It takes a lot more than buying a high-rise unit and hiring a property manager to succeed at investing in Las Vegas high-rise condos
Yesterday a lady investor planning on investing in a Las Vegas high-rise condos called me and told me that she wanted to invest in a unit at the Juhl Tower. I asked her why, and she said to me that she thinks it is a nice building. If you want the the highest cash flow and future appreciation for your investment, nice doesn’t cut it.
High-rise rentals can return 1.7% to more than 6% in cash flow or cap rate depending on the tower, floor plan and how the condominium is managed. And it has taken us more than a month of research to find the best units. We shall discuss other factors affecting the cash flow like asking rent, upgrades, lease duration, and whether or not the unit is furnished that affect cash flow.
In this video we discuss why we are recommending investing in Las Vegas high-rise condos, different ways of leasing condominiums and which factors affect cash flow and where to find the highest cap rate.
Up to 2021, we have not recommended that investors invest in verticals and here are the main reasons.
Las Vegas high-rise condo towers have not appreciated nearly as much as traditional homes and condos.
A good criterion to figure price gains in real estate is the price per square foot of all condominiums sold in a period. The reason for showing yearly price per square foot is the low number of unit sales in the high-rise category, which results in large fluctuations in monthly reports.
|Yearly Price per square foot of units sold||2017||2021||Percentage price per square foot appreciation|
|Las Vegas homes||142||202||42.25%|
|Condominiums and townhomes||120||177||47.5%|
The price per square foot of single-family homes has appreciated by 42.25% since 2017. Condos and townhomes have done a little better and have appreciated by 47.5% since then.
While residential high-rise condominiums have only appreciated by 10.8% in the last five years, about 6.5% has happened after Covid-19 hit Las Vegas. Condo prices are going up, and we predict at least high single-digit price appreciation in 2021.
Las Vegas condo hotels have appreciated by 2.1% in the past five years, trying to recover from the lows of 2020 due to Covid-19. We warned about this in Las Vegas condo-hotels hit hard by the COVID-19. However, they still are selling for less than they did in 2019, but pricing is recovering.
Cash flow from investing in residential Las Vegas high-rise condos
Several actors affect cash flow from investing in Las Vegas high-rise condominiums
1: Asking rent
2: Different towers provide for different cash flows, as do different floor models in the same building
4: Lease duration
5: Whether the unit is furnished or unfurnished
How unrealistic asking rent price destroys cash flow
Here are three 1523 square foot rental listings at Sky Las Vegas on the 38th floor and fortieth floors. They are pretty much the same.
The first listing rented for $2500 in 261 days, and the other two were leased for $2100 and $2150 in seven and eight days. Let's see how much rental income they provide in a year. The first one gets about $8000 in a year while the other two get $24,600 and $25,260. The first investor makes less than one-third of the other two, and who is to blame? The investor or his or her property manager. To avoid this situation, we always give a reasonable rental rate to our investors.
If you think that it is an isolated case, it is not. Check out unit 1212 at the Ogden. If you want to look for rentals here, you have to search for Streamline Tower, its formal name. This condominium was listed for rent for $2500 on 2/17/2021 and was leased ten days later for $2500 for a month. It was subsequently listed for $3600 per month on 3/20 with no action. Then these geniuses decided to raise the rent to $3900 on 5/17. We are astonished by what they are thinking. This unit will end up like our previous example. There is much more to Investing in Las Vegas high-rise condos than buying a unit and hiring a property manager. A knowledgeable investor or property manager wouldn’t make rookie mistakes like the above.
Factors influencing high-rise rental income
Let's discuss unfurnished condominiums leased for one year or more as a base so we can compare it with the ways of renting:
Unfurnished Residential high-rise condominiums that rent for a year return anywhere from 1.7% to 4%, depending on the tower and floor model. One reason for lower cash flow is extended vacancies caused by the Covid-19, which is abating.
Las Vegas condo towers do not offer the same cash flow. Some buildings provide less cap rate than others. The same is true for different floor plans in a tower. While condominium prices goes up with elevation and views, some floor plans do not rent as well as others. And the only way to know is to analyze rental income for different units to find out which. However, some smaller units may offer higher cash flow, but not universally. One has to know which, and it took more than a month of research for us to find out.
Upgrades affect the cash flow as well. Highly upgraded condominiums rent for more and in less time than non-upgraded counterparts. The best investment that an investor who owns units can make is to upgrade them. The return on investment for upgrades can be 20% or more, which means that you will get the money spent on upgrades in five years or less. You will be amazed at how many experienced real estate investors ignore this fact.
To make the point, we have picked units 3108 and 2908 at Sky Las Vegas. Both units were unfurnished and rented with a one-year lease on 12/31/2020.
Here are some pictures of living room, kitchen and bedroom for the unit 3108 at Sky Las Vegas which is a non-upgraded base model and has carpet everywhere except for wet areas. This unit was leased for a year for $2300 per month.
Unit 2908 is two floors down with the same views and should rent for as much or a little less than the above unit. The flooring is tile in the living areas and carpet in the bedrooms. Additionally, the owner has put wallpaper in the bedroom and has used custom paint in some selected areas. This unit was rented for $2700 or $400 more than the 3108, which adds at least one point to the cash flow. The biggest mistake that even expert investors make is failing to upgrade their units to the latest styles.
Minimum Rental period at Las Vegas high-rise towers
Different towers have different minimum rental periods. Here is the list of the minimum rental period at various high-rise condo towers.
Towers with a one-year minimum rental period:
Allure condo, One Queensridge, Regency Towers, Turnberry Place
Towers with a six months minimum rental period:
Newport Lofts, One Las Vegas unfurnished condominiums, Panorama Towers, Soho Lofts, The Martin, Veer Towers, and Waldorf Astoria at MGM City Center
Towers with a three months minimum rental period:
One Las Vegas for furnished units and Sky Las Vegas
Towers with one-month minimum rental period:
Metropolis and The Ogden: Nightly, but Clark County requires a business license for that. Most investors rent for a month
For example, Allure Condo's minimum rental period is one year. The majority of towers have a six month rental period. But Sky Las Vegas' minimum rental period is three months, as well as One Las Vegas for furnished units. The Ogden allows nightly rentals, but Clark County only allows monthly rentals, and if investors want to rent their units for shorter periods, they have to get a business license. Turnberry Towers HOA allows two rents per year. The lease duration is up to the unit owner.
In addition to rental periods, furnishing a unit affects the cash flow and we’ll discuss both henceforth.
Leasing unfurnished high-rise condos for a year or more:
The most common category of rentals offers the least cash flow. Cash flow from existing renters is at about 1.8% to 4.2% depending on the tower and floor plan
Leasing furnished high-rise condos for a year or more:
Investors can get $200-$300 more per month with a year's lease. The deal is that those who need to rent for a year or more usually have their furniture. And even if they don't, they can buy a set of decent furniture for $3500-$4000 to furnish the unit.
Leasing unfurnished units for six months:
Leasing unfurnished units get 150-$250 more per month than renting for a year.
Leasing furnished units for six months or more can get an additional $150-$200 from the non-furnished counterparts.
Unfurnished: This is the least desirable form of renting units. Transients usually do not have their furniture and either has to buy or rent them. These units have some of the most prolonged vacancies.
Leasing highly upgraded units short-term: Furnished Upgraded units for rent for three months provide for some of the highest cash flows, and the same rent for a month or less can fetch $1000 more than their non-furnished counterparts that rent for a year. Cash flows higher than 6% can be found here.
Cash flow from renting Las Vegas condo-hotels
While we know how much residential high-rise condos rent for, the expenses involved, and the vacancy rate, this information is unavailable about condo-hotels.
After the Great Recession of 2008-2011, condo-hotel companies have been forbidden from projecting income from their units. But as for future appreciation, it is an excellent time to buy these at a good discount until our economy fully recovers, and that is not too far into the future.
This good article in the Review Journal, Las Vegas Strip rooms listed on Airbnb, and without resort fees discusses in part about the difference between reserving a Las Vegas condo-hotel through the hotel and other sites like VRBO, we highly recommend that you read it.
Doing the required research for how to succeed at investing in Las Vegas high-rise condos took all my free time for about a month and a half, since the high-rise condo market is unlike the typical home and condo market. To calculate cash flow, one needs to know how much is the current price for each rented condo in our database. Doing so is increasingly tricky since most rental units have not sold recently. And it isn't easy to find an exact or close comparable unit which has sold recently to set a price for it.
Additionally, setting a suitable vacancy, is just as tricky since asking list price affects vacancy, and as we have shown, they are all over the place. The reason that we say estimated cash flow is that our findings should be used as a guidepost. For more detailed information contact us at 702-478-7800.
At any rate, now we know exactly where to go to find the units with the highest percentage of cash flow with a good shot at great future appreciation.
If you find the information in how to succeed at investing in Las Vegas high-rise condos useful, please like it and subscribe to our real estate channel for future videos.
This is Karen Saberzadeh of Las Vegas homes, condos and luxury high-rise condos wishing you a great day.