Las Vegas Condo Investment Property
Las Vegas, NV was one of the hardest hit cities during the housing bust of 2008-2010. Prices for both single family homes and condos have decreased significantly from their 2007 highs. This means that properties which didn’t make financial sense as investment properties due to their low return on investment now make a lot of sense. Even though home prices fell, rents in Las Vegas, NV haven’t fallen that much. Small units in Condominium projects like Sky Las Vegas, Allure Las Vegas and Palms Place for example used to sell for upwards of $550,000 and fetched $1600 in rent. Include $600/mo (conservative figure) for Condo HOA fees and property taxes, the yearly return on investment would have been a measly 2.2%. This same $550,000 condo can be easily purchased today for $220,000 and will still fetch $1600/mo in rent. So after HOA fees and property taxes, the yearly return on investment is 4.5% today. This may not seem like THAT much compared to single family homes, but there’s A LOT of room for appreciation in these units, as they’re still selling below replacement cost. Purchasing a luxury condominium and renting it out in Las Vegas didn’t make a lot of economical sense for investors pre-2007, but it does make sense today. There’s a lot of opportunity in Las Vegas for investors to capitalize on.
Return on Investment: Condos vs. Single Family Homes
Since condominiums have HOA fees which the property owner is expected to pay, investors can definitely earn a higher immediate rate of return by purchasing and renting out single family homes. I say “immediate” rate of return, because in the long-term, Condominiums in luxury developments have much more room to appreciate than single family properties. As the Las Vegas Strip continues to grow, properties on the strip such as the Veer Towers, Sky Las Vegas, The Mandarin Oriental, will most certainly appreciate in value. Keep in mind though, even though these properties have more “room” to appreciate, it doesn’t mean it is guaranteed to happen or could take many years. Investors who want to start generating as much income as possible should look into buying up and renting out single family homes, while investors looking to cash in on long term appreciation should look into Condos. It’s probably best to take a balanced approach though, and invest in both types of properties.
Las Vegas Condos and HOAs
One of the biggest drawbacks to living in a condo, especially a high rise condo, is the HOA fees that owners have to pay each month. In order to provide the on-site amenities that most high-rise condominiums provide, these condominiums charge monthly home-owner association fees. As a property owner looking to rent your condo out, these HOA fees will take a good chunk of your monthly income, as these costs are difficult to pass on to the renter. Another problem with Condos as investment properties is that they tend to have certain restrictions – such as a minimum rental period. Most high-rise condos in Las Vegas require owners to rent out their units for a minimum of 6 months at a time. These small obstacles shouldn’t deter investors from giving condos a serious consideration though, as even though they generate less net rent each month, they can appreciate in value much faster. The HOA isn’t much of a hassle for investors if they use a property management company, which most investors choose to do anyway, as most property management companies have experience in renting out units in high rises.