LV rental ROI - a realistic figure?

Asked by h1234, San Jose, CA Thu Feb 21, 2013

I'm looking to buy LV rental property in & near Henderson with cash. Interested in 3br/2ba SFH. Is it realistic to expect an ROI of 8 to 9% pretax after prop mgmt fees, property tax, insurance & maintenance/misc expenses? If not, am I missing something?

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6
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Tue Feb 17, 2015
Hello,

I just took a second and read your question, also took a minute and read all of the replies.

The one thing I find funny is no one has made any reference to the ROI being gross or net. Eight to 9 percent gross can be done all day long. Now what you net is a different story.

Between my husband and myself we own multiple properties throughout the valley and manage quite a few as well. This is true for both residential and commercial.

Right now we are seeing returns on SFR properties within the 89123 postal code at about 4.5 % to 6% net. A blue chip area. Gross they are at about 7.5% to 8% gross. So you loose a few points after management fees, taxes, insurance, vacancy calculations repairs etc.

Take that same house and put it in North Las Vegas and we see ROI at 6%to 8% net. Not so much a blue chip stock anymore. My experience is eviction rates are higher, vacancy rates increase, tenant life expectancy within the property half of that of southern Las Vegas. Gross return ranges from 8% to 11% gross.

These examples are all real world examples of properties we own and or have purchased within the last 5 years.

With regards to multi family properties. The ROI is significantly higher. You are looking at an average of 9% to 11% net ROI with a gross of 9.5% to 14% gross. Obviously turn rates are higher, vacancy rates are higher etc. A higher risk investment brings a higher return.

I hope this helps.

If you would like to discuss further or have additional questions feel free to contact me at your leisure.

Respectfully,

Becky Cordova
702-612-1584
becky@canamrealestateservices.com
0 votes
Becky,
What a great and well thought/researched answer. I am impressed. Did you notice though, that the question is two years old? Kinda speaks to where our market is right now, eh?
Flag Tue Mar 10, 2015
Damon Bottic…, Agent, Las Vegas, NV
Fri Apr 12, 2013
It's still possible, but 8-9% deals are few and far between these days. The experienced agents and property managers can spot them, but you've got to find someone whose opinion you trust enough to move quickly when they call you with a "deal".
0 votes
lvhomeproper…, Agent, Las Vegas, NV
Tue Feb 26, 2013
As a property manager here is what I think. Yes you are correct in your items for the calculations for your return. You can still get 7-9% ROI on homes in the area you are looking for. We just closed a home for an investor that will be in the mid 8% range. Now, homes are going fast and house prices are going up. With so many (over 40%) being bought by investors, many rentals are available. Ours tend to rent the best that look the best. New paint, nice flooring and a great kitchen. One thing to remember is that even with the return, now you will be getting appreciation of value and the tax deduction. That should be factored in your plan for how long you look to own the property or properties. There is value in new homes as well as older homes that may need a little freshening up. I would welcome the opportunity to help you in your search and be your property manager. Feel free to call me or email me with any questions. I am looking for homes everyday for our investors and have a pulse on the rental market in the Henderson area.

James Battaglia
702-361-6994
Realtor, Property Manager
lvhomeproperties.com
Elite Realty
8625 S Eastern Ave
Las Vegas, NV 89123
0 votes
h1234, Home Buyer, San Jose, CA
Thu Feb 21, 2013
Joe, thanks for the prompt response.
Brett, thanks for the very valuable input. Would surely take that into consideration.
0 votes
Brett Gordon, Agent, Henderson, NV
Thu Feb 21, 2013
There are definitely opportunities for 8-9% returns. That stated, the Vegas and Henderson markets are experiencing an significant spike in home prices due to an artificially low supply of homes on the market. As a result, we have seen prices of home go up from 10%-30% or more over the past 8-12 months.

This is due to a Nevada Assembly Bill that basically stopped banks from forclosing on homes since October of 2011. Now there are over 75,000 (likely closer to 100,000) homes in the Vegas Valley that will be foreclosed upon over the next few years. These foreclosures and many more short sales will hit the market later this year and significantly more in 2014.

Once the foreclosures begin in earnest, we may see home prices drop by 10%-30% depending on neighborhood. The pressure to drop prices will come as the inventory on the market grows. Right now there are less than 4000 homes on the market (less than 4-6 week supply). Prior to Oct 2011, theres were closer to 12,000-15,000 homes available.

I do not have a crystal ball, but the basic rules of supply and demand would indicate that next year will make for better home prices. That stated, good returns on investment can still be found in this very competitive market.
0 votes
Joseph Rados…, Agent, Las Vegas, NV
Thu Feb 21, 2013
last year 12-14% if you trusted me to pick the homes I knew would work. Now 7-9%
I had owners buy homes everyone else said " thats a bad neighborhood" or "tenants wont pay there" and 12 months later my owners have 100% gain in values and are making 14% ROI on rents with never a late payment,
I know the right houses to make the most money and I manage in a way that I get the right tenants and they respect me enough to pay rent first vs other bills and never had an issue to date with someone not paying me rent
Today 7-10% return possible after ALL costs but I feel safe with 8%
0 votes
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