On Multi-Family in Las Vegas
I've owned multi-family in the past and did well on some and lost money on others. For example, I owned two four-plexes in Atlanta that did well. These properties were located in a good area and targeted young professionals. I also owned a four-plex in Houston. On paper, the Houston property looked outstanding. However, there were so many skips and evictions plus the cost for vandalism and maintenance that I lost money each month, even though I did all the maintenance myself. After taxes savings, I only lost a little money each year. One of the happiest days of my life was selling that property. My point is that there is nothing good or bad about multi-family. It all depends on the tenant pool they target, the location, and the property's condition.
The tenant pool for all C class properties is cash-based; no credit cards, no bank accounts, no loans, nothing. So, skipping out on a lease or eviction has no impact on them because they have no dependency on credit. And, without a credit history, it is impossible to weed out the bad actors. In the words of one of the property managers I know who manages these types of properties, "If they have two paycheck stubs and enough cash for the first month's rent, they are in." Also, the average length of tenant stay is a little less than one year. Below is a link to an article I wrote on tenant turn cost.
There is another issue besides the tenant pool. All multi-family properties in Las Vegas are over 40 years old and are located in high-crime drug areas. The newest multi-family property I am aware of was built in 1980. All that I am aware of are in poor condition. Note that in some cases, the investor selling the property updated the interior. But the cost to update the interior is nothing compared to replacing the aging infrastructure. For example, installing granite counters in a small unit is probably about $1000. Replacing the plumbing, which is usually falling apart, is about $10,000 to $20,000. Replacing the roof is probably between $15,000 and $25,000. The sewer pipe is another big expense.
On properties older than about 30 years, the sewer line connecting the property to the sewer main in the street is made with clay pipe. After about 25 to 30 years, the pipe collapses and must be replaced. I've only replaced two sewer lines, and the cost of one was $5,500, the cost of the other was $8,500. A client purchased a 20 unit apartment complex from me, and the quote for replacing the sewer line is $45,000.
A few people purchased these properties and updated them significantly so they could raise the rent. It did not work. The problem is that if people can afford to pay more rent than the typical $850 a month, they would never choose to live in a high-crime area.
In summary, I do not recommend buying any Las Vegas multi-family properties.