Vegas Rental Market Update 2022-2023
The Las Vegas residential real estate market and Vegas rental market have been experiencing market disruptions since the onset of the pandemic. Here are a few of the contributing factors: 1) pandemic resulting in high demand due to an influx of people moving to Vegas 2) Government interference limiting supply with eviction moratoriums/foreclosure forbearances 3) former housing cycle limiting supply due to low inventory of new homes built 2007–2016 and 4) institutional investors focusing on the SFR asset class.
The institutional investors have been swarming our market with cash offers to get their hands on houses under $400k to capitalize on strong demand and low supply in the Vegas rental market. Here’s an article that references the billions and billions of dollars being pushed into this asset class typically reserved for accidental landlords and mom and pop investors.
Las Vegas is experiencing very low inventory for single family rentals and, as a result, rent rates have drastically increased over the last 3-6 months. We have seen about a 20-25% increase in market rent rates from just 12 months ago. There is also very low inventory of single-family homes for sale with a lot of cash buyers competing at the entry level price point driving sales prices up and forcing potential buyers to seek the rental market instead.
In addition, there have been recent legislative changes that have impacted property management in Nevada. AB308 Impacts “increase of rent” notices: for a periodic tenancy of 1 month or more, 60 days in advance of the first rental payment to be increased (up from 45). AB141: seals eviction records for evictions for nonpayment of rent during the COVID-19 emergency, not the sealing of all evictions during the emergency.
Lease Renewals in 2022-2023 for Long-Term Investors in the Vegas Rental Market:
There are definite benefits to pricing lease renewals correctly to incentivize high quality, long-term Tenants to remain in place.
Pricing a rental property correctly is an important factor in the long-term success of your investment. There is a balance needed between attaining the highest rent rate and attracting/keeping highly qualified long-term tenants. There are always higher risk renters that will pay a premium out of desperation to secure a rental home. While this higher rent rate can be attractive from a short-term perspective the long-term costs of not placing/keeping qualified tenants can far exceed the financial benefit of the extra rent.
With landlord’s rights being impacted by government policy it is very important to secure and maintain highly qualified tenants. I have always placed a strong emphasis on approving quality tenants, and because of this, our company has experienced 100% rent collection in the Vegas rental market during the pandemic. In addition, we have never had to evict a tenant we’ve screened and placed into a managed rental property.
2022-2023 lease renewals:
Here’s a sample lease renewal form a Property Owner/Property Manager would mail to an existing Tenant in the Vegas rental market. The form offers Tenants the option to extend their lease for another year or stay month-to-month.
Due to AB308 lease renewal offers need to be mailed to Tenants earlier than in year’s past. If notice of change of terms of rental agreement is not provided 60 days prior to lease expiration the Las Vegas Association of Realtors lease automatically converts to a month-to-month tenancy at the current rent rate.
Two rent rates are needed for the attached form prior to signing and mailing to Tenants:
1. What rent rate do you want to offer the one-year lease renewal?
2. What rent rate do you want to offer the month-to-month option?
What is the Future of Las Vegas Rental Market?
I’m fascinated by the overall real estate market disruption from the pandemic (influx of people/govt manipulation with eviction moratoriums, etc.) and now the further disruption in our local market from hedge funds swarming the entry level SFR market.
Hedge funds are not the sole reason of rents going up but they are a factor because they work off spreadsheets and are an unemotional investor. The local community is being squeezed financially with increased rent rates from increased demand/low supply (variety of factors from the pandemic and previous housing cycle). Many of my Owners are feeling the humanitarian need not to take current tenants to the higher market rent rates.
Mom and pops investors have a significantly different view on ROI. Institutional investors are coming into our market and are working off spreadsheets.Heidi Rice, Property Manager from Las Vegas
Many long-term investors were at market rent prior to the spike in rents over the last 3-6 months. We’re hitting the 1 year mark of the start of higher rents so I’m having daily conversations with Owners educating them about the rapid changes in our market. Lease renewals are super relevant at this point because rents have spiked significantly in such a short period of time. Long-term investors may be hundreds of dollars under market in just one year as most tenants are on 1 year leases.
I too am curious to see how this all plays out in 5-10 years. There is a chance the Las Vegas rental market and overall housing market comes out of this crazy pandemic housing OK as we are still a relatively young city and the residential sector is well funded with cash at all levels. I believe the turning point will be when/if the institutional investors decide to liquidate en masse due to low returns or from future government polices trying to regulate their investment.