Historic Buying Opportunities in Northwest Las Vegas

“I will tell you how to become wealthy. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”
Warren Buffet

We are currently facing the greatest economic downturn since the Great Depression. Individuals and corporations alike are tightening their belts and refusing to spend money…holding on to whatever they have in an attempt to weather the storm. Certainly prudence in this economic climate is wise. But what should also be remembered is that many of the great American fortunes were made in the 1930s. As others looked for cover, the great investors of the time looked for opportunity. We are faced with the same choice now that they faced then…try desperately to hold on to what we have, or build our wealth.
So where are the opportunities in today’s storm? Where can we invest with any kind of security? The surprising answer (given the recent bubble burst) is real estate. Why? Because when you invest in real estate properly…when you do it the right way…it does not rely on the strength of the economy at large to generate returns. This is because, in the world of real estate, cash flow is king. Appreciation potential is secondary. Not so with the stock market, by contrast. If you invest in stocks, the stocks must appreciate in value in order for you to realize a gain on your investment. If the economy weakens and your stocks depreciate in value, you lose money. A similar situation occurred with those who invested in real estate two or three years ago and ignored the need for properties to positively cash flow. These investors relied on appreciation to generate returns. When, instead of appreciating, the real estate bubble burst and price came falling down, these investors lost everything and faced disaster.
The good news is that, done correctly, not only can this mistake be avoided, but real estate can become the greatest investment opportunity of your lifetime. The key is cash flow. If you purchase a property that cash flows strongly then your investment will generate returns for you even if it declines in value. The bonus, of course, being that when the property does appreciate in value (which historically real estate always does) you will make even more money.
The key then becomes identifying and isolating these strong cash flow buying opportunities. Las Vegas is currently leading the nation in foreclosures, with 1 in every 60 homes in some stage of default. Our home prices have dropped over 70% in some cases from highs of two years ago. When you combine these low prices with a very strong rental market, you create great the best real estate investment opportunity we have seen in years.
Zeroing in even further, I believe that the Northwest area of the Las Vegas valley, specifically, is a hidden gem for real estate investors. While the Henderson and Summerlin areas tend to draw more attention, the Northwest valley has rents that are only slightly lower than these areas, but home prices that are substantially lower. The Northwest is also the newest area of development in Las Vegas. The majority of homes on the market are less than five years old. Tucked conveniently between two freeways, the area features a burgeoning infrastructure with new government and retail development. A brand new hospital and library complex recently opened, along with 3 new high schools, a middle school and 2 elementary schools. The college of Southern Nevada has a new campus beginning construction later in the year and retail developments continue to pop up at every intersection.
As an example, one of my clients recently purchased a one bedroom condo in the Northwest for $41K. This same condo is now renting for $750 per month. This has resulted in a positive cash flow, after all management , insurance and other applicable fees, of over $400 per month. Also in the Northwest, I was able to broker a deal for a different client on a 2 bedroom condo for $51K. This is now renting for $950 per month and producing a positive cash flow, after all expenses, of over $600 per month. And the truly great thing about these deals is that they are not isolated bargains. It did not take us months of looking and grueling negotiations to purchase these properties. Deals like this are reasonably plentiful in the Northwest Las Vegas valley. But you do need to know where and how to look, and you need to make your offers in a timely manner. As prices have come down, investment money has begun to pour back into the Las Vegas valley. Competition is beginning to heat up for buyers, but there is still enough supply to meet the increase in demand.
As a full time investor , I own over 20 rental properties myself so I know what to look for in a potential deal. I also specialize in helping out of town investors purchase and maintain investment property in Las Vegas. The first part of this equation is obviously finding and negotiating a great price on a property her e in the Las Vegas valley. The second part is providing my clients with full service property management. After we find a property that cash flows strongly at a great purchase price, we will put all of the property management features in place to insure that the investment is truly hands off and turn key.
If you are interested in these opportunities, this is a great time to come to Las Vegas and allow me to give you a personal tour of this neighborhood. Hotel prices are low (you can stay at the Trump for $79 on a weekend night), flights and cars are cheaper than they have been in years, even food is on sale.
We do not expect prices in this area to dip much lower, if at all. With mortgage rates at historic lows, we are seeing cash coming back into the Las Vegas real estate market as domestic and foreign investors look for stable, profitable places to put their money. I have personally hosted clients from Canada and China in the last month. I would love to host you as well.

Does the Rise in February Sales Mean the Bottom is Near?

Home sales soared nationwide in February leading many market analysts to wonder if the bottom has finally come for the distressed U.S. housing market. But it is important to note that sales also rose in December and September without a bottom arriving. Another important factor to consider is that even as home sales have risen, median home prices have continued to fall nationwide.

Steve Bottfeld, a real estate analyst with Marketing Solutions presented at our Real Estate Insider Club of Las Vegas last year and outlined a three point test to gauge the bottom of a real estate market. First, he looks at the inventory of homes listed on the local Multiple Listing Service (MLS). Second, he evaluates the sales data. (Sales rose in February.) Lastly, he considers the average median price of homes in the market...which, as of February, is still descending.

Bottfeld stated last year that the hold out factor in the data for the Las Vegas housing market was the median home price...and that appears to continue to be the case, not just in Las Vegas, but across the country as well. As soon as we see the median home price stabilize, according to Bottfeld, we will have found the true bottom of the market.

So what does all of this mean for us property investors looking to add to our portfolios? Should we hold off on purchasing property until the market reaches an identifiable bottom?

I think that the answer is a resounding “NO.” The key element to consider when purchasing investment real estate in a stagnate or declining market is cash flow. Cash flow is king. As long as an investment property cash flows at the time that you buy it, you will not have to count on appreciation to make your deal worth while. The property will continue to provide you with monthly income even if the value dips slightly before a bottom is reached. Any appreciation you do incur will be a bonus.

Las Vegas Real Estate Insider Club Keeps Growing

Wednesday March 10th was the two year anniversary of the Las Vegas Real Estate Insider Club founded by me...Glenn Plantone. The event was recently moved to the meeting room inside Tommy Bahamas at Town Center on the south Strip. We have already begun to outgrow this location. This last meeting saw over 65 attendees enjoy special presentations from our guest speakers as well as our regular educators.

Our first guest presenter of the evening was Ranya Botros of the Nevada State Contractors Board. Along with her partner and lead investigator Greg Welch, they spoke about how to protect yourself from unscrupulous contractors, both licensed and unlicensed. Greg was able to share several stories of individuals who were taken advantage of and how the Contractors Board aided in their defense.

Out second featured speaker of the evening was Carla Carlson of Direct Credit. Carla spoke specifically about loan modifications in today’s marketplace. Not everyone is aware that loans on investment properties can often also be modified. Carla has years of experience with credit and lending and found it a good fit in the difficult housing market to begin helping individuals with loan modifications.

In addition to our guest speakers, we also benefited from updates and educational pieces from our regular contributors. As the host and founder, I shared with the group a story about a client of mine that ran into trouble with his HOA (Home Owners' Association) regarding rental restrictions in a newer community. I suggested getting a copy of the CC&R’s and reading them before looking to purchase within an HOA community if you are thinking of renting out the home for investment reasons.

Co-host Jeff Howard shared his thoughts on lease-options and explained that our current market is creating a great opportunity to buy inexpensive properties and rent them out to folks that have become credit challenged.

Scott Meservey, our "Realtor on the street," was able to give his update on the local market place and current foreclosure trends.

Our economic update this month was given by financial planning expert, author, Bigger Pockets columnist and recent Harry Reid communicator Mr. Richard Warren. Although an eternal optimist, Rich also prides himself on being a realist. Rich discussed the possibility that our current recession may end up evolving into an economic disaster as severe as that of the Great Depression in the 1930’s. However, this current situation has also presented us with one of the best opportunities to purchase real estate that we may see in our lifetimes.

We are looking forward to next month's meeting which will feature a representative from the Las Vegas Housing Authority speaking on the ins and outs of government sponsored Section 8 housing as well as Internet Marketing and Small Business Marketing specialist Tamara Bostrom who will give tips on how to stand out from the crowd in today's difficult economic climate. This is a meeting any investor and entrepreneur will not want to miss.

We love the value that we currently offer with the meeting: attendees pay $25 which covers not only admission to the club but also dinner and drinks. But as we continue to grow, we must look for a new venue for future Las Vegas Real Estate Insider Club meetings. If anyone is aware of another site that can offer the same benefits but accommodate more people, please contact us with more details.

Freddie Mac Announces a New Plan to Help Occupants Remain in Foreclosed Homes

Last week, mortgage giant Freddie Mac announced a new initiative to help former homeowners or renters stay in homes that have already been through foreclosure proceedings. Millions of the nation's foreclosures through private banks are for loans that have been backed by the government housing giant Freddie Mac. Through Freddie's new REO Rental Initiative, current occupants of foreclosed homes with loans backed by Freddie will be eligible to work out a deal that allows them to stay in their home. Freddie Mac's national real estate unit, HomeSteps, will negotiate month-to-month leases for interested occupants. HomeSteps began contacting residents of Freddie backed foreclosures last Thursday to determine their interest in this offer.

According to the new plan, residents will be able to stay in their homes on a monthly lease as long as they can prove that they can afford the rental amount established by the property management firm. This amount will be determined by considering current market rental rates in each local area.

This is a significant step as it shows realization that evicting residents and creating a glut of vacant homes is not best for surrounding neighborhoods and communities. Vacant homes deteriorate quickly and become targets for vandalism, crime, and squatters.

One of the requirements for occupants to remain in the home is that they understand that Freddie Mac will continue to try to sell the property while they live there and they agree to accommodate showings. However, with the severe downturn in housing prices, many homes spend months or years on the market. The government is beginning to realize that during this time it is better for everyone if the occupants remain in the home and pay rent than if they are evicted immediately.

Investors Redistribute IRA Savings to Purchase Real Estate

With the stock market continuing to weaken and real estate prices at their lowest in years, many investors are looking for ways to redirect their savings into real estate. Self directed IRAs are providing the answer that many savvy investors seek. Using a self directed IRA, investors can purchase real estate before the age of retirement without incurring distribution taxes or penalties. And they can realize their real-estate investment profits tax-deferred in their retirement account. Because the investments are made on behalf of the retirement account (just like a purchase of stocks or bonds) a taxable event is not triggered.

There are certain restrictions that must be observed in order to comply with regulations. Most notably, the real estate purchase must be made with an eye towards long term financial gain. This means that transactions that could represent a conflict of interest, such as purchasing a property for a friend or relative, must be avoided. The government labels these as "prohibited transactions" to "disqualified parties."

Las Vegas is currently leading the way as one of the hottest locales in the nation for IRA investment purchases. Historically low prices combined with high cash flow have made the Las Vegas valley an attractive choice for investors looking to purchase real estate.

If you are interested in redirecting some of your IRA savings into real estate purchases here in Las Vegas, please contact me. I continue to close great deals for my clients and can help you find investment properties that suits your needs.

Nationwide Foreclosures Are Clustered Into a Few Counties

With the national credit crisis in full swing, it is interesting to note that the wave of housing foreclosures which set the economic downturn in motion occurred in a relatively small geographical percentage of the country. Recent data released by RealtyTrac shows that foreclosures in just 35 counties accounted for 1.5 million foreclosure actions... more than half of the country's housing defaults. Clark County in Nevada, which encompasses the Las Vegas valley and environs, led the list.

How could isolated, regional events trigger a national economic downturn? Most of the nation's major banks and other lending institutions were invested heavily in, or owned subsidiaries that serviced the hard hit areas like Nevada, California, Arizona, and Florida.

The geographical clustering of the nation's foreclosures could have an impact on the recent Financial Stability plan introduced by the Obama administration as well. For starters, the plan may face political challenges because it provides so much money...$75 billion...to help relatively few Americans. In addition, because of its many restrictions the plan may not be able to help the homeowners from distressed areas who need the help most. In order to refinance a loan under the proposed Financial Stability plan, a homeowner must owe less than 105% of the home's current market value. In many of the 35 counties that represent the bulk of the nation's foreclosure wave, home prices have dropped so dramatically that most homeowners won't qualify.

Government's Financial Stability Plan Unlikely to Help Most Las Vegans

With much adieu the government announced on Tuesday February 10th that over $75 billion would be spent trying to help as many as 9 million American homeowners avoid foreclosure. This will be accomplished through government sponsored loan modifications and refinance options. One glaring problem with this plan for those on the West Coast is that it restricts loan modification and refinance help to those who owe no more than 105% of their home's current market value. In states like California, Arizona, and especially Nevada where home prices have plummeted 50% or more in the last two years, this restriction renders most of the home owners in these states who would need to take advantage of such a plan ineligible.

The government also imposes other criteria for the bailouts including the need to prove a significant decrease in income as well as financial hardship. It then juxtaposes this with a requirement stating that the new mortgage payment amount for any prospective homeowner cannot exceed 31% of their gross monthly income. Applicants must also be owner occupants and have mortgages that do not exceed a balance of $729,750.

Critics of the plan point out that there is no provision for second mortgages to be refinanced or modified and also argue that with it's extensive list of requirements the plan will not help the very homeowners who need it most. This includes most Las Vegas residents. In a recent article in the Las Vegas Review Journal, Mark Baker, a loan officer with Meridias Capital was quoted as saying, "Up to 105% of the value? I think this will help a lot of people in the Las Vegas area. In fact, it may be more than three or four people, or even up to 10. Another example of how lots of talk, lots of money spent and so few people can use a new government program. Sorry for my sarcasm."

I am a licensed Realtor and a Las Vegas foreclosure expert. If you are a homeowner trying to evaluate your options please call me to discuss.