In 2008, real estate investors learned that real estate, just like everything else, is a risky business. Property isn’t a magical asset that only appreciates, but can go down too.
If you’re new to investing in real estate in Las Vegas, here’s what you need to know before you open your checkbook.
You’re Going To Need A Substantial Downpayment
If the financial crisis taught the banks anything, it was that they couldn’t expose themselves to excessive mortgage risk. Thus many lenders insist that today’s buyers put down large down payments, sometimes as much as 20 percent of the value of the property. Hence, if you want to invest in real estate, you’ll need a large pile of cash behind you first.
You’re Expected Returns Are Probably A Little Off
Buying an investment property in Las Vegas usually requires a little more than simply putting money down on the house and then waiting for renters to move in: there are other expenses too you’ll want to consider when calculating your return.
What could these expenses include? First, you’ll want to factor in the costs of renovations. How much money do you need to spend to bring the property up to a rentable or saleable standard? Next, work out how much it’s going to cost you to finance the mortgage. The interest payments will eat into your profitability, so you need to be aware of that. Finally, you’ll want to consider administration costs? Will you be the one doing all of the paperwork, or will you get an agency to do it all for you?
You Need To Clear Your Debts First
While you might dream of owning high-value investment properties in Las Vegas, it’s a bad idea to take on additional risk if you still owe money to others. Make sure that you’ve paid off your credit card bills, student loans, medical bills, and anything else that could derail your real estate strategy.
Your Partner Can Cause Problems If Things Go Wrong
Many people invest in the Las Vegas real estate market in partnerships, but pairing up with others is risky. You need to feel comfortable ahead of time with the partnership agreement (that is, who gets what), and with the prospect of losing money.
The Las Vegas Market Is Unique
Every property market in the country has its unique features and none more so than the one in Las Vegas. The tourist industry dominates its property market, with accommodation requirements for both local workers and their wealthy patrons. Before investing, check the type of property investment that yields the most lucrative returns. Will you be best served by renting out properties to residents, buying a share of commercial development, or renovating homes and selling them on?
Your Emotions Will Try To Get The Better Of You
When selecting a property in Las Vegas, make sure that you listen to your head, not your heart. Where possible, try to focus exclusively on which homes and units are likely to yield the highest return, not the ones that you happen to like the most.