Why Las Vegas?
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Thanks for all your positive feedback on my blog post from last week, Lessons from National Retailers, where I shared the investing methodology I developed—through trial and error—by following the strategies of successful national retailers.
In this week's post, I'll explain why I chose Las Vegas over all other U.S. cities to build my investing business, and share the unique advantages Las Vegas offers real estate investors.
Before I start, I want to clarify the goal of real estate investing.
Financial Independence Through Real Estate
The goal of real estate investing is financial independence. Financial independence is more than a specific dollar amount. You must be able to maintain your financial independence throughout your lifetime, including during periods of inflation and economic cycles. This means your rental income must meet three criteria:
- Rents must outpace inflation.
- Rental income must last a lifetime.
- Achieve financial independence with the least amount of capital
These factors are defined by the city you invest in. Let’s break them down.
Rents Must Outpace Inflation
Financial independence depends on rental income that grows faster than inflation. Otherwise, your buying power decreases over time. For example, suppose you need $8,000/month today to cover your expenses and you own enough properties to generate that amount. If rents increase by 2% per year while inflation averages 5% per year, after five years, your rental income's purchasing power will decline significantly, even though your rental income increased each year. The buying power (today's dollars) of the increased rent in five years will be
- $8,000 x (1 + 2%)^5 / (1 + 5%)^5 ≈ $6,921
The takeaway is that even though your rent increased by 2% each year, since this was less than inflation, in five years the increased rent will only have the buying power of $6,921 in today's dollars.
Unless rent growth outpaces inflation, no matter how many properties you own, you cannot sustain financial independence.
What Drives Rent Growth?
Two main factors drive rent growth:
- Population Growth: Cities with sustained population increases see higher demand for housing, driving up prices and rents. Conversely, cities with declining populations experience falling prices and rents.
- Urban Sprawl: In most cities, new developments on the outskirts compete with older homes, slowing rent growth in established neighborhoods. Over time, this leads to declining property values.
Why Las Vegas?
Las Vegas is unique. Unlike sprawling cities like Phoenix or Houston, Las Vegas is constrained by federal land ownership—88% of Clark County is federally controlled and, due to land usage around the Las Vegas metro area, there is no practical way to expand. See the map below.
Today, I estimate that there are less than 16,000 acres of undeveloped land in the metro area. This has resulted in:
- High land costs (>$1M/acre in desirable areas).
- New single-family homes starting at $550,000.
- A fixed inventory of homes in the $350,000–$475,000 range, which is what our target tenant demographic can afford to rent.
With a fixed inventory and 40,000–50,000 new residents moving to Las Vegas each year, housing demand steadily increases. The combination of high demand and limited supply drives consistent rent growth and property appreciation. Since 2013, our targeted single-family homes have averaged over 10% annual appreciation and 8% rent growth.
Income Sustainability
For rental income to last a lifetime, tenants must continuously earn similar wages. The average lifespan of a company is only 10 to 18 years. This means that more than once during your lifetime, the jobs your tenants have today will go away. So, income sustainability depends on investing in a city with strong job growth.
Las Vegas Booming Job Market
Businesses, large and small, continuously set up operations in Las Vegas. There is currently 30.7B worth of projects underway or planned. Some of the higher profile investments include: new A’s Stadium 1.8B, Venetian Renovation 1.3B, Brightline High Speed Rail 3.0B, Sony Summerlin Studios 1.8B, HAAS Automation Manufacturing Plant 0.4B, and there is also a major airport plan for just south of Las Vegas. This will be a massive airport on the scale of Dallas/Fort Worth. Such a massive amount of continuous business investment will create thousands of new jobs while under construction and once operational.
Businesses choose to invest in Las Vegas for various reasons, including:
- Lower operating costs - lower taxes, lower insurance and utility costs, and less regulation.
- Low energy cost - Commercial energy in California costs ¢23.72/KwH compared to ¢8.39/KwH in Nevada. This is why energy intensive companies like data centers continue to set up operations in Las Vegas.
- Law and order - Las Vegas is Becoming the SAFEST City in America. This is part of why businesses and people are attracted to Las Vegas.
- Pro-business government - Efficient zoning, licensing, and permits processes.
The influx of new businesses investing in Las Vegas sends a powerful signal to real estate investors—where jobs go, people follow.
Achieve Financial Independence with the Least Amount of Capital
Replacing your current income will require the income from multiple properties. The total amount of capital you will need depends on the appreciation rate in your investment city.
Low-Appreciation Cities
In cities with low property prices and little appreciation, you’ll need significant capital to acquire enough properties. For example:
- If each property costs $200,000 and nets $300/month, you’d need 27 properties to generate $8,000/month.
- With a 25% down payment, this requires $1.35M in capital.
High-Appreciation Cities Like Las Vegas
In Las Vegas, properties appreciate rapidly, allowing you to leverage equity to acquire additional properties. For example, a $400,000 property appreciating at 10% annually, a 75% cash-out refinance can generate $100,000 in re-investable cash in just over three years. This allows you to acquire another property with little additional capital. As your portfolio grows, appreciation accelerates your ability to acquire more properties, creating a compounding effect.
I’ve used this strategy to grow my portfolio, and many of my clients have done the same.
Summary: Why Las Vegas?
Las Vegas offers unique advantages for real estate investors:
- Limited Land Supply: Federal land ownership and natural barriers prevent urban sprawl, driving up property prices and rents.
- Strong Demand: Rapid population growth (40,000–50,000 people annually) ensures consistent demand for housing.
- Job Growth: Thousands of open positions and billions in new projects create current and future employment opportunities, attracting more people to Las Vegas.
- High Appreciation: Rapid property appreciation enables you to grow your portfolio faster with less capital.
- Low Operating Costs: Nevada’s low taxes and insurance costs maximize your net rental income.
For over 17 years, we’ve leveraged these advantages to achieve consistent rent growth and property appreciation for our clients. Las Vegas remains one of the best cities for real estate investors seeking lifelong financial independence.
