Las Vegas and Henderson Home, Condo, and Townhouse Rental Tips

Suburban Las Vegas neighborhood

If your looking at today’s real estate market and want to make an investment, you’ll be joining countless other real estate investors looking to get their hands on a slice of Las Vegas real estate. Though prices are at an all time high, so are rents. As a matter of fact, according to Realtor.com, rents rose 16% from one year ago. Many investors are starting to see significant returns, especially if they purchased a rental property a few years ago.
Nonetheless, many investors are in the market now, sifting through the tight inventory, looking for that gold nugget. As with any investment though, there are a number of factors that will determine how profitable a rental property can be. Or how much expense might be associated with it. So, what factors should you consider?

Age of Property
Everyone loves the smell of a brand new car. But not everyone can always flip the bill on one. And so the used car market is a popular one. The same goes with housing. Most investors would prefer brand new housing – not because of the new house smell necessarily, but because everything is, well, brand new. All major components of the house are brand new and should have a significant life expectancy, minimizing expenses for the first few years of ownership. However, brand new homes are in high demand and typically priced higher than a resale home – though that gap has closed some. The higher price keeps many investors from buying brand new. And so, the resale market is a popular one. When looking at resale properties, what should you keep in mind? Here are a few points:

  1. Are major components, such as appliances, HVAC or hot water heater nearing the end of their life expectancy? If so, keep in mind that those may fail and need replacement. Prepare for those expenses.
  2. Is the home generally older, perhaps 30 years or more? Keep in mind that certain items may be needing replacement, such as the roof. The house may need some remodeling. Repairs may be common place. Are you prepared to allocate a budget for those?

Property Type

Las Vegas has an abundance of housing. There are single family homes, condominiums, town homes, mid and high rise units and multi family buildings. Have you decided what you want to own? Perhaps your budget will determine what you will be considering. For example, the median price of a single family home is higher than that of a condominium in Las Vegas. However, what other factors should you consider?

  1. Many communities have homeowners associations. Each month, quarter or annually, they assess fees for maintaining a community. These fees can vary, depending on the community amenities. Are you prepared to absorb those?
  2. Back to HOA’s on this point. Keep in mind that condominiums and town homes typically have HOA’s to maintain the community pool, park and perhaps gated entry. Monthly fees are used to cover that expense. However, many times those fees also cover the insurance necessary for those common areas as well as the exterior of the building, roof and some components of the building. As a result, homeowners insurance may cost less.
  3. Single family properties typically need insurance for the entire dwelling and property. As a result, those costs can be higher than that of a condo or town home. On the other hand, you might find that the HOA dues are lower.

When all is said and done

In the end, you have to do a side by side comparison to see what the constant, ongoing costs will add up to. This, coupled with potential repairs, will prepare you for owning a rental property. Of course, researching what the potential rent for a property will be is necessary as well. A good property manager can be an invaluable asset in this process. This way, you can be a well prepared, savvy investor who has done their homework and knows exactly what kind of a property you are looking for.

While most homeowner’s are primarily concerned with obtaining Homeowner’s/Landlord insurance, covering the property, liabilities and damages from unexpected malfunctions and disasters, some fail to keep up with their tenants renter’s insurance policy, making sure it’s current and active. While it is highly important to maintain homeowner’s insurance (or called a Landlord / Fire policy if property is a rental), what’s the advantage of requiring tenants to carry a renters policy?

Tenant Benefits

First, there are significant benefits to a tenant! For example, should a fire or water event occur within the  property, the homeowner’s insurance will typically cover the damages to the structure itself. However, many times it will not cover the tenants personal belongings and furniture. Homeowners insurance may also not cover injuries that occur, exposing a tenant to liability.

On the other hand, renters insurance is designed to cover personal property, just in case of the unexpected – a theft, fire, water damage, etc. If someone gets hurt inside the property, renters insurance can offer a measure of protection, offering liability coverage. Other covered items can include: Coverage of a tenants personal property in the event of a windstorm, frozen pipes (that eventually leak and create a major water event), vandalism or a vehicle impact!

If a tenant is temporarily displaced from the property due to these items, renters insurance can cover the cost of alternate living arrangements.

Finally, renters insurance is typically inexpensive to obtain for a tenant and can potentially save thousands of dollars in the event of an unexpected situation.

As a Landlord, requiring renters insurance adds a measure of protection and can help a tenant with unforeseen costs. To ensure that a renters policy is obtained and maintained, you can request to be added as an additional interest. That way, you are updated by a insurance company when a change takes place.

The Las Vegas rental market has seen an upward trend the last few years

While the Las Vegas real estate market has been getting a lot of attention over the last few months, we thought it would be good to discuss the rental market, which also has experienced a similar situation. Yes, Las Vegas rents are going up, up and up!

This is music to every landlord’s ears, especially for those who saw little appreciation for for a considerable amount of time. Yet, the Vegas market has shifted. A shift started 3 years ago, when rents started to appreciate noticeably, especially with what most landlord’s were used to. Fast forward to today, the market is hot – and landlord’s are loving it.

In a similar twist of events, a shortage of rental properties is creating a competitive market, driving rental prices up. While many tenants used to find 2 bedroom condo’s for under $800 / month or single family homes for under $1300, that price has shifted – considerably. A 2 bedroom condo now averages close to $1000 or more per month. An average single family home is between $1500 – $2000. And that’s assuming you can find one! With such a shortage, prices have been going up – and there do not appear to be indicators to show anything changing, at least for the foreseeable future. As a matter of fact, as the Las Vegas economy rebounds, driving employment and reducing unemployment, we can expect more individuals to move here. How exactly that will play out is yet to be seen.

However, all indicators point to a strong and stable economy. If inventory remains low, we can also expect rent prices to appreciate, perhaps 6-8% per year.

A single family home illustrated

Is real estate a good investment? With many seasoned investors looking for a place to invest their money, real estate has always been at the top of the board. Or perhaps it’s a real estate enthusiast, first time potential investor looking at their options. The simple answer is: As with any investment, there are variables and there are risks. In this article, we’ll discuss residential rental investments.

Why do many investors decide on residential rentals?

For some, it’s where they will get the most return for their investment. If an investor has cash saved, they may realize that keeping it in a savings account or even higher yield CD (certificate of deposit) will only give them a limited return. However, investing that into a rental property may generate considerably more income and the investment has the potential for appreciation and profit. As a result, a rental property looks appealing.

What are the risks?

Of course, the risks have to be evaluated as well. Many rental owners put down minimal down payments and as a result, end up with a higher mortgage payment and PMI (private mortgage insurance). As a result, the rent they generate may not cover the monthly expenses, which would also include taxes, insurance and possibly HOA dues. As a result, they may be unprepared to cover the difference. A 20 or 25% down payment can eliminate PMI insurance and lower the monthly mortgage payment as well. Of course, in the end, it is best to confer with a property manager to see what rent potential a property has to be better prepared to absorb the costs.

Finding the right property

The type of property will also determine the profitability/cash flow of a property. For example, an older property may have a number of components nearing the end of their life expectancy. HVAC systems, hot water heaters, roofing and appliances can add a significant price tag to the operation of a rental property. Of course, once replaced, those items can last for many years. However, can an investor absorb those expenses since they will be real, cash expenses, even if the property is priced to reflect updates needed? On the other hand, a newer – or brand new – property may ask a higher purchase price. However, there may be limited maintenance expenses in the first few years of operation. These are things to consider when embarking on a purchase.

Be prepared for vacancies

Finally, as an investor of rental property, there will be times when a vacancy occurs and repairs have to be made. As a result, not only will there will be a lack of income but repairs that will cost money. Is this something that you will be able to absorb? Will you be able to save enough each month when generating income to cover those periods of time? Those are difficult but necessary questions to ask yourself. Additionally, market conditions fluctuate and real estate and rental values change. Some rental property owners have had to keep their rental properties for an extended period of time because of that, waiting for values to rebuild perhaps to sell their investment. Other long term investors, who had no plans of selling, had to be patient to see rental rates rise.

When planned correctly, a rental property can be a great investment – and has been for countless property owners. However, calculating the cost and type of investment is an integral part before embarking on being a rental property owner.

Modern street of typical middle class desert homes near Las Vegas Nevada.

With a shortage of inventory in the Las Vegas real estate market, more and more owners are turning to brand new properties to invest in. Of course, the difference is price. On average, brand new homes in Las Vegas have a median sales price of nearly $100K over existing inventory. So, is it worth the investment?

Here are the pros of brand new:

1. A brand new home means everything is brand new! Electrical, Plumbing, HVAC and Appliances should be in prime condition to last a number of years. Maintenance costs are reduced typically the first few years of ownership.

2. Rents for brand new properties tend to average higher compared to an existing home with comparable size and amenities – on average by 5-10%.

The cons of brand new:

1. Initial investment is typically higher since brand new properties tend to cost more than a comparable resale property.

2. Construction in a neighborhood can be a negative aspect to a potential tenant.

However, many homeowners have been able to purchase a brand new home and generate handsome rent to cover their monthly expenses. Planning is needed to research brand new communities and calculate potential rental income. Another big factor is financing. If you plan on carrying a mortgage, how much will you put as a down payment? The less of a down payment, the higher the monthly payment. And a down payment of less than 20% means Private Mortgage Insurance, which adds to the total payment due each month. And don’t forget the vacancy factor. Periodically, a vacancy will occur with no rent generated. Will you be able to satisfy the necessary mortgage payment.

Of course, if purchasing cash, monthly expenses will be limited to insurance, property taxes and HOA dues. While the return on investment calculation may be less than desired in certain cases, will owning a brand new property give you peace of mind, knowing that major maintenance should not be an issue for a while?

So, when all is said and done, a brand new property can mean less maintenance expenses and more peace of mind in that regard. However, it also means a higher investment. A resale property may be priced lower but also harder to come by. Repairs and other maintenance costs may need to be factored in as well.

So, the decision is ultimately yours. Take time to research and talk to the experts to help you make the best decision possible.

There are a dime and a dozen window coverings available for your home. All you need to do is walk into your local home improvement store. From stock blinds to custom fitting shutters, the selection is endless. So, what should you choose for your rental home? A lot will depend on the type of rental home. A higher priced rental property may warrant more than basic mini blinds to complement any luxury features. But that is really up to you as a rental property owner!

MINI BLINDS
Mini blinds come in various styles and material choices. Some are plastic, vinyl or aluminum. Pricing is very reasonable, starting at just a few dollars. Its the most popular choice among homeowners as a result. However, keep the following in mind when choosing this option. Plastic and vinyl mini blinds, once damaged, typically have to be replaced all together. The gears inside are tedious to work on and hiring someone can be cost prohibitive. If a slat is cracked or broken, it will be nearly impossible to replace it. Aluminum blinds are higher priced and while slats tend not to crack or break, they can bend, which is a more common issue since they can have that tendency and is usually difficult to repair it properly. Installing mini blinds is most cost effective if you do it yourself. Once a blind company or handyman is hired, your cost goes up. At that point, you may want to consider upgrading. Mini blinds can last 2-5 years on average.

FAUX WOOD BLINDS
Faux wood blinds have gained popularity in recent years. Slats are typically 2″ in width and made to resemble wood blinds, with many being textured. They come with a decent sized rail at the top and can be operated using strings or a wand. They are fairly durable and the slats, though made of a PVC / vinyl material, are thicker and more resistant to breaking. They cost more as a result, averaging about 20-40% over mini blinds. However, they can last an average of 5-10 years.

SHUTTERS
Shutters are a beautiful addition to any home. Of course, they can be costly. Even entry level shutters can cost a pretty penny. However, shutters are durable, though they can have a flaw – the staples that hold the shutters together to the rod that allows you to open and close them can, in time, fall out. However, shutters can have many good years of use. Shutters are available in wood or PVC material and in a variety of colors.

DRAPES
Drapes are also an option that is affordable. Of course, drapes require the purchase of a rod that is hung over a window. Depending on the size and style, the rod can surpass the cost of the drapes themselves! However, many times an average rod is affordable and decent drapes can equal the cost of mini blinds. Drapes can be durable. However, they also get dusty and require cleaning, adding to the maintenance factor over blinds. Additionally, because many drapes have specific designs, it can create a theme that may or may not go well for all renters. The best theme is neutral for a rental property.

Yes, window coverings add privacy but also create style. Depending on your budget, there is a choice out there for you!

Shot of a Bright Cozy Modern Condo with new wood floors, fresh paint and furniture.

One of the most popular questions we get asked is if improvements made to a house increase its rental value? Perhaps the home you own was purchased many years ago and was recently remodeled – with new floors, counters, fixtures or cabinets. Or you purchased the home recently, maybe even brand new, and upgraded certain aspects of it to make it pop! How does this affect rental value?

Homes in Las Vegas are traditionally built in planned unit developments (aka PUD’s), or as we like to call them, tract homes (some call them cookie cutter homes). Homes are replicated by a builder with minor variations. As a result of this, when a rental analysis is performed on a home in one of these neighborhoods, other comparable, or identical model match homes that have leased are used to establish a value. For example, if your looking to lease a home that is a 3 bedroom, 2 bath, single family home with 1500 square feet, we would look to see if there is another model match in the neighborhood that has leased recently. In many neighborhoods, we can usually find a handful of model match homes. And due to this, because we are working with a similar size home, rental values will usually be within a specific range – not spread apart too far.

How, then, are upgraded features handled that may make your home stand out compared to others?

First, upgraded features definitely have advantages. They make your home stand out and make it desirable, allowing, in many cases, for it to rent quicker. How about rent value? Rent value can typically be increased, however, within reason. A home priced significantly above other comparable homes in the neighborhood may appear overpriced, even if it is highly upgraded. Consistent rental rates within a neighborhood play a significant role to tell a prospective tenant about what is competitive in a neighborhood. Of course, certain upgrades add solid value. For example, a pool can add rental value.

There are some additional factors to also consider. If you find yourself in a depreciating rental market, you may find that adding value is more challenging. An over supply of rental properties on the market can also affect this. The general economy plays a role as well – unemployment or decreasing wages for example.

So, whats the point of this article? Upgrades within a house make it more appealing to a prospective tenant to rent, even adding modest rent value. However, in many cases, upgrades do not add significant rent value above the rental range of a neighborhood or area. Depending on the economy along with supply and demand, this can also change. So, before you upgrade your home for the purpose of renting it, calculate to see if what you have in mind will be a good return on your investment.

Contributed by Nicklin Property Management. Opinion article reflects the views of Nicklin Property Management and is based on our years of experience.