Las Vegas Real Estate: A Matter of Perspective

Like anything in life, it’s all about perspective and how we choose to look at a situation.
We all have the same data about the housing market available to us. For some, the data reads bleak... this is the worst real estate market ever (at least since the Great Depression). For others, it is the opportunity of a lifetime (also like the Depression if you were around to accumulate real estate at that time).

I ask this question: If the market is so terrible, why are cash investors flocking to Las Vegas, scooping up homes at record levels, and paying cash for them? My perspective, along with most of the other happy, cash investors, is that this is truly the opportunity of a lifetime and we are taking advantage of it now while the iron is still smoking hot. Over 5500 homes were sold in Las Vegas in June of this year (2011). This is the most since August of 2005, the heyday of Las Vegas real estate. But this time around, statistics show that nearly 55% of purchasers are cash buyers and nearly 80% are investors buying up what they can as fast as they can. In 2005 the percentage of cash buyers was very low and the percentage of owner occupied properties was much higher. With prices dropping nearly 70% over the last 4 years, investors are getting rates of return between 8-12% on cash investments and 15-25% on financed investments. The only downside seems to be that with all of this demand, actually acquiring one of these great Las Vegas investment properties is not as easy as you might think.

Just how cheaply you can acquire investment property in Las Vegas in 2011 depends on what type of property you are purchasing. Each form of purchase has its own distinct advantages and disadvantages. Foreclosure properties that are liquidated at the Trustees’ Sale usually fetch around $55/sq. ft. The Las Vegas Trustees’ Sale represents the least expensive and simultaneously the most difficult way to acquire property. You must come to the sale daily in order to bid on properties that can be seemingly endlessly postponed, you must bring all cash to purchase the property, and even then, you are often competing with several other cash buyers on a property that is sold “as is” with no disclosures and limited opportunity to view the property beforehand. I do not recommend the Trustees’ Sale as a means of acquiring property for any but the most experienced professional.

Bank owned foreclosures (or REOs) are currently selling for around $64 per square foot in the Las Vegas market. These properties provide greater visibility for the purchaser and allow for financing options, but the rather substantial downside to this is that the REO market in Las Vegas has become extremely competitive. It is very rare, at the moment, to encounter an REO listing that does not turn into a multiple offer situation, with bidding wars often raising selling prices to well over $75/sq. ft.

Short sales are the next cheapest way to acquire Las Vegas investment property...usually being approved at around $70/sq. ft. This is still a bargain compared to the average closing price of $78/sq. ft. for non-distressed sales and $98/sq. ft. for new construction. Like auction properties and REOs, however, short sales are very rarely in move-in ready condition and usually require some level of renovation before they are ready to rent out. While less competitive than REOs, short sales require lots of time and patience and result in lots of “misses” for every “hit.”

I have become the third busiest buyers’ agent in all of Las Vegas by dealing exclusively with investors that are looking to take advantage of this phenomenal buying opportunity in Las Vegas but want to avoid the stress of hunting for properties on the open market. My team specializes in sniffing out all the best bargains in Las Vegas. We purchase properties from the Trustees’ Sale, from banks, as short sales, and occasionally from private owners and builders. We then rehab these properties to better-than-new condition, find and place a quality long term renter or lease option tenant in the property, and then sell them to our investor cilents for prices that are still below $70/sq. ft. and allow for CAP rates of 10% and higher. Wynn Realty offers in-house property management and renter placement, which works extremely well considering the majority of our clients are from out of state or out of the country.

If you have been sitting on the sidelines, waiting for a good time to act on the greatest real estate buying opportunity of our lifetime...maybe today is a good day to call. I’d love to speak with you.

Glenn Plantone
Wynn Realty
(702) 656-3264
gsplantone@gmail.com

www.glennplantone.com

If you’d like to see more of Glenn’s articles, follow his blog at:
www.vegasforeclosures.blogspot.com

MGM Signature 1st and 2nd Quarter Update 2011

I predicted in my final quarter MGM Signature update for 2010 that we would see sales begin to pick up slightly at the MGM during the beginning of 2011, but that sales might become volatile after that time due to lingering uncertainties in the economy and housing market. As predicted, sales did accelerate with 73 units closing in the first quarter of 2011 (51 studios and 21 one-bedroom units.) By comparison, there were 63 units sold at the end of 2010...an increase of almost 20%.

The highest priced studio closed for $214K (unit #135-3507) and the lowest priced went for $112K (unit #135-2318.) This resulted in an average of $159K for studios. The high sale for one-bedrooms was $335K (unit #135-3001) with the low sale coming in at an amazing anomaly price of $138K (unit #125-1102.)

The most significant trend I spotted as we moved into the second quarter of the year, was the drop in inventory and sales and the corresponding rise in average sale price. In the second quarter of 2011, only 31 studios sold (as opposed to 51 in the first quarter) and only 10 one-bedroom units closed (21 in the first quarter.) Simultaneously, we saw the average sale price for studios climb from $149K in the first quarter to $159K in the second.

The gradual climb in price that we have seen at the MGM over the last several months corresponds with my prediction last year that we had seen the bottom of the market for high rise units in this development.

There are three major points that indicate that we will continue to see prices rise gradually at the MGM:

1. There are a total of 1824 units in the MGM Signature Hotel Condo development. Of these, over 700 units have turned over since their original sales dates. This is nearly 40% of the total and represents a disproportionately large number. This means that most of the investors who needed to get out when property values tanked have done so, and those that remain have most likely decided to hold out for the long haul. This means that we will, most likely, not see another large wave of foreclosures and the accompanying price cuts that they produce.

2. Lack of inventory...with the majority of “fire sales” now being completed, we are seeing the available inventory at the MGM continue to shrink. Less supply with steady demand necessitates price increases.

3. By reviewing the docket for upcoming Trustees’ Sales, we are able to see how many units are going to be available at a discounted price. Currently, inventory at the Trustees’ Sale has slowed to a trickle.

All of these items point to the fact that anyone interested in purchasing at the MGM Signature needs to take a serious look at the available units before prices move beyond their current levels. Unfortunately, it can be very difficult to purchase a unit at the MGM. Competition for available, reasonably priced units is fierce. I am the number two salesman at the MGM and I still have difficulty getting my clients good units, or sometimes, any units at all. In order to combat this competition, I look for great deals at the Trustees’ Sale, through REOs, with short sales, and regular listings.

If you are interested in purchasing at the MGM Signature, as an investor or for personal use, or if you are a current owner looking to review your options, please contact me directly and I will be happy to share my expertise on this development with you.