Should You Buy Rental Property in Las Vegas or Memphis in 2017? The Investment Property Showdown


On this first episode of the Investment Property Showdown, we are talking to two of the best property

managers in the country. They have gone through all the trials and errors of starting a property

management company, and they have grown their businesses successfully. Today, we’re talking about

why an investor should choose Las Vegas or Memphis to buy and hold investment property.

Douglas Skipworth is with CrestCore Realty in Memphis, and George Trombley is with Blackbird Realty in

Las Vegas. By the end of this discussion, you can decide whether you’d rather invest in Memphis or Las

Vegas. Or maybe both.

 

Why Should Real Estate Investors Buy in Memphis?

Memphis is economically stable. There is consistent growth in the region, and it’s a solid rental market.

The rent to price ratio is the best in the nation. You can get more bang for your buck when you buy

investment property in Memphis. We have big companies like Fed Ex in town, and there’s a steady

demand for quality rental houses. You can get a lot of house for your money, and bring in big rent

compared to your purchase price.

 

Why Should Investors Buy Real Estate in Las Vegas?

A few years back, Las Vegas was the foreclosure capital of the world, so many houses got dumped into

the rental market. Houses that were once worth $400,000 were suddenly available for $80,000. The

market is coming back in Las Vegas, but there are still a lot of great deals. Vegas as a lot of conventions

and the people who live here service those conventions. Vegas also just picked up a hockey team

franchise and there might be an NFL football team coming as well. A lot more business is coming to

Vegas, making this an outstanding investor market.

 

What is the Magic Number to Leverage Cash for an Investment? How Much Needs to be Put Down, and What is the Median Home Price?

In Las Vegas, the down payment for an investor is about 20 percent. That’s probably the minimum. The

more you can put down, the better off you’ll be. The median home price in Las Vegas is between

$212,000 and $215,000. Houses in that range fall into a seller’s market. Those don’t stay on the market

very long because they’re so desirable to investors. There’s a lot of bidding going on because those are

the houses that most people buy. They are three bedrooms, two bathrooms, two car garage properties

in a nice neighborhood and sometimes a gated community.

 

In Memphis, the median home price is just shy of $150,000. So as an investor, you can be conservative

and pay in all cash, which many people do. Or, you can put down about 50 percent to leverage your

investment. If you really want to goose it work towards cash on cash, we see people go in with less than

25 percent down. Memphis has some lenders who are helping people buy with zero to 20 percent

down, which is lower than traditional mortgage requirements.

 

What is the Appreciation Forecast in Memphis and Las Vegas? What Do You See in the Next 5 Years?

In Memphis, we have two markets. The suburbs are a seller’s market and there’s a lot of new

construction and growth. You’ll have about three to five percent appreciation in those houses over five

years, on average. In the city, where the properties are older and the neighborhoods are more

traditional, it’s more of a buyer’s market. The rent to price ratio is excellent, but there’s less

appreciation. The growth happens slowly and steadily.

 

In Las Vegas, it’s hard to forecast five years out. In this market, we look at appreciation by zip code. For

example, there’s a very popular development called Mountain’s Edge. The appreciation there has been

over 10 percent. North of town, which was traditionally a terrible place to be, is also seeing higher

appreciation rates because everything there is new and people are starting to gravitate that way.

There’s also a beltway running through the area and it’s close to the air force base. So there are a lot of

military people who buy a house and live there for a few years and then turn it into a rental. Henderson

is the largest city in Nevada when we measure the amount of land it occupies. It’s become a desirable

place to buy rental properties. So it’s hard to say that this market appreciates at a specific rate because

we have pockets all over the market that are higher or lower.

 

What is the Formula for Success when Investors want the Best ROI? Specifically, what Type of Property, what Location, and How Much Down?

For the Las Vegas investor, the formula is a single-family home in the $200,000 to $250,000 range. Try to

find a house that’s not in an HOA because tenants like to rent there better. They can be really intrusive

and tenants don’t like to receive letters about trash bins being left outside too long. Investors should

plan to make a down payment of about 20 percent, and you want to have a great property manager.

 

The Memphis investor should look at either the city or suburban market. In the city, an older house will

only cost about $50,000, and you’ll earn about $800 in rent. On the flip side, there’s new construction in

the suburbs where you’ll pay between $125,000 and $150,000. With those properties, you’ll earn over a

thousand dollars a month, even up to $1,700. You can put down 20 or 25 percent to get more

appreciation initially. We also recommend single family homes, or a small apartment or duplex.

 

Final Thoughts: What is Your Most Important Advice for New Investors?

In Las Vegas, the most important thing an investor can do is to pick a property manager who spends

more time on management than on sales. If you have a house for rent and your property manager is too

busy showing homes to potential buyers in order to get a higher commission, your house is going to sit

vacant and you’re going to lose money. So make sure your manager is accessible and easy to get a hold

of, even late on a Friday afternoon. If you can’t get a message to your manager or a fast return call, the

tenants won’t get good service either, which is a problem when the air conditioning goes out or the

water heater starts leaking.

 

In Memphis, there is a lot of economic development going on. Those big projects are attractive for the

stability of houses in the core of Memphis. Investors need to do two things. First, find the right property

management partner. Check them out online, get referrals and make sure they are right for you.

Second, treat your investment property as a business, not a hobby. Mind the store even though you

have a great property manager.

 

Conclusion: Memphis or Las Vegas?

It seems that an investor with about $50,000 to spend should go to Memphis. Then, when there’s a little

more available to put into a property, it’s a good idea to go to Las Vegas and spend some time looking

for a great investment home and then bidding on it before the competition gets there first. Both the Las

Vegas and Memphis markets are really hot. While they’re different places to invest, they are probably

two of the top rental markets in the nation.

 

Thanks to Doug and George for their time. You can find them at CrestCore.com for Memphis and

Blackbirdrealty.com for Las Vegas. As always, if you have any questions about this series or building

your property management business, you can contact us at EverythingPropertyManagement.com

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