Long-Term Real Estate Looks Promising in Las Vegas
Internationally renowned as a resort city, Las Vegas is well known for its nightlife, casinos, shopping, and fine dining. Located on the Southern edge of Nevada, it is the commercial and cultural center of the state and the greater Mojave Desert region. It’s also the most populated, with over 641,000 residents as of 2020; the surrounding metropolitan area has a population of over 2,227,000.
Sometimes referred to as the Entertainment Capital of the World, the economy in Las Vegas relies heavily on tourism. The city is home to more AAA Five Diamond hotels than any other city on the globe, and annually ranks as one of the most visited tourist destinations. Famous for its plethora of casinos and hotels located on Fremont Street, the city is also a popular destination featured in films and literature. In addition to its large casinos and hotels, a variety of industries flourish in Las Vegas, including mining, natural resource technology, information technology, healthcare, and aerospace and defense.
As one of the most popular cities in the United States, it’s unsurprising that the real estate market in Las Vegas is extremely hot. In the last few years, the city and surrounding South Nevada area have seen record-breaking prices and homes that go off the market just as soon as they’re listed. The median home price in 2022 is $425,000, a price increase of almost 20% from the previous year. The start of the COVID-19 pandemic slowed real estate appreciation for only a short time. Once interest rates were federally lowered in order to stimulate the market, prices started skyrocketing. The median home price has increased so dramatically that investors are seeing profit margins drop on short-term investing methods. One of the biggest annual profit margin decreases in the second quarter of 2021 was in Las Vegas, dropping from 45.8% to just 30.5%, according to the U.S. Home sales Report by Attom Data Solutions. This doesn’t mean these investment options aren’t viable, but it does mean that other types of investments are starting to look more attractive.
Las Vegas investors are encouraged to consider strategies other than flipping, such as commercial investing, tax lien investing, REITs, and buy-and-hold real estate. Additionally, building a rental portfolio will help investors to take advantage of low interest rates. Purchasing a home now with low borrowing costs and low mortgage rates allows investors to make more profit from rental units over time. The price-to-rent ratio in Las Vegas currently favors property owners at around 18.22; the median rent in Las Vegas is now over $1,500. As home prices continue to rise, more consumers will opt to rent, in turn driving up the rental demand. Investing in a condo or a single-family rental home may be the most promising option for Vegas investors this year.
Looking to the future, price increases in the area of Las Vegas are not expected to slow any time soon. The housing supply is extremely scarce, with an average of 6 weeks of supply on the market, and houses selling in less than 2 weeks from their listing date. The housing inventory has some catching up to do if we are to see appreciation slowing in this city. In addition to the scarce inventory, Vegas is seeing more out-of-state buyers since the beginning of the pandemic, as well as general population growth in all of Clark County. Many residents from nearby big cities like Los Angeles and Phoenix are turning to Las Vegas for its relative affordability and lack of state income tax. The job market in Las Vegas is expanding to accommodate this population growth, with the most quickly growing industries being trade and transportation, hospitality, and information and communication technology.
In sum, investing in Las Vegas is promising as the city experiences continued growth and real estate appreciation, and increasingly high price-to-rent ratios. Investors may want to turn to long-term investment strategies to maximize profits in the following years.
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