When prospective investors contact us about buying Las Vegas condominiums or homes or high rise condos, there are a few issues that I would like to discuss here. Most of the investors who contact us about investing in Las Vegas real estate are not Las Vegas residents; furthermore they are unfamiliar with Las Vegas other than the Strip (Las Vegas Boulevard) or Down Town Las Vegas.
1: What is the total amount of money that an investor would like to invest in Las Vegas homes or condos?
2: Is the investor going to pay cash or finance the property?
3: What does the investor expect from his/her investment?
1: What is the total amount of money that an investor would like to invest in Las Vegas homes or condos?
The reason is that those who have enough money for several properties have to know how they want to invest the money. For example an investor who wants to invest $500,000 in Las Vegas real estate can buy one $500,000 home or condo, two homes or condos for $250,000 each or 4 homes or condominiums at $125,000 each, etc.
Needless to say, the cheaper the price for a home or condo, the fiercer the competition and an investor who makes an offer on a home with 25 offers on it will not get a bargain. The two most important factors that a real estate investor has to pay attention to is vacancy and repair costs. Older homes or condominiums have a bigger probability of future breakdowns and longer vacancy rates than newer homes.
Some investors are still wetting their toes but are trying to time the bottom of the bottom of the Las Vegas real estate market. I spend a great deal of time tracking the real estate market and even I don’t claim that I know when we will reach the bottom for Las Vegas real estate. We will know that the real estate bottomed out at least 3-4 months after the fact. Additionally the Las Vegas real estate market is too general to discuss. Even Las Vegas home or condo market is too general.
Las Vegas homes or condo market should be analyzed block by block and based on square footage, price VS rental income and days on the market before a home or condo is leased. For example, in many areas in Las Vegas homes that are bigger than for example 3000 are not leasing quickly and 1400 square foot homes do much better.
The rental income for a $500,000 home may be $25,000 a year while someone who buys 4 homes at $125,000 each may earn $35,000 for the same amount of investment.
2: Is the investor going to pay cash or finance the property?
This makes a big difference in what the investor can purchase. For example other than a few exceptions, those investors who want to finance their purchase cannot buy a hotel condo like the Signature at MGM Grand or most condo communities in Las Vegas.
Foreign investors will have a hard time financing their deal in the United States to my knowledge; however I am not in the mortgage business. Foreign investors should research financing themselves. I have had investors from Canada who used a line of credit or a home equity loan in order to buy for cash in Las Vegas. It is best for a foreign investor to obtain financing in their own country and buy for cash in Las Vegas.
3: What does the investor expect from his/her investment?
Is it cash flow, a shot at future appreciation or both? Properties with better cash flow could appreciate less in the future and nicer properties with a shot a future appreciation do not offer great cash flows. Bear in mind that no one can guaranty future appreciation; however one can take an educated guess.
3: What is investor’s timeline to buy?
Timing is important in making a real estate investment; the rule is to buy when others aren’t and that can’t be generalized. Homes that are priced below $250,000 and are priced right are getting multiple offers at this time and I have advised my investors to be patient until the rush on the properties calms down a bit. If the investor wants to buy a one bedroom condo at MGM Grand or Meridian, try to do it now.
It also affects how often we would contact the investor. If the investor wants to buy in three months, we will not contact them often until they are ready to buy. Instead we will try to educate them by e-mailing them different products in different locations in order for the customer to get an idea about pricing versus location. When the customer is ready to buy, we will interact with them more frequently.
I hope that I gave an explanation about why we ask the questions that we do and why correct answers will help both of us in the search for a great real estate investment that will make the investor happy.
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