A Las Vegas Real Estate Agent Asks, "Is it Time to "Invest" in Las Vegas Real Estate?
A friend of mine is building some new homes in the south part of Las Vegas located close to Las Vegas Blvd. The community has a product similar to a townhome except that the houses are detached. The price per foot is $96 to $104. The actual prices are $130,000 to $158,000. I penciled it out and with 20% down the return on my investment would be 4.7%. And this is if I manage the property myself. A cash purchase would net 6.24%. (These returns do not take into consideration income tax deductions.)
Even though I have been in the Las Vegas real estate biz for years I do not own a rental property. Why? Because it never penciled out to my satisfaction. I want a fair return on my investment. I don't want a break even and I definitely don't want a negative cash flow. Soooo many Las Vegas "investors" (speculators!) obviously did want that. And I admittedly got caught up in the buying frenzy of the boom years and put in a couple offers on some homes only to toss and turn all night trying to justify a big fat negative cash flow in the hopes of equity appreciation. Thank goodness I canceled those deals.
What I want to decide is if it is time to invest in rentals here in the Las Vegas Real Estate market. I am seeing positive cash flows of more than 1 or 2% for the first time since I can remember. But I am also seeing the rents slip over the last few months. And many of the owners of the properties with the slipping rents are very much upside down. Their current home values are half of the original purchase price. Another wave of foreclosures and short sales on the horizon? Looks that way. How many waves are out there and when will it end?
The above observations are based on actual data taken from the Greater Las Vegas Board of Realtors Multiple Listing Service and Clark County Recorder's office.
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