There has been a lot of buzz about the Las Vegas real estate market. Is it justified? In the following article, Travis Cadman discusses the booming Las Vegas development trend of the past year. Travis Cadman is co-founder and CEO of Investar USA.
In January of 1848, as the story goes, someone noticed a metallic glimmer in a river on the California property of Captain John Sutter. That glimmer turned out to be gold. As word spread throughout the region, people began to unearth millions of dollars’ worth of gold nuggets from the rivers and streams on and near the property, causing a frenzy known as the Gold Rush of 1849.
The thing was – by the time the Gold Rush became an official phenomenon, no one was getting rich from panning for gold anymore. Sure, prospectors were making claims and corporate interests were constructing mines, but anyone who came to California with the idea that they could simply pluck their fortune from a stream was in for a bitter disappointment. That’s not how the real Gold Rush success stories made their fortunes. Fortunes were made by capitalizing on the volume of people in the region and filling a gap in a market. Fortunes were made not by jumping on a bandwagon, but by being flexible.
So, what does this have to do with the development frenzy in Las Vegas? If you’re noticing that developers are buying Las Vegas property and building multifamily complexes, you might think that now is the time to consider making an investment. But take a moment and think carefully about the advantages and disadvantages.
Disadvantage: Buy Low, Sell High
Buy low, sell high is a famous investment adage, and yet no one really does it. This is partly due to herd mentality. The herd doesn’t buy low – the herd buys high and prays that it can ultimately sell higher.
How does this affect multifamily property investment in Las Vegas? With the Las Vegas market already ramping up, it is getting more difficult to acquire property at a desirable price point. The market is still viable, however that viability decreases as the market strength grows. But what about renters? What job opportunities are currently available in Las Vegas sub-markets, and what will become available in the near future? These factors should be considered when defining investment objectives.
Advantage: Nearby States Pricing Out Residents
I don’t mean to throw cold water on anyone’s enthusiasm for Las Vegas real estate investment prospects. The fact is – there is a lot of optimism about multifamily property desirability. Although tourism may not be as buoyant as it has been in the past, here’s the good news for prospective Las Vegas multifamily property investors: The California exodus isn’t slowing down. Although job growth is steady, wages don’t even begin to meet California’s astronomical cost of living requirements, causing many to relocate to more reasonably-priced states.
If you’re thinking about a Las Vegas multifamily property acquisition, consider the following:
- Las Vegas job growth is prevalent in what sector?
- Are salaries high-paying relative to the cost of living?
- How competitive is the current market?
- What kind of returns do I want?
Las Vegas may be an explosive development, but is now the time for you to take the plunge, or was the time three years ago? Is Las Vegas Sutter’s Mill at the beginning of 1848, or the end of 1849?
Travis Cadman is a real estate investment professional, specializing in multifamily property.