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Vegas Rental Market Is In Trouble... Saturation Point?


By JonSilence   Follow   Sun, 5 Feb 2012, 2:24am PST   35,270 views   86 comments
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I bought a 3br/2ba/pool home in the Summerlin area of Las Vegas in Feb of 2011 for $134k, as an investment/rental. The first tenant skipped out after 2 months, stiffing me for $800. Next tenant only wanted a six month lease, but did pay their rent on time. They vacated on Dec. 31, and since then the home has been on the market---over one month at this point---without even ONE rental applicant. I just received the following from my property manager:

"We know you are concerned about how long it is taking to rent your property. We are very concerned as well because we do not want our customers unhappy and just like you we do not make any money on a vacant property...the single family home market has drastically slowed down because of the influx of all the new properties put on by the investors. I have been tracking this for some time now. Listed below are the records showing this trend.

Currently there are 6,614 properties on the market for rent.

-30 days ago in January alone there were 2,799 added and in January only 414 rented.

-60 days ago in December 1,389 properties were added and 969 were rented.

-90 days ago in November 1,019 were added and 479 properties were rented.

-120 days ago in October 591 were added and 2,219 were rented.

-160 days ago in September 396 were added and there were 3,158 properties that rented.

In short, what this means is that we are having much more properties being added (due to investors) every month and fewer properties are being rented
(due to the holiday months)." (end quote)

With the glut of rental properties on the market competing for tenants, we are now seeing rent wars with prices aggressively being dropped. I've had to reduce my asking price by almost $200 with the hope of getting a tenant and am still waiting for one as I go out of pocket to cover my mortgage and other costs for the second month in a row. In less than one year, my property has been on the market three times.

Right now its looking like Vegas is a BUST.

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LASVEGASWINNER   Tue, 7 Feb 2012, 8:21pm PST   Share   Quote   Permalink   Like (1)   Dislike (3)     Comment 47

bob2356 says

LASVEGASWINNER says

My rental houses are now spinning off positive cash flow that gives me a nice, tax-free income.

Tax free? That's a neat trick, I have to pay taxes on the income from my rentals. Putting it into a numbered account overseas are we?

Depreciation of the house plus accelerated depreciation of equipment does the trick, plus I am" forced" for a check up visit to my properties every couple of months, meaning airfare, hotel and meals are part of deductible business expense.

zzyzzx   Wed, 8 Feb 2012, 11:23pm PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 48

Obligatory Hitler video about Las Vegas:

&feature=player_embedded

bob2356   Thu, 9 Feb 2012, 12:36am PST   Share   Quote   Permalink   Like   Dislike     Comment 49

LASVEGASWINNER says

bob2356 says

LASVEGASWINNER says

My rental houses are now spinning off positive cash flow that gives me a nice, tax-free income.

Tax free? That's a neat trick, I have to pay taxes on the income from my rentals. Putting it into a numbered account overseas are we?

Depreciation of the house plus accelerated depreciation of equipment does the trick, plus I am" forced" for a check up visit to my properties every couple of months, meaning airfare, hotel and meals are part of deductible business expense.

BUYERS AGENT LAS VEGAS BANK-OWNED HOMES

What equipment for a rental property? This isn't europe where you can depreciate the chattels on a separate schedule from the building. I don't come anywhere close to offsetting the rental income with depreciation. Sounds like some pretty creative accounting to me.

I don't consider taking thousands of dollars out of the rental income for trips to vegas then deducting 25 cents on the dollar tax free income unless you were going to vegas anyway and are looking to get 25% off.

David Cooper   Thu, 9 Feb 2012, 2:19am PST   Share   Quote   Permalink   Like   Dislike     Comment 50

.
Not every part of your rental property is real estate. You have a host of other pieces of property that aren’t real estate, and those can be depreciated over a much shorter period of time. Plus, there is one provision of the tax law that allows you to deduct a huge portion and possibly the entire cost of some property you would normally depreciate in one year.

Look at the depreciation schedule below taken from Internal Revenue Service instructions.

Refrigerators, ranges, dishwashers, carpeting, furniture – 5 years

Land improvements (sidewalks, fences, landscaping shrubbery, septic systems, water pipes) – 15 years

Computers and peripherals – 5 years

Typewriters, adding machines, copiers – 5 years

Automobiles and trucks under 13,000 lbs. – 5 years

Office furniture (desks, chairs, file cabinets, etc.) – 7 years

Residential rental property building – 27.5 years

Non-residential rental property – 39 years

You are allowed by law to separate all of these pieces of property from the value of the building and depreciate them individually on IRS Form 4562. As we will see later, that can make or save you thousands of dollars a year on your taxes

FaithInHim   Thu, 9 Feb 2012, 2:40am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 51

Johnsilence brought up a topic that no one wants to talk about. Yes, the rental markets are at their saturation point. When jobs decrease, the renter pool decrease because they cant afford to rent or do not have good credit to rent.

Here are some figures you may want to look at to give you a feel of what is going on.

Below is a website of an article from 1975. Its an interesting read because history repeats itself.
http://news.google.com/newspapers?nid=1755&dat=19750907&id=nv8jAAAAIBAJ&sjid=K2cEAAAAIBAJ&pg=7165,2787945

Here is some data on the new construction of single and multifamily units. Keep this in mind, if the rental market is so great, then there should be a jump in units built.

http://www.census.gov/briefrm/esbr/www/esbr020.html

Here is some data on the vacancy rates. Im basing this data on the timeframe that you stated your rental property was vacant. According to table 9, in 2rd quarter of 2011, 3 bedroom vacancies in the West made up 18.6% of the vacancies, and in the 3rd quarter 2011, they increased to 21.1% of the vacancies.

http://www.census.gov/hhes/www/housing/hvs/prevqtrs.html

To the crowd that is saying its Johnsilence fault, I have one thing to say: We can all say you should have, could have, would have. But in the end, no one can predict the future. The bible says that gold and silver cankers and money makes wings for itself. So if anyone of you think that your living lofty, your dead wrong. Any investment vehicle can fail. Any savings can dry up. Any crop can fail due to lack of rain. Judge not, lest you be judge.

REpro   Thu, 9 Feb 2012, 6:05am PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 52

When vacancy is high, tenants immediately takes advantage of situation by moving from one fresh clean apartment to another living left unit trashed and unpaid last rent.

“An Era of Abandonment: New York City in the 1970s
and the Use of City-Owned Properties for Affordable
Housing Development.
Although it is hard to believe during today’s thriving
real estate market, New York City faced a surge in
disinvestments and housing abandonment just over
thirty years ago. Significant housing abandonment
began around 1963, and peaked in the 1970s. Between
1970 and 1978, the city’s housing inventory fell by
nearly 320,000 units.3 During those years, dramatic
increases in heating oil prices pushed the overall
operating costs of apartment buildings beyond the
possible rent revenue in certain areas of the city.4 As a
result, many building owners deferred maintenance
and services, leading to physical and financial decline
and, in some cases, the inability to pay property taxes.” Manhattan Borough President
Scott M. Stringer

JonSilence   Mon, 13 Feb 2012, 1:25am PST   Share   Quote   Permalink   Like   Dislike     Comment 53

I am the original poster of this topic. The home is 3br 2ba with a pool, just under 1200 sq ft, near Anasazi & Summerlin Parkway in Summerlin. Last year in Feb of 2011 the home went on the rental market at $1450 and was leased quickly via a prop mgmt company. After being vacant since Jan. 1 of 2012, I've dropped the price to $1290 and still no takers as of this writing.

JonSilence   Mon, 13 Feb 2012, 1:38am PST   Share   Quote   Permalink   Like   Dislike     Comment 54

LasVegasWinner: I appreciate your insights from long term experience in LV. When you say "investors are coming from all over the world", I assume you are referring to the influx of those who are buying rental properties, correct? If so, as a result, aren't we now seeing a glut of such properties on the rental market, resulting in competition for renters and price wars to get them? I'm curious: Of all the properties you own in LV, how many are handled by property management companies? What has your track record been with regard to tenants, vacanicies, etc.? I've had my property less than a year, am going on my third tenant, and third month out of pocket. Thus far, not my idea of a good investment.

dodgerfanjohn   Mon, 13 Feb 2012, 1:53am PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 55

A LOT of people overestimate what their properties will rent or sell for. Its like and emotional block where they can't see what is actually going on. Hence the listings that pop up at bubble prices.

Just recently on another real estate board, a recent purchaser posted about how he could rent out for more than his morgage was. I looked where he bought in LA. The area is miserably over priced. Theres basically no way he could rent out and be cash flow even unless he had put 50% down. I think he believes he could command $3500/mo because his place is nice and well located. Truth is, he gets $2500-2700 on a good day.

I commend Jonsilence for posting this. All I have to add is that due to the low cost nature of Las Vegas, you might take a shave, but it won't be a tremendous shave. I know people that lost EVERYTHING in the stock market. Losing 10-20% happens and really isn't anything to be ashamed of if you decide to sell. Obv you'd lose much less if you're able to rent it relatively soon.

zzyzzx   Mon, 13 Feb 2012, 1:58am PST   Share   Quote   Permalink   Like   Dislike     Comment 56

JonSilence says

I've dropped the price to $1290 and still no takers as of this writing.

Clearly you are still asking for too much money. I wouldn't pay that much to live in the Baltimore-DC area, much less Vegas.

toothfairy   Mon, 13 Feb 2012, 6:05am PST   Share   Quote   Permalink   Like   Dislike     Comment 57

JonSilence says

After being vacant since Jan. 1 of 2012, I've dropped the price to $1290 and still no takers as of this writing.

here's a 3br for only $1k. is it nicer than this?

http://www.trulia.com/rental/3075115183-10677-Windrose-Point-Ave-Las-Vegas-NV-89144

JonSilence   Mon, 13 Feb 2012, 2:36pm PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 58

toothfairy asks:

"here's a 3br for only $1k. is it nicer than this?"

http://www.trulia.com/rental/3075115183-10677-Windrose-Point-Ave-Las-Vegas-NV-89144

Mine has a pool and is in what appears to be a nicer neighborhood. Are those things worth an extra $250 per month? I guess the market will tell me....

KILLERJANE   Mon, 13 Feb 2012, 4:00pm PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 59

After being vacant since Jan. 1 of 2012, I've dropped the price to $1290 and still no takers as of this writing.

3/2 summerlin rent for 895 to 1150. Don't be greedy or foolish.

LASVEGASWINNER   Mon, 13 Feb 2012, 4:50pm PST   Share   Quote   Permalink   Like   Dislike (2)     Comment 60

JonSilence says

LasVegasWinner: I appreciate your insights from long term experience in LV. When you say "investors are coming from all over the world", I assume you are referring to the influx of those who are buying rental properties, correct? If so, as a result, aren't we now seeing a glut of such properties on the rental market, resulting in competition for renters and price wars to get them? I'm curious: Of all the properties you own in LV, how many are handled by property management companies? What has your track record been with regard to tenants, vacanicies, etc.? I've had my property less than a year, am going on my third tenant, and third month out of pocket. Thus far, not my idea of a good investment.

There is a glut in the small 1200-1500 sq ft 3+2, the ones that sell for $60,000 to $90,000, but are not in good areas. Location is the key, as always. Been a rental house landlord since 1994. Everything with property manager. I search for market rent, list i there and then start dropping $25 every week after first 2 weeks.. Average vacancy 45 DAYS

Monkeyswing   Mon, 13 Feb 2012, 4:52pm PST   Share   Quote   Permalink   Like   Dislike     Comment 61

Hey, I live and work in Vegas. A friend of mine just rented a really nice 3/2 in Summerlin with a pool for 1,100/mo. Had plenty to choose from. Good luck!

zzyzzx   Mon, 13 Feb 2012, 11:32pm PST   Share   Quote   Permalink   Like   Dislike     Comment 62

JonSilence says

Mine has a pool and is in what appears to be a nicer neighborhood. Are those things worth an extra $250 per month? I guess the market will tell me....

Seems to me that the market already has.

bubblesitter   Tue, 14 Feb 2012, 3:30am PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 63

If it does not sell then the price is higher then recent comp sales,if it does not rent then the rent is higher then current comp rents.

generallyfd   Tue, 14 Feb 2012, 6:08am PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 64

I maintain my earlier question about there being an investor real estate bubble.

While it's true that every house will sell... eventually... it's not quite as simple with rentals.

When you sell, you don't care who buys it, but when you rent, you definitely should care who you're renting to. As you're forced to lower the price, you begin to attract more of the people you don't want to rent to.

Buy a house to live in it.

JonSilence   Wed, 15 Feb 2012, 4:43am PST   Share   Quote   Permalink   Like   Dislike     Comment 65

Thanks to everyone here for your input & insights. Good News and BAD news: Good News--Looks like I have found a tenant for my Summerlin property at $1225 per month, down $225 from the $1450 I was getting through all of 2011. BAD NEWS: My LV property manager has been doing research and says that 21 rental properties came onto the market last year from Feb 1-14 2011, compared to the 1,440 that have come onto the market Feb 1-14 this year in 2012. That's over 65 times MORE rental properties on the market today than a year ago. She says that indicators are that we have not hit bottom and that its going to get worse...
W T F ???? :(

generallyfd   Wed, 15 Feb 2012, 6:56am PST   Share   Quote   Permalink   Like   Dislike     Comment 66

Renters tend to be nomadic. We have to be. Without a lease, WE could be given 30 days notice at any time. The positive to that is we can do the same.

As such, we're also less tied to a particular neighborhood. School continuity for kids is nice, but if you can't afford it, you can't afford it. Faced with moving, we have multitudes of options, and we can move far, far easier than an "owner".

If the world was filled with nothing but investor-owned properties, there would always be a lot of homes on the market to choose from. Renters only have trouble in low turnover markets, which tend to have fewer rentals.

So while I still think it's a bubble, the bigger it gets, the easier it should actually become for renters. When everybody dumps their listings on Craigslist at once, it's for sure a buyers market!

toothfairy   Wed, 15 Feb 2012, 7:03am PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 67

it sounds like you need some more due diligence. Call me paranoid but I dont trust what anyone tells me regarding the real estate market. I need to see things with my own eyes because It seems like everyone involved has some type of agenda.

chzwiz   Mon, 19 Mar 2012, 7:59pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 68

@lasvegaswinner, You are full of it. I live here. Saw your chart on housing median prices. Guess what? Recent spike is due to AB284 restricting robo signing. It has backed up the foreclosure process. When all of those REOs hit the market later this year your chart is going to look a lot different. I expect about a 10% to 15% drop in 2012. Then after the elections I expect a recession in 2013 and 2014. Interest rates will probably go up at the same time. I have no idea how big of a drop we will see then. I do predict that everyone in Vegas will be underwater, not just the current 85%.

Jon is in a good area. The entire real estate market is in a death spiral. Cut your losses and sell sell sell!

bgamall4   Mon, 19 Mar 2012, 11:08pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 69

JonSilence says

Right now its looking like Vegas is a BUST.

Actually Vegas is a win for renters. This is what is going to happen. Corporations will buy up the empties for pennies on the dollar and perhaps you will have even less of an opportunity to compete. That is a function of not being an insider and wages declining.

The decline in wages must be reflected in rents or families will have to double up. That makes it even worse for landlords.

I sympathize with you but there are forces at work.

bgamall4   Mon, 19 Mar 2012, 11:11pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 70

KILLERJANE says

The sky is not falling,

It could be.

bgamall4   Mon, 19 Mar 2012, 11:12pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 71

JonSilence says

I am the original poster of this topic. The home is 3br 2ba with a pool, just under 1200 sq ft, near Anasazi & Summerlin Parkway in Summerlin.

Nice area, ridiculous price for such a small home.

APOCALYPSEFUCKisShostikovitch   Tue, 20 Mar 2012, 1:03am PDT   Share   Quote   Permalink   Like (2)   Dislike     Comment 72

Hahahahahahahahahahahahahahahahahahahaha! Typical Realtor® scum sucking mendacity. A deduction is not equivalent to tax-free income, you reptilian psychopath. What's happened? Did you sell your mom's second kidney and decided the only scummier way to make a buck was to sell worthless properties to people who will be trapped in Cannibal Anarchy ground zero? Do you get a charge out of eating kids' pets in front of their families?

LASVEGASWINNER says

forced" for a check up visit to my properties every couple of months, meaning airfare, hotel and meals are part of deductible business expense.

LASVEGASWINNER   Tue, 20 Mar 2012, 2:29am PDT   Share   Quote   Permalink   Like   Dislike (3)     Comment 73

It's sure hard to use logic with all the emotional "doom and gloom" but the FACTS are that Feb 2012 sales in Las Vegas were almost 4000 homes, putting it as one of the best Feb in Las Vegas sales history.
50% of the sales are to Investors, and they are coming form all over the world.
I must assume that a lot more people with money feel good things are going to happen in Vegas.

bmwman91   Tue, 20 Mar 2012, 2:48am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 74

LASVEGASWINNER says

I must assume that a lot more people with money feel good things are going to happen...

One must be careful with this though. This exact thought process was prevalent in 2006. "Buy RE, you CAN"T lose. Everyone is doing it, so it is obviously safe!" If one gets in early enough, good things can often happen. At this stage in the game though, it just seems like a stampede of the herd. I am willing to accept that I could be wrong here, but it makes almost no sense to me to be buying up properties with the intention of renting them out when everyone has been doing the same for years, and knowing that large institutional investors will likely be flooding the market with even cheaper rentals since they will pay considerably less for properties than the little folks.

To whom will all of these properties be rented to? Increasing the supply of a rentals with a fixed supply of renters only seems like a recipe for...well, it is pretty obvious at this point.

bubblesitter   Tue, 20 Mar 2012, 2:55am PDT   Share   Quote   Permalink   Like   Dislike     Comment 75

LASVEGASWINNER says

50% of the sales are to Investors, and they are coming form all over the world.

I guess all of them must be cannibal anarchists.

freak80   Tue, 20 Mar 2012, 3:11am PDT   Share   Quote   Permalink   Like   Dislike     Comment 76

Get rich quick! Halelujah Jeeeezzzzuus.

bmwman91   Tue, 20 Mar 2012, 3:14am PDT   Share   Quote   Permalink   Like (2)   Dislike     Comment 77

wthrfrk80 says

Get rich quick! Halelujah Jeeeezzzzuus.

I love the parable of the poor fool that didn't buy when the Nazarean market was HOT and was destined to be priced out forever. Thankfully, the Savior came and bumped the conforming loan limit back up for him, thus providing the poor fool the ability to put 3.5% down on his dream house, and give thanks by paying interest to the Almighty for the remainder of his corporeal life. So heartwarming!

freak80   Tue, 20 Mar 2012, 3:36am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 78

Jesus loves Ninja Loans!

thunderlips11   Tue, 20 Mar 2012, 5:08am PDT   Share   Quote   Permalink   Like   Dislike     Comment 79

wthrfrk80 says

Get rich quick! Halelujah Jeeeezzzzuus.

I's prayed to Jesus and gave $500 to his Minister. Jeesus is giving me my hundred-fold Increase thanks to this fixer upper I just found! Now, Lord, please send me a gay couple as renters so they'll fix the place up for free, In Jesus' name, Amen!

bgamall4   Tue, 20 Mar 2012, 6:28am PDT   Share   Quote   Permalink   Like   Dislike     Comment 80

LASVEGASWINNER says

50% of the sales are to Investors, and they are coming form all over the world.

True, many Chinese investors with the ability to undercut all you small investors on rental prices.

everything   Tue, 20 Mar 2012, 9:02am PDT   Share   Quote   Permalink   Like   Dislike     Comment 81

So much for rents going up, go ahead and raise them, I'll just get a room mate, or efficiency to defer costs. I'm seeing more rentals going up around me as well, they might have to start re-converting the condo's back into rentals again because they are piling up fast. Now imagine you bought a condo, and now your condoplex is turning into a rentalplex, real nice. Property management business is going to be booming for years.

waiting_for_the_fall   Wed, 21 Mar 2012, 2:00pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 82

This reminds me of when everyone was buying Las Vegas homes for 150k back in 2003. People were buying 5 to 10 homes at a time. It was crazy!

After buying, the homes were rented out while waiting for prices to go up. Are all these investors thinking they will hit it big when the price of LV homes go up in a few years and they sell at a profit? Not all the investors are in it for the long term. They are looking for quick profit.

What happens when there are so many rentals, the rent price drops to half the cost of the mortgage?

elliemae   Wed, 21 Mar 2012, 2:19pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 83

waiting_for_the_fall says

What happens when there are so many rentals, the rent price drops to half the cost of the mortgage?

It'll never happen. NOW is the time to buy! Hurry, hurry!

Vegas has changed so much over the past ten years. It's a shithole with a few nice areas thrown in.

http://www.lasvegassun.com/news/2012/mar/21/police-identify-intruder-shot-summerlin/

Well, so much for the nicer areas...

APOCALYPSEFUCKisShostikovitch   Sun, 25 Mar 2012, 11:11pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 84

DIE! DIE! DIE! YOU SCUM-SUCKING, PATRONIZING PIECE OF FUCKING SHIT!

Pointing out that a deduction is not equivalent to tax-free income is not emotion. You know that. I know that. The camel's asshole you crawled out of and call mother knows that.

The alleged facts you point to are complete fabrications of scum-sucking gangster fucks like you who retired from arson, cooking meth and selling children into lives of prostitution and became Realtors® who are trying to sell their own flips to credulous suckers.

Justice is on the way, fuckface. When cannibal anarchy reigns, it's grinning freaks like you who'll be dismembered and eaten to the applause of your neighbors.

LASVEGASWINNER says

It's sure hard to use logic with all the emotional "doom and gloom" but the FACTS are that Feb 2012 sales in Las Vegas were almost 4000 homes, putting it as one of the best Feb in Las Vegas sales history.

50% of the sales are to Investors, and they are coming form all over the world.

I must assume that a lot more people with money feel good things are going to happen in Vegas.

PROFEESIONAL BUYERS AGENT - INVESTOR - SALES ASSOCIATE - PROPERTY MANAGER 35 years experience

StoutFiles   Mon, 26 Mar 2012, 12:07am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 85

LASVEGASWINNER says

but the FACTS

Hey, could we talk about the fact that Vegas is quickly running out of water? You know, since we're talking about facts and all.

Must be fun trying to sell homes in a desert hellhole.

JohnJohn24   Mon, 26 Mar 2012, 2:05am PDT   Share   Quote   Permalink   Like   Dislike     Comment 86

It would seem that high energy costs would also place a cap on any major growth in these markets. Sure, your mortgage payment might be low but you might spend the same amount on fueling your car and cooling your home. When incomes are based on service sector work these little changes do matter.

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