Rental

Where to Invest Now: The Las Vegas Rental Market

Las Vegas’s Housing Market is On Fire

The Las Vegas rental market is currently one of the hottest in the country, showing signs of strength despite the hit that the hospitality and tourism industry has taken in the last 12 months.

Even though a global pandemic ravaged the city’s hospitality industry, housing demand is high, rental occupancy has increased, and construction permits have skyrocketed. If you’re wondering where to buy an investment property, real estate experts would tell you Las Vegas is the place.

Las Vegas Real Estate Market:

• Rental occupancy increased from 94.4% to 95.8% YOY.
• Average monthly rent jumped to $1,196 a month, a 6.7% YOY increase.
• From February 2020 through February 2021, multifamily permits rose 67% while single-family permits rose 7%.
• Median prices for single-family homes soared to $383,000.
• Median days on the market: 30, a 33% decrease YOY.
• Housing inventory: 0.5 months

Median home prices for single family homes in the Las Vegas area were up 12.3% in February compared with a year earlier, according to Las Vegas Realtors.

Las Vegas is experiencing increasing rental prices and record-low rental vacancy rates – despite the city’s unemployment rate that is much higher than the national average due to the impact of shutdowns on its tourist-centric economy. It’s a positive sign for real estate investors in the area as it demonstrates a growing demand for rental properties.

Nationally, build-to-rent single family properties increased 27% from 2019 to 2020. Las Vegas is one of the biggest build-to-rent markets in the nation and is ranked 14th in metros with the most single-family rentals. Nationally, Las Vegas is the hottest housing investment right now. It is ranked as the No. 1 real estate housing investment recommendation, and it’s a real estate investment strategy that fits Las Vegas like a glove.

Las Vegas is also a great market for fix-and-flip investors. In Q4 of 2020, 5% of all Las Vegas area sales were flipped. A typical flip in Vegas took 148 days compared to the national average of 176. Fix-and-flip investors made a healthy profit of $65,000 – an increase from $27,300 a year ago.

Josh Craig, Chief Revenue Officer at Lima One Capital, said he was surprised by the tenacity of the Las Vegas market. Craig said that the continued growth shows “how bullish everyone is on the pandemic coming to an end quickly” and reverting to pre-COVID norms. Craig added that Las Vegas being the most over-valued market in the country isn’t a surprise.

Impact of COVID on Tourism and Hospitality

Often referred to as Sin City, Las Vegas is known for its colorful history, often including tales of gangsters, notorious casinos, and some of Hollywood’s most famous actors. That same history has allowed Las Vegas to build an economy driven by the tourism and hospitality industry.

When COVID-19 struck Las Vegas and its surrounding cities, the tourism and hospitality industry came to a screeching halt. Tourists generate billions of dollars for the city, so when traveling was put on hold and casinos, museums and restaurants had to close their doors, that money stopped coming in.

In February 2020, the city’s unemployment rate was 3.9%. By April, it had shot up to 34%. When casinos and other businesses reopened in June, the unemployment rate had fallen to 18%. The economic uncertainty and massive job losses directly affected the Vegas housing market as well.

Home sales dropped sharply in April 2020 compared to March. Construction projects were canceled or postponed indefinitely. Lenders across the country put a halt on rental property loans, and investors stopped actively looking for investment properties in Las Vegas.

Despite all the problems COVID caused, Las Vegas real estate housing market didn’t collapse, instead declining only for the short term. Las Vegas has experienced several economic booms in its history, and it saw an incredible real estate bust during the Great Recession of 2008. All signs so far show the Las Vegas real estate market having the strength to bounce back from the pandemic quickly, which is why so many investors are betting big right now.

A Tight Inventory

The Las Vegas housing market is sizzling. Home sales are already higher than they were last year, and prices are setting new records. The city’s housing inventory is declining each month and can’t meet buyers’ demands. The Southern Nevada real estate market has been on a months’ long hot streak and just keeps accelerating despite COVID-19. Homes in Vegas are selling faster than they were a year ago, and prices are setting record highs.

In January, nearly 81% of single-family homes and 76% of condos and townhouses sold within 60 days. Compare that to January 2020, when 69% of single-family homes and 66% of condos and townhouses sold within 60 days. As inventory continues to dwindle, buyers are looking to homebuilders for help. Many Vegas builders have been putting buyers on waiting lists and even taking bids for available lots.

Vegas’ real estate market is also feeling pressure from people flocking to the city to escape higher-priced areas like Southern California. It’s a familiar trend for Las Vegas, but the pandemic has accelerated it – contributing to the highest pace for home sales in the area in 14 years. According to Nevada Census data, the state will likely see a 1.51% increase in population between 2020 and 2025, as well as a 1.46% increase in median income in that same time frame. Las Vegas is expected to add over 400,000 new residents by 2030. These factors will lead to less supply and will help keep the single-family housing prices strong.

With a housing inventory that barely covers a month, Las Vegas’ housing inventory will deplete faster if people continue looking for houses to rent or homes to purchase at such a high rate in Las Vegas.

Looking Forward

While Las Vegas is most known for its gambling and entertainment, the city is seeing growth in other industries. Several companies have relocated to Las Vegas from other cities, and it’s becoming a popular place for startups. Home to the University of Las Vegas and online shoe retailer Zappos, Las Vegas is a business-friendly environment that is propping up the economy and helping the positive real estate trends.

Experts are still waiting to see what the Las Vegas tourism and hospitality industry will look like as it recovers from COVID’s impact. The city was able to survive the temporary closure of casinos and resorts, but experts are concerned that further delays to full capacity could have lasting impacts on the local economy. Las Vegas presents several opportunities for investors with its growing population, business growth, and strong housing demand.

While inventory might be harder to find, investors with strong real estate investment strategies can still profit. It’s more important than ever to have a lender capable of helping you:

• Secure a loan with the best price and maximum leverage for your next rental investment
• Close properties quickly and certainly
• Run your construction or rehab projects smoothly

Lima One Capital offers that and much more for real estate investors. We are experts in financing rental properties and portfolios. Our team of experienced professionals will help guide you through our rental loan programs regardless of your experience level and help you purchase, refinance, or cash out individual rental properties, as well as entire portfolios. Get started today and scale your rental property portfolio with Lima One, the nation’s premier lender for real estate investors.