Nevada is probably best known for its gambling industry and its strong tourism.
But, it’s more than that. In fact, gambling and tourism are only two parts of a thriving economy. The population continues to swell – with both visitors and full-time residents. In Las Vegas, you’ll find education and tech companies. There’s manufacturing and industrial industries. Start-ups are leaving more expensive markets for the business-friendly climate in Las Vegas.
It’s a good time to buy real estate here. Multiple drivers are making Las Vegas a stable and outstanding investment market.
So when you’re ready to buy, how do you know you’re investing in a good asset that’s likely to make you money?
We have some thoughts on this, and we’d like to help you invest wisely.
Why Invest in the Las Vegas Rental Market?
The Las Vegas rental market has really shifted over the last 10 or 15 years. It’s always been based on tourism and gambling. People come for the shows and the casinos and the shopping, but there’s more to it now. It’s a destination for families and for outdoor enthusiasts.
The economy has grown and diversified. Technology, energy, healthcare, and defense are just a few of the industries that are employing people and pouring big dollars into the local economy. It’s still a strong area for agriculture, cattle ranching, and mining, too.
This impacts the population. More people are moving into Las Vegas not only for vacation – but to live and work.
These people need housing, so it’s an outstanding market for investors who can provide it.
Identifying a Good Las Vegas Investment Property: Location
Every real estate expert – whether in Las Vegas or not – will tell you that location is perhaps the most important indicator of whether you’re making a good investment. When you’re choosing a rental property, you have to make sure that it’s in a desirable neighborhood.
We recommend you think like a tenant.
Where do tenants want to live? They prefer to rent a home that’s close to good schools and just a short distance to shops, restaurants, grocery stores, and other conveniences. They don’t want to be in the center of The Strip. They don’t want to be out in a remote location with the tumbleweed. They want a neighborhood with a sense of community.
A well-located rental property will bring in higher rental values and qualified tenants, which leads to positive cash flow and an impressive return on your investment. Location also impacts vacancy. You’ll have fewer unoccupied days when your property is in a desirable location.
Buy a property in a neighborhood where people will want to live. In Las Vegas, that could mean an older established neighborhood or a new construction community with amenities and an HOA.
A good investment property is in a neighborhood that’s easy to reach and offers a direct route to work, school, entertainment, and recreation. Parks will help and so will things like hospitals, libraries, movie theaters, and shopping malls.
Las Vegas Investment Property Condition
You know you’re buying a good investment property by its condition and the amount of maintenance you expect it will require as you’re renting it out.
How much work will be needed before it’s in rent-ready condition? We recommend you have a complete inspection before you buy. Budget for any investments that will be needed to make the home habitable, safe, and attractive. A good investment will need mostly cosmetic changes – maybe some fresh paint or new floors. You don’t want to buy something that’s going to require thousands of dollars and several months of renovations.
Your best investment property is probably not a fixer upper. For some investors, this is part of their investment plan. Maybe you’re hoping to buy cheap properties and then fix them up before you rent them out for top dollar. If that’s your goal, you’re going to intentionally look for those specific homes. But if it’s not your goal, and you’re more interested in getting a rental home to market quickly, focus on the homes that don’t need a lot of work right away.
A lot of time and money will be spent renovating that house and not only do you have to consider how that impacts you financially, you also have to think about the delay in getting the home on the market. You won’t collect rent right away. It may take months.
You’ll also need to think about long-term planning. Consider the age of the roof and the appliances. You need a well-maintained property in order to attract stable, long-term renters.
Numbers Make Sense with the Right Las Vegas Investment Properties
If you’re like most investors, you’re probably looking for an investment property that will earn you some money.
Investors need to do some serious math before they decide that a property is a good investment. In Las Vegas, you’ll find that generally the numbers make sense for most investments, especially compared to other markets. Cap rates are pretty healthy and there’s a lot of potential for immediate cash flow, increasing appreciation, and strong ROI.
In real estate investing, the cap rate is basically the price to earnings ratio. You know your budget and your comfort level. Make sure the property you’re considering falls within that range. Measure the strength of your potential investment by price per square foot or some other metric that tells you whether the investment will hold up for you economically.
Buying properties on the low end and renting them out on the high end is every investor’s dream, but it won’t always work out that way, especially in our competitive market. Define what you’re comfortable with, and be consistent. You can make the numbers work with almost any investment, but if you have to get too creative trying to make the math add up, you might want to find something else that’s less risky.
Establish your anticipated rental income and compare this to the expenses you’ll face, including vacancy time, repairs, insurance, taxes, and management fees. Make sure you’re comfortable with the cash flow that you’ll earn. No one invests in property to lose money.
Know Your Competition: Out of State and Local Las Vegas Investors
In Las Vegas, the pool of investors is a mix of local property owners and out-of-state investors. We’re seeing a lot of investment interest from other cities, other states, and even other countries.
The recent trend has been for investors in states like California, Texas, Arizona, and Washington to sell their portfolios and buy up some property in Las Vegas. They may have held these portfolios for 10 or 15 years, so there’s a lot of money in them.
It’s a competitive investment market. You need to know that before you start looking for the right investment, and you need to be disciplined about not chasing down any available property. Stick to your investment goals and make intentional choices. Otherwise, you’ll have a hard time succeeding.
In Las Vegas, your equity is strong, and it will rise quickly. You can leverage some of the investments you might already own. You can take advantage of a 1031 exchange. Be creative when you’re looking for ways to find and acquire the right investment. There’s a lot of opportunity when you know where to look and how to make your moves.
Work with a Las Vegas Property Manager to Identify the Right Investment
Working with a team of experts is essential to choosing the right investment property.
When you’re trying to decide if a particular asset would make a good and profitable investment as a rental home, don’t hesitate to reach out to a property manager. A local Las Vegas property management company that understands the local market can be an invaluable asset.
Some investors make the mistake of thinking that property management isn’t necessary until the investment has already been purchased. But, we can help you even before you buy. Our expertise can be valuable in terms of understanding rental values, measuring what you’ll have to spend on repairs and renovations, and determining who will make your ideal tenant.
Don’t wait. If you contact a management professional before you buy, you can access our expertise and leverage our professional network and resources. We can put you in touch with brokers, lenders, insurance experts, legal professionals, and even vendors and contractors who can help you get the property ready for the rental market.
Whether you’re local to Las Vegas or investing from somewhere else, we’d love to speak with you more about what you’re looking for and how you can succeed. Talk to us about your investment goals and how you want to grow your portfolio.
Please contact us at New West Property Management. We’re passionate about the services and value we provide to the owners and investors who trust us with their properties. Our team expertly manages residential rental homes in Las Vegas and throughout Clark County, including Henderson and North Las Vegas.