We have been receiving a lot of questions lately on local rents so I wanted to try to address the subject more broadly to all property owners in the Las Vegas area.
I know that you may have been reading about increasing rents in certain areas of the country. The most common place I hear referenced is California (particularly northern California and the Los Angeles metro area). While it is true that both rent and resale prices in those areas are skyrocketing right now, it is important to know that Las Vegas (and Nevada) bears very little similarity to our larger neighbor. Our market tracks much closer to parts of Arizona and markets in Texas than it does California. Our income bases are more similar to those markets and our property values are more comparable. The cost of living here is vastly lower than California and you can buy an entry level single family home in a good area of town for $175,000 - $300,000 range in Las Vegas which would be impossible in many parts of California. The low cost of living, affordable home prices, lack of state income taxes, and low regulation make our market very attractive to own real estate for investment purposes. Much like Arizona and parts of Texas.
From 2008 - 2012, we did not see much of an increase in rent prices in Las Vegas because of the recession and collapsed real estate market across the country. In the past year, we have started to see increasing rents in certain locations. Particularly the high-end locations. That trend is showing in 2015 as well. Certain locations will go up more than others.
We are always examining properties at lease renewals to determine if we feel there is room for an increase. Rent increases happen over a longer period of time in residential real estate. Raising rent every year is not advisable. If you raise rent every year on a good tenant, that is just going to lead to vacancies. I only advise raising rent on a good tenant if the market forces indicate we can get that increased rent on the open market and the home is updated and a desirable product. This is important because we do not want a tenant looking at comparable homes in your neighborhood(s) and finding cheaper options to rent. A small difference they may overlook if they love the home. A big difference will get a tenant thinking about all their options. We’ve had tenants vacate over increases as small as $25 per month. Even when owners withdraw the increase request, the tenant may have already settled on the idea of moving (prompted by the increase). The resulting cost of vacancy, marketing, utilities, far far outweighs the potential increase.
We weigh all these factors when we email our property owners on upcoming expiring leases. I’m sure most property owners and managers would agree that the biggest factor affecting your returns on a rental property is vacancy. An occupied property should always be our top priority. And that's our first mindset. It is my philosophical approach to being a landlord (and its the same approach I’ve taken with my own personal rental properties).
Cunningham Group at RE/MAX Advantage
(702) 823-0855 Shawn
(702) 823-0840 Kyle