A cash flow property is a great investment in
Vegas right now!
Banks are still avoiding lending on condos and
townhomes so they normally have to be all cash purchases and thus outside the
reach of anyone needing financing. Because few people can purchase all cash
they are CHEAP! Expect a 40% + capital gain on cash flow property in the next
couple of years.
A well located 2/3 bed, 2 bath, detached
carport, 900SF - 1100SF
CONDO in decent condition runs $45,000 - $75,000
depending upon location, size, condition and upgrades. These were $180,000 -
$220,000 in 2006 and rent between $600 - $850 per month today. HOA fees can be
$120 - $240 per month. (HOA = Home Owner’s Association or Body Corporate)
A well located 2/3 bedroom, 2 bath, 2 car,
1200SF – 1750SF TOWN
HOMEin decent condition runs $65,000 - $110,000 depending upon
location, size, condition and upgrades. These were $220,000 - $280,000 in the
boom and rent for $750 - $1100 per month today. HOA fees can be $120 - $240 per
Townhomes have the advantage over condos in that
you own the land it sits on.
They are also more likely to have a 1 or 2 car garage; two big advantages that
add value and make long term tenants easier to attract and retain. Tenant change
over typically costs up to three months in ‘lost’ rent with vacancy, repairs and
re-letting costs. Thus it is vital to ensure your investment property is in
both a great location and has many practical and emotional qualities as
The big negative with either a condo or townhome
is the HOA cost. This often takes a 14% ROI and reduces it to 8%.
However some HOA’S actually offer you a lot for
your money – some pay the sewer and trash, provide and maintain landscaping,
great community facilities with tennis courts, multiple pools, multiple gyms,
community rooms, dog walks, picnic areas, BBQ facilities, even beach volleyball!
I’ve even seen putting greens and bocce ball areas in some! Some HOA’s maintain
the landscaping right up to your front door, and maintain the exterior walls and
roof of your property. These can be significant expenses! So you don’t have any
real repair expenses except for the interior of the property. Other HOA’s
charge the same and don’t provide anything of real value.
Carefully investigate the community you wish to
Nevada real estate contracts normally provide a due diligence clause
so the buyer has time to receive and review the rules and financials of any HOA
community and what they provide.
My outlook? I expect rapid capital gain in cash
flow property as soon as banks offer financing on condos and townhomes. And I
can’t imagine this to be longer than two years away. Prices halved from
$100,000 to $50,000 when this lending freeze took effect; a similar value
increase would not be unexpected.
Despite recent price increases, most homes are
still significantly below replacement cost with prices currently at early 1990’s
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