minimal cost. The Keystone pipeline was 1,200 miles and crossed several states, and was mostly on private or reservation land, and is projected to cost $5.7B. The most recent casino to open cost over $7B. The last estimate I heard for building the Las Vegas water pipeline was $2B. However, whether the cost is $2B, $10B, or $20B does not matter. Las Vegas is not going to be shut down due to water.
• Californication - This is a valid concern. People flee California due to regulations, and costs and then want to implement the same disastrous conditions in Nevada. Fortunately, it seems that after about a year, they lose the "California" mindset. So, this may not be a valid concern.

My Opinion

Las Vegas is doing well today and is very likely to do well into the foreseeable future. What am I personally doing? I am adding more properties to my portfolio.