So, you are going to have a new casino in the area? This sounds like a sweet bargain when you think about it. Then again, gentrification may be a real issue for locals at least. On the plus side, those residents looking to benefit from increased property value so that they can flip their property may have just been given a golden ticket. But there are a few things that residents and real estate investors looking to spend their savings around an area where a casino is due to open should know.
Investment as always is a bit of a gamble – well, isn’t that appropriate?
1. Looking to Buy Next to a Casino: What It Means for Your Money
Casinos are not just about gambling. They sprawl on thousands of square feet and come with all sorts of bells and whistles. In fact, the gaming saloons are but a very small part of the entire bargain, as bars, restaurants, and other entertainment venues criss-cross what most commonly is a resort. Multi-story hotels emerge overlooking the ocean and revealing breath-taking vistas and this is definitely hard to compete against.
Most studies on the effect of casinos on real estate markets and property value have yielded mixed results, according to the Washington Post. Some, such as Summer Davis Inman, estimate the value of real estate properties next to casinos is usually cheaper – or should be in theory. He estimates between a 2% and 10% drop in the net value of the property.
However, this is not necessarily true, as there are too many moving pieces to consider as well.
According to Jed Smith from the National Association of Realtors, things are much grimmer, and as he puts it, “casinos are an attractive nuisance, nuisances on home values.” In the case of the casino in Springfield, Massachusetts, a NAR study revealed that home values could have expected an impact worth between $64 million and $128 million.
Of course, to pinpoint the exact impact of a casino project, you will need to read a report commission to study the exact real estate market you are in. This definitely takes some time and investment, but the good news is there is a way around to look at a tidy profit beyond worrying about the price too much.
Related: 10 Factors That Affect Property Value (#7 Will Surprise You)
2. Buying to Rent Out
One viable investment is to buy real estate and rent it out. This is perhaps the safest way to move your money around into something meaningful. Of course, it may only be safe if you have a stable job, a place to live yourself, and the ability to quickly pay off the investment property mortgage, so you can start turning money in the real estate market.
The downside is you probably won’t be turning a profit – i.e. cover your original investment within the next 20 years in the very least, especially when you factor in property taxes and tax on any income you generate by renting out.
On the flip side, the gig economy is out there to help you monetize your real estate investment without any issues – well almost. Airbnb is a big help to would-be landlords, but it also comes with its challenges – such as the initial investment. As Dan Weber from Airbnb Hell advises: “You have to realize everything should be furnished and it should be fairly new because you are competing with other Airbnb hosts.” Hosts also need to focus on preparing at least $1,500 to furnish a room and up to $3,000 for common areas. As per a Priceonomics report, the average income hosts can expect is $924, although there could be abrupt fluctuations to this income, not least of all because of location, a seasonal turnout of visitors, and others.
Unsurprisingly, location is crucial, and if you are looking out for an Airbnb investment opportunity of this kind, you must focus on choosing from some of the best venues available. TripAdvisor would be a great place to start, so you can also check out this comprehensive list of the best top 10 casino resorts in the United States which is based on the same rankings.
You would still need to take a closer look and compare the cost of the Airbnb investment versus the long-term return on investment.
Related: How to Start an Airbnb Business in 2020
3. Factor Some of the Downsides
Real estate is a volatile market, especially when you consider the hefty investment you need to make to even secure an asset at first. With this in mind, there are multiple factors that may affect the economic value of a property next to a casino.
For obvious reasons, a casino may simply go out of business.
A moribund economy in the Detroit real estate market has caused a resurgence of casinos, but this still doesn’t guarantee long-term stability.
Meanwhile, Atlantic City, one of the most popular gaming hubs in the United States, has known the same periods over and over again.
As casino projects begin appearing in neighboring states, the New Jersey real estate market will be facing even tougher issues with keeping casinos afloat. No small part of this has been due to some casinos’ lack of willingness to invest in their properties and bring them up to date. With this being said, buying next to a casino in the hopes of attracting tenants over Airbnb may prove a challenge.
Europe has less of this problem, as property prices in Berlin, London, Paris, and even Warsaw are going up and you can always buy there and rent out with success.
However, the landscape in the United States has its challenges.
4. The Biggest Gamble on Real Estate
When looking to buy a house for investment and considering the impacts casinos could have on a real estate market, try to look past emotional decisions. Especially in the casino sector, there are comprehensive forecasts and statistical data allowing you to make the right sort of decision.
Atlantic City is going to be facing problems in the next few years, but the Las Vegas real estate market may remain as vibrant as ever.
Closing casinos, however, will definitely lead to a slump in the housing market, based on a lack of economic prospects in regions previously relying on casinos for prosperity.
The good news is people will always love to take a chance on things. Yet, just as a roulette ball spins madly in the wheel, nobody can quite tell you what property prices are going to be five years from now.
Is it worth it? That’s for you to decide.
This article has been contributed by Kiera Regan.