I began investing in Las Vegas real estate only months before the economic recession hit. My investment properties were originally intended for use as house flipping; a practice I had been successful with in California and Washington. Once the banks started collapsing, the real estate market came to a screeching halt and I was stuck with two Vegas houses in the midst of repair.The only way to break even with the Las Vegas real estate was to complete repairs and offer the houses as rentals. The first year was a nightmare. It took months to locate suitable tenants and neither was willing to pay the amount I needed. I had to decide if I was willing to take a financial loss or hope to find tenants who could afford the rental rate. I chose to accept less and hope for the best.
Three years later, I am still incurring a loss on the Vegas homes. At the time I was fortunate enough to buy those properties with cash and have been able to retain tenants who pay their rent on time. Additionally, I have a diversified portfolio of properties located along the West Coast which help offset losses. Otherwise, there is a strong probability I’d be facing foreclosure.
Currently, Las Vegas is a tough market to generate positive cash flow through real estate investments. However, if investors can afford to buy houses with cash and consistently retain good tenants, they can generate positive cash flow until market conditions change.
A recent report published by DataQuick Information Systems claims investors were responsible for nearly 50 percent of Las Vegas home sales in December 2010. The report also states that 51 percent of investment properties were purchased with cash.
Buying houses with cash can be beneficial on two levels. First, investors do not have a mortgage payment. Second, investors can often obtain reduced pricing for cash offers. I have found that banks love cash sales because it reduces the time required for closing. It is not uncommon to shave upward of 20 percent off the asking price of bank foreclosures by offering cash.
Many of the properties listed for sale in Las Vegas have been on the market for 12 months or longer. A large percentage are foreclosure homes that banks need to remove from their books. One strategy that investors should try to capitalize on is scouting out properties that qualify for grants offered through HUD’s Neighborhood Stabilization Program (NSP).
Applying for NSP grants is a tedious process, but it can be worth the time and effort. Each year, the government sets aside funds for every state. A report published by HUD shows Nevada receives approximately $70 million in NSP funds. Qualified applicants can receive discounts of up to 20 percent off the purchase price. Better yet, investors can receive up to five NSP grants if properties qualify.
The catch to obtaining NSP grants is that properties must be bank owned. That shouldn’t be a hindrance because there are thousands of bank foreclosures listed for sale in Clark County. Investors should apply as quickly as possible before allocated funds run out.
If rehabilitating foreclosure homes isn’t your strong suit, there are other opportunities to buy Las Vegas real estate below market value. Overall, Vegas has witnessed property value declines of over 40 percent since 2008, so there is an abundance of cheap homes for sale in Sin City.
If anyone were to ask if I’d buy additional investment properties in Las Vegas, my answer would be a resounding “Yes!” There are plenty of great deals in this area. Investors can offer homes as vacation rentals, Section 8 housing, rental homes, or offer seller-financing strategies to the thousands of homeowners who have lost their house to foreclosure.
Before investing money in Las Vegas real estate it is crucial to become familiar with the area and available properties. Consider working with a real estate agent who can provide comparable sales reports and advise on locations with anticipated growth. Last, but not least, keep bank owned foreclosures and short sale real estate at the top of the list as distressed properties are typically priced well below market value.