Why the Supreme Court Decision on HOA Foreclosures Is Good News for Everyone

Lenders and investors are squaring off in Las Vegas over the recent Supreme Court ruling that stated that Homeowners Associations (HOAs) have the authority to foreclose on properties and sell them at auctions to recuperate delinquent dues without needing to go to court for permission. The Supreme Court ruled that the super priority lien that the HOA holds on the property for unpaid assessments trumps the first trust deeds held by mortgage lenders. The HOAs are allowed to sell these delinquent properties to recuperate unpaid dues. These properties are often listed for sale at the auctions at prices equal to the total amount of dues owed to the HOA plus collection costs and late fees, which usually equals only a couple thousand dollars.

This means that investors at these HOA auctions can purchase these delinquent homes for a fraction of the cost of their real value, making these properties an excellent investment opportunity. After purchase the property is transferred over to the investors via a quit claim deed or a foreclosure deed which gives them title to the property and allows them to live in, resell, or rent (depending on HOA rental restrictions) the properties. According to the recent supreme court of Nevada ruling the first trust deed held by the mortgagee (the bank) is completely wiped out.

The super priority lien held by the HOAs allows the associations to foreclose on the properties and any delinquent dues to the HOA are paid back.  Any overage from this sale will go in lien priority, with the bank being next in line in most cases, to recover any overage from the HOA foreclosure sale.  This September 18th 2014 ruling has, of course, put many lenders in an uproar as lenders now potentially can lose their security to the property if they choose not to foreclose themselves before the HOA does or if they choose not to pay the back HOA dues to prevent an HOA foreclosure.

The Nevada Supreme Court and the HOAs have no sympathy, however, for the lenders. Since the bank foreclosure process has been taking a very long time (sometimes years!).  HOAs are often left with empty homes and delinquent dues with no possibility of re-payment through the existing owners. Lenders are given the opportunity to pay for the HOA liens to prevent the property from being foreclosed upon by the HOA, but if lenders choose to not pay the liens they run the risk of losing out on possession of the properties that they could foreclose on themselves.

Some lenders claim to be unaware of HOA liens on the property or state that the HOA will not allow banks to pay the liens. In this case the issue of timeliness comes into play. If lenders foreclosed on properties quicker there is less of a chance of the properties remaining vacant for so long and thus acquiring further delinquent dues. If a new owner was allowed to move in quicker the current dues could be consistently paid preventing the HOA from needing to foreclose on the property in the first place.

There has been a definite shift in the real estate market with this new Supreme Court ruling, and some agents are already beginning to notice the difference in how short sales and foreclosures are being handled. Some agents are reporting short sales that are being approved in less than a month, a process that usually drags on for months or even a year or longer in the recent past. Why the sudden quick decision from banks regarding short sale approvals? Banks and lenders are trying to recuperate their losses before the HOAs foreclose first and thus prevent them from losing their security against the homes.

It will be interesting to see how the lenders handle the new ruling and whether it will affect mortgage rates or the ability to get a loan in Nevada. While the banks have stated that HOA foreclosures may be bad news for them in reality it is a great situation for the banks.  The delinquent properties sold at HOA auctions are selling at about 70% of retail value and will actually get the bank their money faster than if they waited to foreclose themselves. Remember that any overage of the HOA auction is paid to the bank.  This is the same way it works with a normal trustee sale.

This decision is also good news for real estate agents and short sale buyers and sellers who may see quicker short sale approvals and re-listing of foreclosed and short sold properties. Residents who live in HOA communities will also benefit as the HOAs will be better able to service and maintain their associations with the recuperated dues.

Local Las Vegas Investors will reap the most rewards, however, especially those who took advantage of the HOA foreclosures prior to the Supreme Court decision. Millions of dollars of equity was created with the Supreme Court ruling and investors who purchased many of these properties are now sitting on a real estate gold mine.

For more information on HOA foreclosures and how you can still take advantage of this investment opportunity contact Glenn Plantone today!

Continue reading

Why You Should Attend the 2014 Economic Summit

As a Las Vegas Real Estate Investor I know that staying on top of trends in the marketplace is the most valuable tool an investor needs to use in order to gain equity in personal portfolios. I have personally added over $5 million in equity to my personal portfolio in the last 2 years alone, as well as helped add millions more for many other investors I have worked with.

How did I achieve this?

Through my constant vigilance in spotting marketplace trends, identifying where the opportunities lie, having the ability to act on the opportunity, and actually taking action to take advantage of that opportunity.

The Economic Summit is an example of the type of conferences and events I frequent to keep abreast of the trends and opportunities that exist in real estate on a local, national, and global level. Investors who attend this year’s annual “Econosummit” will learn:

1. How current geopolitical events will impact investors on a personal level
2. What to invest in and avoid in today’s economy
3. The outlook for interest rates and how it will impact investors
4. The best strategy to make money in today’s real estate market

This year’s Economic Summit will take place on November 15th and 16th, 2014 and will last from 8am to 8pm on both days. It will be held at the Las Vegas Orleans Hotel. Registration is normally $299 but I have negotiated a special rate through the Las Vegas Investment Club for a discounted registration price of only $99!

I encourage all aspiring real estate investors to take advantage of this special offer for this upcoming Economic Summit in November in Las Vegas. By attending the Economic Summit investors can gain valuable knowledge on market trends to help boost equity in their own personal portfolios…all at an incredible discounted price.

I will be there and I hope you will to!

To take advantage of the $99 special registration rate you must RSVP to Kelsey, my marketing coordinator, by emailing her at info@vip-realty-group.com. This special rate is NOT available through the website. Registration is limited to a maximum of 200 people. This will sell out! RSVP today!

For more information on the Economic Summit, please visit: http://www.econosummit.com/

Continue reading

Trustee’s Sale Becomes Best Buying Option as Home Prices Rise in September

As you may know I have been very heavily involved in the Las Vegas real estate market for the last six years, both as a private investor and as a licensed real estate agent. As an agent specializing in undervalued properties, I have sold homes and condos to both owner occupants and investors at great discounts…before and after the bubble burst.

The current Las Vegas market represents one of the greatest buying opportunities that we have ever seen in real estate. Prices have over-corrected as a result of the credit crisis and have come down to levels that are way below builders’ costs. We are seeing condos selling at about $35-$45 per square foot and single family homes selling as low as $50 to $60 per square foot. From October of 2007 to May of 2009, the average median home price in Las Vegas fell approximately $10,000 per month…every month. As prices began to stabilize in the summer of 2009, investors realized that a bottom was arriving and began to flood back into the market. This past summer saw record sales volume in the Las Vegas valley. There were over 3700 closes in both June and July, 2009…beating even the previous monthly highs set in the summer of 2004, at the height of the bubble. Of these closings, 45% were cash deals and 40% were to investors (as opposed to owner occupants)…these numbers also exceed the percentages posted in 2004.

This extraordinary demand for great properties at great prices in Las Vegas caused the median home sale price to increase in September…the first increase in the Las Vegas market in over two years. September also saw sales taper off slightly. The general consensus, however, is that this decline is not because of a reduction in demand, but rather because of a drastic reduction in supply. In September only around 1800 homes were returned to bank ownership through the foreclosure process. In contrast, 3358 single family homes sold in this same month. Since almost 70% of all these sales were on foreclosure/REO properties, this represents a situation where more homes are being sold than are coming on to the market. The prices are low, the demand is high and, as a result, prices are starting to creep up on these REO sales. In addition, we are seeing multiple bid situations on almost every REO property that comes up for sale. These circumstances are making finding good deals by buying REO properties very difficult.

The most viable option at this time for acquiring properties below market value is at the trustee’s sale. Once the owner of a property passes his 90 day notice of default period, he is issued a notice of trustee’s sale. After the NOS, or notice of sale, is given, the owner has 21 days to cure the default or the property will be sold to the highest bidder at the trustee’s sale. Buyers at the trustee’s sale in Las Vegas are currently picking up properties for a discount of about 20% under the already heavily discounted REO listings that are setting current market values. For example: If a home sold in 2007 for $300,000, and it is now worth about $100,000 on the REO retail market, it may be picked up at the trustee’s sale for around $80,000. This would represent a buy price of approximately 25 cents on the dollar from the highs of just a few years ago.

I have spent the last several months working with a handful of investors and have made several purchases through the trustee’s sale. If you are interested in finding good properties at the best prices in the hottest foreclosure market we have ever seen (and may ever see) please give me a call or shoot me an email and I can go over the details with you. Buying at the trustee’s sale represents not only a great opportunity for the buy and hold investor to purchase properties for cash flow, but also represents the only viable opportunity for flip investors in Las Vegas to actually resell a property for a quick flip profit.

Continue reading

Short Sales or REOs?

Over the last year, many of my clients have asked me about the feasibility of short sales…both from a seller’s perspective, as a way out of an upside down property; and from a buyer’s perspective, as a way to acquire properties below market rate. Up until recently I have advised most of my clients away from short sales…as a buyer or as a seller. The reason was simple: lots of time invested, small chance of success. As a rule, since the housing bubble burst and the credit crunch began, banks have been overwhelmed with defaults and the departments in charge of evaluating and approving short sales have been notoriously slow and inefficient. Trying to negotiate a short sale with the bank often resulted in frustration for all parties involved with a very low success rate.

As a result, I have advised my investor clients to seek out REOs as the best buying opportunity here in Las Vegas. Time, however, are changing. My recent articles on the Las Vegas housing marketing have highlighting the dwindling supply of bank-owned REO properties available. Each month the demand for these REOs and the closings exceed the fresh supply of foreclosed homes coming from the banks. This has resulted in bidding wars across the Las Vegas valley as investors and primary residents eager to capitalize on the best real estate buying opportunity in decades flock to purchase the REOs that make their way on to the market. But with the percentage of homeowners behind on their mortgages still at all time highs, why is the number of foreclosures entering the market declining? The answer may be the increase in short sales.

Brian Wargo of the Las Vegas Sun recently wrote an article discussing this increase in short sales. In it, he quote Larry Murphy, president of the real estate monitoring firm SalesTraq, who says that of the 35,742 closings through the first three quarters of 2009 75% were foreclosures and only 10% were short sales. However, of the 11,249 contingent sales currently in place in Las Vegas, 71% are short sales and only 21% are REOs or foreclosure homes. This represents a dramatic shift in banking policy.

Murphy believes banks are becoming much more willing to consider short sales because they are finally realizing that short sales generate a higher sales price for the banks than REOs. Data supports this. The median price of homes sold through foreclosure is $116,900, while the median price for homes sold through short sales is $150,000.

The federal government has also adopted standardized rules for short sales, simplifying the process. This, combined with the pressure being exerted by the Obama administration to keep homeowners out of foreclosure, is creating a much higher approval rate for short sales. This, in turn, is keeping the flood of foreclosures that we had been expecting here in Las Vegas off the books and creating the progressively lower inventory monthly of bank-owned REO homes.

All-in-all, whether you are a seller looking to get out of an upside down situation or a buyer looking to capitalize on low home prices, now may be a great time to consider the short sale as an option.

Continue reading

Latest Update — MGM Signature Towers

It has been a little over three months since my last update on the MGM Signature Condos and I wanted to update my readers on the new developments that have been taking place. Those of you who are on my mailing list will have received a spread sheet I produced that details the profitability of a studio unit purchased recently for $150,000. This same unit was selling for $465,000 at its high three years ago. The spreadsheet shows that purchasing the studio unit for $150K, or roughly 32 cents on the dollar, would result in positive cash flow for the new owner.

In crunching the numbers on the MGM Condos, I have come across an interesting anomaly that I would like to share with you: The one bedroom units that are placed into the rental program have historically generated lower occupancy rates than the studios. Yet they cost about twice as much (the new lowest 1 bed sale has been $185,000), the HOA fees are nearly twice as high ($1000 vs. $500 for the studio), and they only rent for about $40 more per night. Potential investors should keep this in mind when considering studios vs. one bedroom units at the MGM Signature Towers. The one bedroom units are getting close to being a good deal for a buyer that is thinking of either living in it, renting it outside of the MGM rental program, or just holding it as a second home. But the one bedrooms are not as attractive as the studios from a pure investment perspective.

So far, the six lowest price studio sales in the entire project have been transactions that I have been able to negotiate for my clients. I was recently able to broker a deal in which one of my investors purchased a bulk bundle of four studio units at what amounted to $118,000 each. The Mountain View studio units are selling for the $120K-140K range and the strip view studios are now selling in the $140K to $180K range. The higher range would include the studios with a patio. The unit I discussed in the first paragraph that originally comped for $465K and recently sold for $150K, was a higher floor studio with a strip view and also a patio.

The inventory remains very light at this time. Currently, there are only 9 bank-owned foreclosures available in the MGM Signature Condos. 8 of them are studio units and one is a one bedroom condo. There are still quite a few short sales in various stages, but we are beginning to see a lot of short sales reverting back to the bank and becoming foreclosures as the short sale process is very slow and agents and banks are often unable to get them approved before the foreclosure happens.

Because of the light inventory of REOs and the difficulty in successfully negotiating short sales, I am beginning to look at the Trustees Sale in order to purchase affordable MGM Signature units for my investors. We are starting to see many studio units being sold at the Trustee Sale for around $120,000. MGM Signature Condos continue to be a great investment opportunity for those looking to acquire properties and utilize a buy and hold strategy. However, the really good news is that if you are looking to buy and flip, there is the opportunity to make $20,000-$50,000 per condo in a two month period through purchasing MGM Signature units at the Trustees Sale. If you are interested in this opportunity, please contact me for more details.

Continue reading

Upcoming Nicaraguan Investment Conference

My friend and colleague, Kevin Fleming recently shared with me a project he is involved with in Nicaragua. I have endorsed some of Kevin’s deals in the past and this one looks like it has potential. Costa Rica and Panama have offered great appreciation over the last ten years and it looks like Nicaragua might be the next play in the Central American real estate market. I am including some details below. If you are interested, contact me and I will get you in touch with Kevin.

In celebration of the release of Phase 2 at Seaside Mariana Spa & Golf Resort and the amazing new investment-friendly progress within the country of Nicaragua, Grupo Mariana Family of Resorts is proud to host “Nicaraguan Abundance: Live, Invest and Grow,” December 3-6 at the Intercontinental Hotel in Managua, Nicaragua.

“Nicaraguan Abundance: Live, Invest and Grow” is a three-day business and culture immersion conference tailored for the savvy real estate investor. We will guide you through exactly what you need to know to successfully invest and do business in Nicaragua, allow ample time to network with colleagues, and then be your personal hosts for a day immersed in the sunshine and culture of the New Nicaragua.

You’ll meet a select group of real estate professionals already living and working in the Nicaragua…You’ll check out great places to live…You’ll get all of your questions answered about investment in Nicaragua…

• You learn about opportunities for the forward thinking investor
• You’ll learn more information about our Joint Venture Offerings
• You’ll find out how you can buy real estate in your IRA, 401 (K) or other
qualified retirement plans
• You’ll learn about title insurance and meet approved Nicaraguan Law Firms
from First American Title Insurance Company and Stewart Title Guarantee.
• You’ll meet members of the Grupo Mariana Development Team
• You’ll learn how you can get involved in the country that many are calling
the next Costa Rica.
• You’ll learn how you can participate in fascinating business opportunities
available in one of Central America’s fastest growing countries.
• You’ll discover how you can earn potentially stratospheric returns on
pristine, pure beachfront real estate.
• You’ll see how you can enjoy a tropical lifestyle for far less than you’d
spend at home.
• And many other details…

Continue reading

Las Vegas Mayor Oscar Goodman to Speak at October Las Vegas Real Estate Insider Club Meeting

The Las Vegas Real Estate Insider Club is proud to host special guest speaker Mayor Oscar Goodman at their upcoming meeting, held Wednesday October 14th. In order to accommodate the increased number of guests expected to attend, the meeting will be held at a special venue this month… the conference center high atop the Newport Lofts in downtown Las Vegas. The mayor will likely address such topics as the state of the economy, the redevelopment efforts downtown, and the housing market in Las Vegas.

In addition to the presentation from Mayor Goodman, the Club will welcome its usual line up of speakers discussing current Las Vegas housing market conditions, the national economy, foreclosure properties and more. Tamara Bostrom from Spiral Digitial Media will discuss how professionals can use the internet to generate new business in this challenging economic climate.

The Las Vegas Real Estate Insider Club, which normally meets the second Wednesday of each month at Putters Grill on Rainbow at the 215, was founded almost three years ago by full time real estate investor Glenn Plantone. Glenn’s vision was to create a forum for other investors and professionals involved in real estate and related trades to meet and exchange ideas and opportunities as well as have the opportunity to hear timely, educational presentations from local and national real estate experts. Thus far, the Club has enjoyed tremendous success and anticipates welcoming over 150 members and guests to the Newport Lofts downtown for the October meeting featuring Las Vegas Mayor Oscar Goodman.

Continue reading

Shrinking Inventory Necessitates New Buying Strategies

The Las Vegas real estate market has endured an amazing roller coaster ride in the last ten years. Homeowners in the Las Vegas valley saw very modest price appreciation throughout the 90’s and the early part of this decade. In 2003, sales began to pick up and by 2004 Las Vegas was the hottest market in the United States. Prices shot up to astronomical new heights only to come crashing down a few years later. The 2007 and 2008 season saw the Las Vegas real estate market become as cold as ice as both prices and closings plummeted and foreclosures soared. But all things come full circle and since the summer of 2008, the Vegas market has been picking up steam and has in fact enjoyed record sales going into the summer of 2009. In fact, there were more sales in June and July of this year than during any previous month on record…including the heyday back in 2004. The continued bad news, is that after 18 months of price drops the huge gains in appreciation that we saw from 2003 to 2006 have not only been erased, but we have receded to levels of a decade ago. The average median home price in Las Vegas has settled near $130,000. Virtually everyone that purchased in Las Vegas after 1998 is now upside down in their home. It does not make a lot of sense to most Las Vegans as homes are now selling well below builder’s replacement costs.

This drastic decrease in prices has brought droves of investors back into the Las Vegas real estate market. 80% of closings in the last several months have been on REO or post-foreclosure bank owned homes. Cash buyers have been dominating the market and getting great properties for around $40 to $70 per square foot. Unfortunately, the inventory of bank owned homes is now at an all time low of under 2000 units. This represents less than a two week supply of inventory based on the fact that the majority of the 4702 and 4602 closings in June and July were REOs. Even though Las Vegas is the “foreclosure capital of the world”, we are continuing to see foreclosure inventory shrink on a monthly basis. June and July saw nearly 3300 homes per month revert to the banks through foreclosure, but this pales in comparison to the over 3700 REO sales per month that we saw at the same time. This disparity means that we are loosing nearly 400 homes per month from the inventory of bank owned homes.

The low inventory is causing heavy competition for the homes that are available. REOs coming on to the market today are creating bidding wars as investors try to snatch up cash flowing properties at great, low prices. Both owner occupants and investors looking to take advantage of great buying conditions are finding that they are having serious difficulty getting homes under contract. This excess of demand is beginning to drive prices up on bank owned homes.

For months, I have touted the benefits of buying REOs directly from the banks. The process is simply and easy, and, until recently, investors could use this method to acquire great properties at great prices. But those days appear to be coming to a close, at least for the time being. There has been talk for over six months, since the moratorium on foreclosures ended in March of this year, that the banks have a surplus of inventory they are holding back. The problem seems to be that no one knows when or if this rumored inventory will be released. Until or unless that day comes, I am now advocating that investors change their strategy for acquiring properties in Las Vegas. Plan B is to buy homes at the trustee’s sale. After the notice of default (giving a late paying home owner 90 days to cure the late payment) and the notice of sale (giving them another 21 days) a home is sold at the trustees sale. At this sale, the property will either be bought by a third party (you or I) or it goes back to the bank and will eventually become a bank owned, MLS listed REO foreclosure property.

Previously, I have not advocated buying at the trustee sale because there are many restrictions and hassles involved in this method of purchase. Not the lease of which is that properties cannot be financed…cash must be paid at the time of sale. However, with the inventory of REO homes tightening so drastically, I am now finding that trustee sales are offering opportunities to purchase homes at 20-30% below the price that would be paid once the home becomes an REO. Buying at the trustee sale also eliminates the competition of multiple offers. This is where the true investor can now turn to get great wholesale deals. Investors must continue to adapt in order to profit in today’s real estate market. I believe trustee sales in Las Vegas are the next step in this evolution.

Anyone interested in getting involved and finding great homes at the best prices with the least amount of competition feel free to get in touch with me for more information.

Continue reading

Will Cash Flow For Cash

Over the last five years I have sold a lot of real estate in many different markets nationwide. In 2003, droves of investors came into the Las Vegas market and purchased single family homes and condos. In 2004, the scene repeated itself in the Phoenix market. In 2005, towns like Albuquerque and Austin saw investors moving in to snatch up large quantities of new construction homes. Finally, in 2006, the Carolinas became hot and certain areas on the Gulf Coast enjoyed profitable buying conditions.

I was on the move throughout this time period, visiting all of these markets and helping my investors find deals there. All the while, I was sitting on the sidelines at home. After 2003, home prices in the Las Vegas valley became too high to cash flow and purchasing here no longer made sense to investors. Of course, that all began to change in the summer of 2008 as the real estate bubble burst abruptly and prices began free-falling throughout much of the West. As home prices plummeted, Las Vegas began to make sense again for investors because the point of cash flow was once again reached. The “point of cash flow” is a simple equation in which the amount of money an investor can make from renting a home exceeds his/her costs of ownership. These costs of ownership include the mortgage, taxes, insurance, repairs, and property management. With a 20% down payment (or in many cases less), positive cash flow can now be achieved in the Las Vegas market for the first time in several years. This is due primarily to the rock bottom prices of the foreclosures that have been flooding the market. Not only has Las Vegas lead the nation in foreclosures for well over a year, but the amount of foreclosures coming on the market now are near triple the amount from just a year ago. Currently, in the Las Vegas valley, nearly one home in 40 is in some stage of the foreclosure process. The median home price has come down approximately $10,000 per month, every month for the last year and a half from a high of near $300,000 to a new median price of only $140,000. These drastic price reductions have created a new buying boom.

Local newspaper articles and analysts talk about a 30% declines in home values here in Las Vegas. But as a full time investor myself and a licensed Realtor, I can tell you the reality is that we are seeing prices that are being discounted 50-70% off of where they were just two years ago. Many of my deals over the last couple of months have been coming in at well below 50% of older, higher values from 2006. I recently sold a one bedroom condo at $31,000 that sold for $148,000 two years ago. That is nearly 20 cents on the dollar! Three bedroom homes, only two years old, that sold new as high as $300,000 are now priced under $120,000. I recently closed on a three bedroom, 1300 square foot home for $75,000. This same home sold for $244,000 just three years ago. Deals like these are typical of what I have been getting for my investors.

These incredible prices open the door for virtually anybody to step back into the Las Vegas market and begin buying once again. Utilizing the government’s Housing Recovery Foreclosure Bill, 1st time buyers have a $8000 tax credit to take advantage of and Baby Boomers and retirees looking to relocate to a warmer weather destination do not have to head south of the border as the Southwest has become affordable once again. The vacation capital of the world now makes sense for second home and vacation home buyers, and, of course, investors are delighted to be able to cash flow on their investments in Las Vegas once again. All of these groups will also benefit from price appreciation over the next several years as the market continues its recovery.

The only bad news, as we all know, is that lending guidelines have tightened up considerably over the last year. But, to offset this, prices are ½ of where they were two years ago. If you have a good job, and good credit, it is a great time to be buying a home. Interest rates are at historic lows and now is a great time to lock in a good rate on a 30 year fully amortized note, rates literally have no place to go but up. Current reports show that nearly 85% of closings in this market are being financed through a lender. So it is clearly still possible to get a loan. However, of the nearly 50 deals I have closed this year, only five of them were financed. Nearly 90% of my deals have been all cash. Not only am I getting more deals accepted, but I am getting them at or near list price in most cases and getting them pushed through rapidly. I just had a lender for a bank owned property countact me stating that they were willing to accept our lower than list price offer as long as we could close in 10 days with all cash (as we had stated). They had two other offers on the table for more money but banks do not want to fool around with financing either. They want to take the sure cash sale even if it is at a huge discount. This just goes to show that even though financing is available, cash is still king right now in this market.

June and July of 2009 have seen record sales in Las Vegas with 4702 and 4602 closes in each of the last two months. After 18 months of declines we have seen 3 months of holding steady on pricing. Investors have sensed the bottom has been reached and are coming in droves to pick up homes and condos at the bottom of the market. So, folks, if you have been able to save some money, or if you still have a line of credit open, I suggest you come back into the Las Vegas market and start looking around for some real bargains. The banks are ready to deal and the timing to buy a great foreclosure is as good as it gets.

Continue reading

Glenn Plantone Quoted in Las Vegas Sun

I recently had the pleasure of being interviewed for an article written by Brian Wargo for the “In Business” section of the Las Vegas Sun. Following is a reprint of the article which was titled, “Single Family Homes Catch Investors’ Eyes – Buyers Focus on Rental Income More Than Appreciation Potential”:

Southern California investors have returned to the Las Vegas market in force to look for bargains on single-family homes and helped drive Las Vegas to a record number of sales in June, housing industry experts said.

The number of investors buying new and existing homes in Las Vegas rose 35 percent when June numbers are compared with June 2008, according to San Diego-based DataQuick.

The demand for investors buying existing homes has helped that segment of the market fare the best when it comes to real estate investing over the past year and kept housing prices stable between April and June, analysts said.

“Real estate has always been a good investment, and right now it has never been better from a residential standpoint,” said Steve Bottfeld, executive vice president of Marketing Solutions. “I just wouldn’t invest in commercial (real estate) because it is about to go through what residential already has.”

DataQuick reported that investors made up 37.5 percent of the buyers of both new and existing homes in June. That’s the second highest June this decade when it comes to investor-purchased homes, next to the 39.4 percent in June 2004. It’s also the highest percentage of investors as buyers since it was 37.6 percent in February 2006, said DataQuick spokesman Andrew LePage.

The influx of investors into the market is evident since it hit a low of 25.3 percent in September 2008 in the aftermath of the housing boom. In June 2008, investors comprised 27.8 percent of the sales, below the 30.3 percent average for Las Vegas between January 2000 and June 2009, LePage said.

No one should confuse this class of investors in residential real estate with those during the boom that bought and flipped houses, Bottfeld said. These investors are looking to hold long term and earn money off rental income, he said.

It makes sense because if someone can buy a home for $100,000 in cash and rent it for $1,000 a month, that equates to a 12 percent return before taxes and other expenses are included, Bottfeld said. Even getting an 8 percent return is better than the 2 percent they might get at their bank, he added.

Glenn Plantone, a Realtor and president of the Real Estate Insiders Club in Las Vegas, said investors are taking advantage of a steep drop in prices since they peaked in 2006. In some cases, prices of homes in the northwest fell 70 percent.

Homes that sold for about $300,000 are going for about $110,000 he said.

“They are buying them for cash flow,” Plantone said. “We are not even talking about appreciation potential.”

The market to rent homes remains strong because people understand the value compared to renting an apartment, Plantone said. And for those homeowners who lost their home to foreclosure, they want to stay in a home.

“It is a lot easier to rent houses than condos,” Plantone said. “We are getting people who are walking away from a $2,000 a month home payment and going across the street to rent a home for $1,200 in immaculate shape.”

Despite the interest in Las Vegas, it is not as strong as Phoenix where 39.6 percent of sales were bought by investors, LePage said.

Most of the investor buyers that Plantone said he has dealt with are Southern Californians. Many are small businessmen who have several hundred thousand dollars to invest and have been waiting for an opportunity in real estate.

Plantone said these buyers are savvy because none of his investors has bought a property for more than $121,000. They are looking for homes built in 2003 and later.

Robyn Yates, the broker-owner of Windermere Prestige Properties said not only are investors coming from Southern California but there has also been a lot of interest from foreign buyers, especially in Asia. Some are even buying homes without seeing them in person, she said.

Many investors have been hurt by the decline in the stock market and liquidated some of those assets or took out money from their 401k despite having to pay a penalty, she said. In some cases, there are a group of five people pooling cash to buy 10 homes, but most are individual investors, she said.

“Some of them were just holding onto cash until the opportunity was right,” Yates said. “I think they are going to be around for another couple of years.”

As long as homes can be bought much cheaper than builders can construct them, there will be a market for investors in Las Vegas, Yates said.

Plantone said that many of these buyers will leave the market when prices go up $20,000 to $30,000 because their investments won’t pencil out for rental income as they will now.

“That’s why investors have been so aggressive,” Plantone said. “I am telling people they may not see a better time to buy since the Great Depression.”

Investors are winning out over frustrated first-time buyers for the properties because they are offering more than the list price and because they have the advantage of offering cash, Plantone said. It was only three months ago that buyers could get properties below list price, he said.

Any investors who bought in 2007 or early 2008 wouldn’t have had any luck with appreciation, although buying single-family homes fared the best out of all real estate investment categories over the past year, according to Larry Murphy, president of SalesTraq, a Las Vegas housing research firm.

“The single-family home has always been the preferred house of choice with most people,” Murphy said. “Most people want the picket fence and the back yard and not being attached to someone.”

Between the first six months of 2008 and first six months of 2009, the median price of single-family homes fell 34 percent, Murphy said.

The best performer on price appreciation when it comes to planned communities was Silverstone Ranch in the northwest valley. The Pulte Homes community had a median price of $226,000 in 2008 and that fell 19 percent to $182,500 through the second quarter this year, Murphy said.

Homes performed better than an acre of undeveloped land, whose median price fell 42 percent over that timeframe, he said.

Third on the list were mid-rise condominiums, which fell 49 percent in the past year They were barely ahead of high-rise condos whose values fell 50 percent and other condos and town homes which fell 51 percent, Murphy said.

The worst investment over the past year was apartment conversions with values falling by 56 percent, Murphy said.

The worst of the that segment was the Meridian at Hughes Center on Flamingo Road, east of the Strip that was converted from apartments to condominiums between 2005 and 2007, Murphy said.

The property, which had a failed attempt at trying to convert into a condo-hotel because of Clark County regulations, sold for $604 per square foot when it first entered the market. The average price was $539,000, Murphy said.

Through June, the average resale price has fallen to $87,611 or $121 a square foot, Murphy said. With that drop in price has come rising foreclosures. Murphy reports that 201 of the 680 units or 30 percent have been foreclosed upon, and that number is likely to rise. The foreclosures have been running as high as 25 a month so far in 2009, he said.

Murphy said he’s not surprised apartment conversions have fared the worst because in essence some are 20-year-old buildings that have a new granite countertop.

There was a strong demand for condo conversions during the housing boom because they were the only units available that could be bought for $200,000 or less. With homes more affordable today, that softens the demand for conversions, he said.

Land came in second after single-family homes because despite the meltdown in the market, it remains a precious commodity, Bottfeld said. Even though Las Vegas is overbuilt, there is a limited supply of land because of restrictions by the federal government, he said.

There is not as much movement on buying high-rise condominiums because the inventory is limited and banks have been reluctant to put that inventory on the market at bargain prices, Plantone said.

The high-rise condominium market that has fared poorly is condo-hotels in which buyers put the room in the daily hotel rental pool. Demand for hotel rooms has been weak in the economy and hotels only return about $30 for every $100 in rental income, Plantone said.

Continue reading

© 2018 VIP Realty Group. All Rights Reserved