Las Vegas or Glendale, Surprise Az. for str or mtr?

[Steve Bebek]

Which city would be best for income and occupancy?

[Eric Fernwood]

Hello @Steve Bebek,

My 2¢.

Markets change, so I recommend only considering properties that would make good long-term rentals, as well as good mid-term rentals (MTRs) and short-term rentals (STRs). That way, if the market for MTRs or STRs changes, you have a backup option.

Short-term rentals seem to have ongoing issues in many locations. Especially when you include HOAs. Additionally, STRs provide less reliable income because they depend on people taking vacations. And, if the economy declines, fewer people take vacations. But everybody has to have a place to live, all the time (demand for long-term rentals.)

We just did a study on Las Vegas MTRs. They appear to be very attractive and they do not run afoul of most of the HOAs in Las Vegas. Most HOAs have a 30-day minimum lease period. I assume Glendale and Surprise are similar. If you want a copy of the Las Vegas MTR study, DM me.

When I was living in NYC and decided to create an investor services business, Phoenix was high on my list of possible locations to set up business. However, two things made me decide on Las Vegas. The first was operating costs. Below is a table comparing state averages.

If I compare a $400,000 property generating $2,000/Mo cash flow (ignoring all other costs like debt service), it works out as follows.

So, for a property in Arizona to generate the same cash flow as one in Nevada, it must generate $1,280 more cash flow to compensate for the higher operating costs.

The main factor that led me to choose Las Vegas over Phoenix was the issue of urban sprawl. Here is a link to a time-lapse of Phoenix. As you can see, there is no limit to expansion. This kind of urban sprawl limits rent and price growth in existing areas (for rentals). Also, people with sufficient income tend to move to newer areas on the outskirts. Those who remain have lower incomes, which also minimizes rent and price growth.

Below is an aerial view of Las Vegas taken in 2020. The brown areas on the map indicate federal land surrounding the small island of privately-owned land that is Las Vegas. As you can see, there is almost no undeveloped land left. Soon, redevelopment will be the only option. In fact, it is already happening in some areas.

Between the two, Las Vegas will perform better in the long run due to limited or no urban sprawl and lower operating costs.

Steve, I hope this helped. If I can help, DM me.