Tech, tourism, and low taxes: real estate investing in Las Vegas
Written by Brian Boucher
Reviewed by Mynd Editorial Staff
If would-be soothsayers and gamblers have learned anything in the pandemic era, it's that predictions are a mug's game. The Las Vegas housing market is a case study.
In November 2020, CoreLogic formed a gloomy chorus, predicting with over 75 percent confidence that Las Vegas, slammed by the tourism downturn, was at an above 70 percent risk of a decline in home prices in the coming year.
But nine months later, that very company reported that Las Vegas was fourth among major metros for increased home prices, which had skyrocketed 18 percent. The Nevada Current wrote, “What seemed like a sure bet proved to be a fool's wager,” adding that CoreLogic wouldn't answer their emails.
Even Las Vegas real estate, though, has not proven impervious to the effects of rising mortgage rates, along with inflation hitting historic highs.
Sale prices fell month to month in July for the second month in a row — the first time that happened in two years.
Area realtor Clay Isley predicted that median home prices would rise to $500,000 by the end of the year. The number may not reach quite that high, but despite the slowdown, prices rose to well above the national median ($403,800) by July:
As of July 2022, the median home asking price was $455,900, up 21.6 percent year-over-year, according to Realtor.com.
As of July 2022, the median existing home sale price was $461,900, up 21 percent year-over-year, according to John Burns Real Estate Consulting.
Homes were on the market for a median of 25 days, up seven days year-over-year, according to Redfin.
“Moody's Analytics ranks Las Vegas as the third highest overvalued market in the country,” says Haley Curtin, an economist with Moody's. “We're expecting prices to decline by about 10 percent over the next five years, and that's assuming no recession. Things are already cooling off with local inventories rising. Active listings have more than doubled from last year.”
Sin City diversifies from a tourist-dependent economy
The city was still too tourism-dependent 13 years ago, and for that reason was “the poster child” for the 2008-09 crash, says Vivek Sah, director of the University of Nevada Las Vegas's Lied Real Estate Institute. It didn't start to recover until 2013.
One factor that has historically discouraged companies from moving to Las Vegas, Sah points out, has been a sub-par school system. (Even the uneducated, he said, have typically been able to earn six figures at casino and resort jobs.) And there's just one university serving the population.
But now, like countless other locales nationwide, Las Vegas wants a slice of the tech pie.
“Nevada got a huge gift when Tesla opened one of its ‘gigafactories' in Sparks,” says Curtin. “People started investing more in Nevada and price rises exceeded the national average.”
In 2019, national commercial real estate services firm CBRE Group ranked Las Vegas as one of its top 10 up-and-coming tech talent markets. Google says its new $600 million facility in suburban Henderson will hire at least 50 employees, earning an average of $65,000 — well above the median national household income of about $56,000.
The University of Nevada at Las Vegas is opening a tech incubator, the Harry Reid Research and Technology Park, named for the former senator. The school predicts it will create 25,000 jobs and generate $2.6 billion in revenue.
In cooperation with Startup Nevada, which gets federal funding, Las Vegas created an innovation center to help support startups, 10 at a time for 9-month terms. The future is visible on the city's streets: it is allowing tech companies to use public infrastructure to test out innovations like self-driving cars.
This job growth, and accompanying housing demand, has supercharged the real estate investment market in the Las Vegas metro area, which includes Las Vegas, North Las Vegas, and Henderson.
Tech workers influx pushes up home prices
Those incoming, well-paid tech workers will likely continue to raise home prices, including on Las Vegas investment property. What's more, says Curtin, a shortage of labor is also affecting home prices.
“Construction employment never fully rebounded from its low Great Recession levels,” she said. “The national average was able to bounce back, but Las Vegas never was. They had about 145,000 construction workers at the peak, now we're at 100,000. So there's fewer people to build houses.”
When builders can erect fewer homes, they are more likely to build more expensive ones to increase profit. And the city is limited in where it can expand since Nevada is about 80 percent federal land, she says.
The downside of the boom? As in many other metros, middle-class families are being priced out of the Las Vegas market as affordability issues crop up.
The tech-enabled Covid-era Great Reshuffling may attract a new class of temporary residents. Zillow placed the city among its top ten metro areas for digital nomads, who can work from anywhere via email and Zoom, and whose number doubled to eleven million in 2020.
Maybe those nomads who came to Vegas will stay in Vegas.
From railroad town to entertainment capital
Whatever it might hold, the city's future builds on a storied history, one that has earned it a berth in popular entertainment from “Viva Las Vegas” to “Leaving Las Vegas,” “Casino” to “The Hangover.”
Founded as a railroad town in 1905, the city soon benefited from an influx of construction workers building the Hoover Dam, creating a Depression-era population boom. Casinos began to pop up in 1941 (and within a decade, Congress was holding hearings into organized crime).
Another boom got underway in the eighties; between 1985 and 1995, the population of Las Vegas doubled.
The seeds for a recent tech boom were planted in 2013, when Zappos, the online shoe and clothing retailer, moved to the old city hall. The building was converted into a LEED gold-certified campus, complete with a 25-foot enclosed fish tank that doubles as a nap room.
The greater metro area is now home to about 2.3 million, making it the nation's 25th-largest city.
The city has been working to diversify from the hospitality and tourism business that took a beating during the Covid-19 pandemic; international travelers, long the bread and butter of Las Vegas, were nowhere to be found on the Strip for more than 18 months.
A high quality of life, and many amenities
It's not just the neon, casinos and resorts that might induce nomads to stay. Unlike neighboring California, there is no state income tax, not to mention no danger of forest fires, earthquakes and mudslides, nor the extreme weather events like hurricanes or tornadoes that plague other parts of the country.
But the heat has grown worse with climate change, and summer temperatures routinely exceed 100 degrees. For relief, many homes have pools.
Based on factors like cost of living, Numbeo's quality of life index is “high.” J.D. Power gave high marks to McCarran International Airport, ranking it sixth among the nation's megas in 2021, and the Bay Area is less than an hour's flight away. The Grand Canyon is within four hours' drive, and the arid climate offers 300 sunny days a year.
“There's even a glacier in Nevada,” says Martinez, referring to Wheeler Peak Glacier, 300 miles from the city. “I bet you didn't know that.”
And the Entertainment Capital of the World has more to offer than Celine Dion and Cirque du Soleil. Sports fans are psyched to have the NFL's Raiders (another migrant from California), the NHL's Golden Knights, and the WNBA's Aces. Major musical acts play here.
The majority-minority hip-hop dance troupe Jabbawockeez, whose anonymous members perform wearing masks and take their name from Lewis Carroll's “Jabberwocky,” have been in residence at MGM Resorts for some 15 years.
One might not think fine art and Las Vegas belong in the same sentence, but Sin City is not without high culture. The Bellagio Gallery of Fine Art (“Where great art goes on vacation”) stages shows of masters from Picasso to Basquiat.
Besides the Neon Museum, which focuses on the city's trademark lighting, renowned California Light and Space artist James Turrell, known for immersive light experiences, has an installation inside the Daniel Libeskind–designed high-end shopping center Crystals, alongside stores like Fendi and Gucci.
Art in America called it “a beautiful, strange experience.”
Destination for investors as well as visitors
With the city's reputation as an entertainment and gambling mecca for tourists is rock solid, there is a lot more to Las Vegas than the Strip. Its affordable cost of living, lack of personal or corporate income tax, and business-friendly environment augur well for its growth in the coming years, making Las Vegas investment property a solid bet.
The median home price in the Las Vegas valley has been rising more than the national average since 2018, and has continued to exceed that rate in most months in the last three years. Rents on Las Vegas rental properties have risen more quickly than the national rate since 2016 as well.
These numbers point to opportunities in Las Vegas investment properties, at odds that are better than those in the casinos.
There are 40,000 people moving to Las Vegas each year, drawn by its neon-drenched mystique and its scenic desert surroundings, looking for a future that is full of promise, beautiful, and maybe even a bit strange.
4 best areas for real estate investing in Las Vegas
Buyers looking for Las Vegas investment properties should get familiar with some of its many neighborhoods, no matter what their budget, since there are rental properties to suit every level of investment. Here are four of the hottest real estate markets in Las Vegas.
Summerlin offers outdoor activities and a strong rental market
About 20 minutes from the Las Vegas Strip, Summerlin is one of the most desirable rental neighborhoods in the city. Many locals head to the open-air, high-end mall for the shopping and the good restaurants, and stick around to watch the Rolls Royces and Bentleys roll by.
Many who can’t afford to buy a home in Summerlin find they can find a rental property for a reasonable monthly rate.
“The average rental for a cookie-cutter house here is about $2,000 a month, and that’s up 30 percent over the last two or three years,” says Trevor Steadman, Mynd’s Nevada corporate broker and realtor. “There’s just no inventory. People are dying to get into these communities.”
Mountain's Edge boasts good schools
One of the newest developments in Las Vegas, springing up over the last 15 years or so, Mountain’s Edge sits to the southwest, a bit farther from the Strip. Homes are still going up throughout this district, which is spreading increasingly farther south.
Many blue-collar workers make their homes here, attracted by good schools and homes that can rent for less than $2,000 a month. History buffs love to visit the petroglyphs left behind by Native American tribes millions of years ago.
Rhodes Ranch caters to high-end buyers
At the entry to the gated community of Rhodes Ranch stands a sign in the same lettering as the iconic one in Hollywood, spelling out the name of this super-desirable neighborhood and hinting at its glamour. Known for opulence, it’s home to some of the well-paid performers on the Las Vegas Strip. Visitors can expect to pass multiple security guards to get in.
“A lot of investors, especially in Las Vegas, purchase a large investment property in neighborhoods like this, get good long-term tenants, and then retire to them when the time is right,” says Steadman.
North Las Vegas has a big upside
“This is the up-and-coming neighborhood of Las Vegas,” says Steadman. It may still get a bad rap as a dicier part of town, but that’s changing, pointing to good potential for appreciation on investment properties here.
North Las Vegas is home to a lot of the new construction. In many cases, the owner buys a home and immediately turns it into a rental property. According to Steadman, real estate investors can find a four-bedroom, two- or two-and-a-half-bathroom house in the area of $350,000 and get enough rent to cover the mortgage payments, and even some positive cash flow.
The shopping centers, schools, and other essentials are sure to follow all the housing that is sprouting up here, making this area of Las Vegas more and more desirable to home buyers and real estate investors.
They haven’t built the big shopping centers yet, though they will pop up around it, and these are some of the last unbuilt tracts of land that are close to the Las Vegas city center, only adding to the area’s potential.
“It’s like Summerlin 10 years ago,” says Steadman.