Investing In Las Vegas (updated 12/1/21)
The real estate market will be changing dramatically over the next 12 months. There is still an unemployment rate of about 8%. There are tens of thousands of properties with tenants not paying rent because have not been able to evict tenants with all the ridiculous new laws. The foreclosure moratorium has ended and the number of defaults have tripled since August.
The only buyers right now are Californians and the latest trend is they are done moving. No more buyers willing to pay over list are on the horizon.
20% of the mortgages in Las Vegas were not paid last month. We predicted a correction back in October 2018 and we are sticking to our expectations of a considerable drop in prices. We expect prices to drop about 25% over the next 20 months. We are witnessing the same sequence of events that followed the last crash. People who were stretched thin, ran out of reserves and stopped paying the mortgage about month 6. The government is just prolonging the inevitable. It was socially acceptable back then to tell banks to pound sand and it will happen again. Investors who are leveraged and have tenants who can’t pay rent are going to be the first to go.
I have been investing in real estate over 30 years. I have been through 2 of these rodeos and lived to tell about it. The first rodeo I went through was 9-11 and the second rodeo I went through was the mortgage meltdown. All these rodeos have the same profile. People pay way over list to buy crappy properties and then can’t get out of them once the market corrects.
When will he hit bottom? We are guessing middle of 2023. The government is scrambling to throw money at distressed owners but we all know printing money isn’t sustainable. It is difficult to know exactly when the government will run out of steam. As we approach the bottom, I be increasing the frequency of these broadcasts. Investors who followed our advice in the last recession snapped up properties and made significant profits. We will do it again. Don’t worry, we will let you know when it’s time to buy -> sign up here.
What about those multi family properties? They look enticing. The listing agents are using smoke and mirrors. We used to manage about 30 of these multi family buildings. Our investors got out of them while the market is hot. They were barely returning 6% even after we got them at killer prices in 2010. What listing agents won’t share with you is they are very old buildings requiring constant maintenance. They are also full of crackheads, drunks and people who have issues. 95% of our lawsuits and evictions used to come from these buildings. We don’t manage them anymore because of that. Here is more on why mulit-family buildings are terrible investments.
What about those Airbnb? Short term rentals make a lot of money! That is true but you can’t get a license except for that needle in the haystack in Henderson. The majority of the short term rentals you see on the market are not licensed. The chances of your short term rental getting caught is about 90% within 6 months. When you get caught, you are done. If you don’t stop after getting a love letter from the government, the fines are $1000 a day. They also don’t make as much money as you think. After all the expenses, platform fees, management fees, and repairs, they only make about 20% more than a long term rental. Here is more about short term rentals.
What about commercial property? Commercial mom and pop strip malls on the “East Side” are about the only remaining asset class worth buying. They return about 5% and your 12 year old can manage it because those leases are all NNN (tenants pay everything). The other nice thing about them is leases are generally between 3-5 years. Buy one and you don’t have to play with it very often. The only downside to these is you have to have a lot of cash. The cheapest mom & pop strip mall in Las Vegas starts at about $800k. Commercial loans are no picnic and you will need to budget about 50% down. Unless you are sitting on about $500k in cash, you can’t play this game.
What are the investment returns right now? It isn’t pretty. Here is what to expect:
- Commercial Mom & Pop Strip Malls -> 5%
- 3/2/2s in the barrio -> 3%
- 3/2/2s newly built -> 2%
- 3/2/2s in upscale neighborhoods -> 2%
- Condos in upscale neighborhoods -> 1%
- Condos Under $100k -> -4% What? Really? You lose money on these? Rents don’t cover HOA, repairs and management expenses.
- 5/4/3s in guard gated exclusive neighborhoods -> -5%
- Fourplexes -> -8% We no longer manager these.
- High rise condos -> -10% (Why do people buy these? To impress their friends I guess.)
Our investors were getting about 14% returns and doubled their investments when we told them to purchase in the last recession. The returns are so terrible right now we have been telling investors burning a hole in their pocket to keep it in their pocket.
Alright smarty pants. What you doing with your money? I’m walking the talk. I’m sitting on a lot of cash waiting for the correction. Some of that cash is in gold and there are some smaller investments in hard money lending. I don’t understand bitcoin so I’m not swimming in that water.
7 Steps in Investing in Las Vegas (starting about 3/1/24)
Step 1 – Determine how your assets will be held.
Decide how title will be held. LLCs are recommended if you want to keep the wolves at bay. DO NOT HOLD TITLE WITH PARTNERS unless the partner is your spouse. These things blow up right about when you are too sick to deal with it or your partner runs out of money. We can send you pictures of burned out buildings if you want to see the end results of partnerships. We see tweakers light these on fire just about every week and will be happy to tell you stories of how those partners got started 20 years ago. Video.
Step 2 – Determine who you will work with.
Do your research on an agent or broker before you throw your life savings at this. If you really want to know what returns the best money, talk to companies who also manage them. Trusting information from a listing agent is the fastest way to get your clock cleaned. Here are our YELP reviews. Video.
Step 3 – Line up your financing before traveling.
The days of easy finding came to an end in the real estate crash in 2008. If you are paying cash, you will need to prove it before you can make offers. If you are getting a loan, talk to a loan professional today. If you need a referral, we have some awesome people who can help you with either residential or commercial loans. We are not going to drive around in the heat until you can show us you have the ability to purchase. Do you go to Walmart without your wallet? Neither do we.
Step 4 – Arrange to go hunting for properties.
Once you have some financing lined up AND you have scheduled some time to look at some properties, we will do a free, no hassle, no pressure hunting mission with you. We are not time share people and there is no reason for us to force you to buy something that will make you lose money. We will probably be managing your property so we are going to get really cozy for very long time.
Step 5 – What you should be doing while in escrow.
Please read this important information about The Las Vegas escrow process. This will save you lots of time and headache. You also want to get the property management ball rolling. DO NOT WAIT UNTIL IT CLOSES TO FIND A TENANT!! We offer a variety of property management services and this page covers all our property management solutions.
Step 6 – Get your property ready for tenants.
Do not waste time or money waiting around or making fancy upgrades. Read our Rehab 101 page for dos and don’ts. You can do your rehab or you can hire us. We charge 10% over invoice. We do about 2 rehabs a week and can probably do it much cheaper and faster than you can.
Step 7 – Collect money!