Land Grab Is On In Las Vegas!

DR Horton and Pardee Homes gobbled up most of the recent land offering from the government here in Las Vegas.  The Bureau of Land Management auctioned off some 109 acres, raising around $21.4 million.  This purchase is almost universally being heralded as a great sign for the Las Vegas housing market.  Since the housing crash in 2008, the government has only sold around 30 acres of Las Vegas land.  It's not that the government didn't want to sell, the developers simply had no interest in buying. With the massive amounts of foreclosures on the market from 2008-2011, partially developed communities sat vacant across the valley as home builders essentially closed up shop. Now, with inventories of existing homes at all time lows, builders are once again in the buying mood.

It also seems that they are willing to pay a premium for the land they are purchasing. According to BLM officials, the $21.4 million paid for the auction's nine parcels exceeded the appraised value of the land by more than $7 million. The sale price worked out to be around $181,000 per acre. Values during the recession had sunk as low as $5K - $25K per acre. The rebounded price, however, is still much lower than the bubble prices of 2006/2007, when acres of land in Las Vegas sold for upwards of $650,000 per acre.

Robert Deville, president of Harmony Homes in Las Vegas, reiterated that land is becoming increasingly difficult to come by in the now booming Las Vegas real estate market. “We came to a grinding halt with the problems we had," he explained, "and now the demand is there but the plots and land supply is not. Right now it is very difficult to find parcels. I’m always looking for land.”

MGM Update January 2010

As those of you who follow my articles and blogs know, I have been tracking the MGM Signature Towers Hotel Condo in Las Vegas very closely over the last year. Many of my investors have asked me to write an update on the project. Here is the most recent information on price and sales trends from the beginning of last year (2009) to the start of this year (2010).

The MGM Signature is a Hotel Condo complex consisting of three high rise buildings that were completed in 2006. This makes it one of the few Las Vegas high rise condo projects that was completely finished and sold at boom prices. All three buildings (576 units per building) totaling 1728 total units were sold before the real estate bubble burst in 2007. In 2006 an average studio unit (520 sq. feet) sold brand new for $485,000 and an average one bedroom unit (874 sq feet) sold for $745,000. The least expensive studio sold originally for $318,250 and the least expensive one bedroom was sold for $494,000. Most were financed with 20% to 30% down and there were very few cash sales.

The MGM now represents a unique buying opportunity for investors as the real estate crash has sent prices tumbling to between $0.20 and $0.25 on the dollar from their original sales prices only four years ago. By the end of 2009, we were seeing several studios selling in the $120,000 range and one bedrooms in the $180-$190,000’s. I have followed the project since the prices started falling in 2007 and by 2009 I was ready to recommend the project to my investor clients. I continue to work hard to find units for my clients and the lowest possible prices and because of my experience and knowledge of the project, I have the distinction of having negotiated the lowest purchase prices for both a studio ($99,900 at the end of 2009) and a one bedroom unit ($176K for a beautiful 8th floor pool and mountain view just one week ago.)

In 2008 we saw very few foreclosures and very few resales on the MGM properties. That changed dramatically in 2009. Last year there were over 220 studios and 90 one bedroom units that were foreclosed upon. This figure represents about 18% of the total project. By comparison, other condo projects in Las Vegas experienced foreclosure rates as high as 35% in 2009. I believe that we will see an avalanche of foreclosures on the MGM Signature properties in 2010. Normally, this wave of foreclosures would mean even lower unit prices to come. But I think the heavy demand for the MGM Signature units will keep prices stable throughout 2010. Because the prices have dropped so steeply, the properties are now able to generate positive cash flow. This is keeping demand extremely high for the few available units that come onto the market. We have run into multiple offer situations for all of the foreclosure units that have come onto the market over the last several months.

The MGM Signature was built and marketed as a hotel-condo, as such, it offers tremendous flexibility. You are able to live in the unit full time if you desire, rent it out independently to a long term tenant, lease it out for short term nightly rentals and manage it yourself, or place it with a management company who will handle short term nightly rentals for you and split the revenue with you. Using a management company is the most popular choice for most investors. With sufficient notice, you are able to stay in your own unit as often as you like with minimal cleaning costs if you choose to have the room serviced by your management company. Most investors use the MGM Hotel Residential Services Company as their management company, but many do not realize that there are three other companies that provide excellent service, some with higher occupancy and in most cases better revenue splits for the investor. This, of course, could mean a higher cash flow on your investment. I have a detailed analysis of the similarities and differences between the four companies if you should desire to compare them. (Contact me if you would like to receive a copy of this comparison.)

Currently, there are four ways to buy a unit at the MGM Signature. The first is to buy a resale unit. I don't recommend this method. Resale units are either units that have been bought by other investors at cheaper prices and are now being resold or units where the owners are desperately trying to lose as little money as possible on the sale.

The second method is to purchase a short sale. The short sale route is long and tedious but we have had some success. We tie up the unit at a good low price and wait and hope that the negotiator is able to get an approval from the bank before the unit is sold off at the foreclosure auction. I have had a couple of short sales that have ended with a successful purchase and lost a couple to the foreclosure auction.

The third way to acquire MGM Signature units, is to buy a bank owned foreclosure property (an REO.) This is a great method and the most common way I use to acquire properties for my investor clients. We are able to get a good look at the unit, get good clean title, and have the purchase of the unit done safely and easily. Because of my contacts with the various listing brokers I have been able to develop great relationships and purchase many units for my investors at the best possible prices.

The final way to acquire units, is to buy them at the foreclosure auction (trustee's sale) before they return to the bank and become an REO. This method has its risks but with proper due diligence it represents the absolute best way to get the lowest price possible.

I have been very successful in purchasing Signature units for my investors because I have been attacking this project from all three sides.

I highly recommend that anyone interested in the MGM Signature come and stay at the hotel-condo and visit with me so that you can gain a clear understanding of all the variables that are involved in this project. We can tour the property, talk about and meet with the management companies, look at the one bedroom vs. the studio units, discuss the psychology of views (strip side vs. mountain side) and get a general overall understanding of the property.

I will be following the MGM Signature Towers very closely this year as I project it will be a great time to pick up units at prices well below the developers cost to build. Feel free to contact me directly should you have any questions or interest. May we all have a great 2010.

Thanks

Glenn Plantone

702.769.9872 (cell)

teamplantone@gmail.com

2009 In Review

2009 was a year of expectations and a year of hopes.  Some of these were met, some were exceeded, and others will wait and continue to seek fulfillment in 2010.  We all knew that the foreclosure wave would continue to sweep over the nation’s beleaguered real estate markets.  And it did.  Las Vegas once again led the United States in foreclosures as more bank owned properties than ever flooded the market.  We hoped that this influx of affordable properties would lure some investors back into the stagnant Las Vegas real estate market.  But no one expected just how tantalizing that lure would be.  As investors from California, Canada, and all over the world sought to purchase cheap Las Vegas real estate that was suddenly cash flowing positively for the first time in years, home sales in the valley boomed.  Throughout the summer of 2009, Las Vegas posted sales numbers that exceeded those of the boom years in 2003 and 2004.  As quickly as foreclosures re-entered the market, they were gobbled up in their REO form by eager investors cashing in on what had become the greatest real estate buying opportunity of our lifetime. 

And we all hoped that this re-energizing of the real estate market would spread to the economy at large.  It didn’t.  To spite the high hopes of many generated by the seemingly endless stream of economic stimulus packages introduced by the new Presidential administration, an economic recovery failed to materialize and December saw some of the worst unemployment statistics since the recession began.

And yet, this bad news for the economy at large, may translate into good news for investors looking to purchase real estate in 2010. Normally, the excess of demand that we have been seeing in the Las Vegas market would push real estate prices higher.  But the general economic downturn may curb those price hikes and keep properties in Las Vegas at their historically affordable levels through the next year.  Especially for those willing to acquire properties through the trustee sale, properties that need a little work, or unconventional properties like high rise condos. 

As the supply of turn key, single family REOs has dwindled over the latter half of the year, my investors have found that the best way to acquire profitable real estate in Las Vegas is to think outside the “herd.”  We have been investing with great success in properties purchased through the trustee sale auction, high rise properties like the MGM Signature Condos, and properties that are not “turn key” such as “stripped” foreclosure homes.  Since the vast majority of investors are not purchasing these types of properties, we are able to continue to get great deals on investments that will generate strong positive cash flow.

I look forward to 2010 as a year that will continue to allow my clients to purchase Las Vegas real estate at deeply discounted properties.  Hopefully, the nation’s job, credit, and financial markets will begin a steady recovery and everyone can begin to benefit again from a robust economy.  Until then, we are wise to once again remember the words of the great financial giant Baron Rothschild who made his fortune largely during the years of the Great Depression, he said, “Buy when there is blood in the streets...even if the blood is your own.”  Now is truly the time to take advantage of every opportunity to create wealth for our future. 

If you are interested in taking advantage of this historic opportunity to purchase great Las Vegas real estate, contact Glenn Plantone at 702-769-9872.

Drop Bids at Trustee Sales

Drop Bids at Trustee Sales

The Arizona Republic recently ran an article discussing the practice of "drop bids" at the Maricopa County foreclosure auction. When a lender posts a Notice of Sale amount (often referred to as the minimum bid) and then drops the amount hours or even minutes before the opening of the auction, this process is known as a drop bid and is considered illegal in Arizona. Ideally, lenders are encouraged to post the Notice of Sale amounts for foreclosure properties that will be sold at the trustee sale at least 24 hours prior to the start of the sale.

According to the article, up until recently, the majority of homes brought to auction through the trustee sale were failing to sell and were reverting back to the banks. These properties would then re-enter the market as REOs. This all changed last month as a record 1,000 properties sold through the public foreclosure auction process. This was five times the number that sold in January. According to the Republic, "Real estate market watchers and unsuccessful bidders at the auctions say drop bids are driving the record number of auction sales."

No one seems to be sure why banks would choose to lower the minimum bid without adequate notice. Those who are up in arms over the practice tend to imply that the reasons are malicious, but there are other possibilities. Kelly Braaksma, a trustee sale expert and CEO of FAST (Foreclosure Auction Service Team) a company that specializes in helping investors to purchase properties at auction, says that the uncertainties surrounding properties coming to auction may have more to do with last minute price changes than anything else. "Lenders are inundated with foreclosure properties," Braaksma says, "of the hundreds or thousands of properties slated to be auctioned off at any particular trustee sale, only a few dozen may actually make it up to bid. The rest are postponed, canceled, reinstated, etc. All the aspects of the sale, including starting bid price, are constantly in flux right up until the last minute."

Whatever the reason, the Arizona Republic continues by saying, "Drop-bid purchases enable the few who know about the deals to buy homes and quickly resell them for hefty profits...Buyers aware of the "drop bids" scoop up the houses before other bidders know about the price drops."

Mr. Braaksma has developed a system that analyzes historical opening bids from various lenders, along with a myriad of other data and generates algorithms that predict which properties are most likely to actually make it to auction and which will most likely have opening bids that make them worthwhile to investors. I have formed an alliance with FAST in order to provide this service to my clients looking to purchase at the trustee sale. I don't charge more for the service, clients pay only my standard commission at the close of a sale. But for this commission, they are provided not only with all of the reports and data that FAST generates, but also with a representative that will be present at every Trustee auction, available to purchase these choice properties and take advantage of last minute drop bids.

If you are interested in using trustee sales / foreclosure auctions to acquire property, please contact me and I will send you a packet with more information on the process:
Glenn Plantone (702) 769-9872

Click here to read the full Arizona Republic article

Update on MGM Signature Towers

The last time I reported on the MGM Signature Towers was in late April when new low comps were established for both Studio and 1 Bedroom units at the close of the MGM auction. I wanted to take a moment to update my readers as prices continue to drop on these properties here in Las Vegas.
I have been following the MGM Signature Towers project since its inception in 2003 and 2004 and have stayed as far away as possible until recently as purchasing made no sense from a cash flow perspective. But as you know, things change quickly in Las Vegas and this investment is beginning to look a lot more lucrative. I will explain.
If you are unfamiliar with the hotel condo concept, it is quite simply explained as follows: You the investor buy and own the actual condo with all of its luxury furnishings, and the condo is put into a rental program and managed by a
management company (in this case as part of the MGM Hotel and Casino). There are a lot of calculations that lead to how much revenue owners will make (or not make) from their condo hotel but a reasonably accurate estimate in the case of the Signature Towers would call for the owner to end up with about 40% of the gross revenues from the rental of the room. In simple math, if a condo hotel room is rented for $100 per night, the owner will net about $40. Of course there are some perks to ownership of the unit as the owner can use it themselves (with a reservation) or the room does not have to be in the rental program at all. If someone wished to live in their luxury condo unit they could choose to do so. The home owner’s association fees are quite high, at near $400 for the studio unit and $900 for the one bedroom unit. These fees pay for the luxury resort amenities which are separate from, yet still attached to, the MGM Hotel. The Signature Towers resort features two exercise rooms, valet parking, guest services, coffee shop, lounge, deli, several pools, high speed internet service throughout and a gift shop.
The hotel condo project was sold in three stages with tower 1 (145 East Harmon) completed in 2005. This building is closest to the MGM hotel and was the first building of the three to be finished. Units in this building sold for between
$300,000-$600,000 for the smaller studio units (520 square feet) and $500,000 - $1,000,000 for the 1 bedroom units. The second tower was the 135 East Harmon tower which was completed in 2006. Studio units sold for a little higher, in the
$400,000 to $700,000 range, and 1 bedroom units remained the same at $500,000 to $1,000,000. The last tower to be built, 125 East Harmon, sold for even higher prices. It was completed in 2006 with studio units selling for $500,000 to
$800,000 and 1 bedroom units fetching prices from $700,000 to over $1 million.
Note that because tower one was sold at lower prices there have been less foreclosures coming on the market from this tower (145). As investors grossly overpaid for units in all buildings, but especially buildings two and three, we are
now seeing a high rate of foreclosures begin to hit the market. I believe that as early investors begin to see how far upside down they are we may see even more people letting their units go as their equity or perceived equity is non-existent.
Over the last year there have been 92 re-sales as a combined total from all three buildings. As of April 2009 the lowest priced 1 bedroom unit had sold for $274,000 and the lowest priced studio unit had sold for $174,000. This was, of course, well below the original sales prices of just a few years earlier. Then in late April of this year, an auction took place at the MGM and 20 units were sold off in about 2 hours time. I reported on this auction in my blog as a new low of $202,000 for one bedrooms and $160,000 for studios were established.
It was about this time that I stepped in and began to educate my database of investors about these units as I could see that the prices were beginning to move closer to the point where they could hit bottom and actually begin to make
sense as an investment for those looking to keep them in the rental program.
When looking at units from these high rise towers, each investor will want to be concerned with the price of the unit, its “rentability” potential, the profitability of the investment, and the future appreciation potential of the property.
I have identified 7 items that have a direct effect on these factors. These 7 items include the following:

1. Odd/Even address numbers: Odd = strip side views and Even = mountain views.
2. One bedroom unit (874 or 847 sq. ft) or studio unit (520 square feet)?
3. Handicapped unit or regular unit?
4. Does the unit have a balcony or not?
5. Is the unit located on a high floor or a low floor?
6. How is the View (strip/mountain/airport/pool)?
7. Is it a penthouse floor (29 to 33)? (Comes with a higher ceiling.)

Since April I have been working with several investors and fighting to get the lowest price possible for them on the units they are looking to take down. All this hard work paid o this past Friday the 17th as one of my investors closed on a lower oor studio unit at only $99,000. This new low blew away the previous low comp of $140,000 for a studio from only a couple of months back.
The very next day, Saturday July 18th, I attended the second auction for the MGM Signature Towers with cashiers check in hand ready to pounce on a 1 bedroom unit for another client. And as I predicted, a new low was achieved when the 1 bedroom sold at auction for $180,000 ($22,000 less than the previous low). The unit was in tower 1 ( first building), 7th floor, with a balcony and a nice pool view on the mountain side (even number). The unit sold originally for $540,000 and made for a nice deal at 33 cents on the dollar from the original high. This lower comp should help motivate the banks to continue pushing prices down into a range that will produce more investors traffic as people look to scarf up these luxurious condo hotels.
As of this writing, there are 155 units listed for sale in the entire MGM Signature Towers project. There are only 22 that are REO/bank owned foreclosures and 68 short sales. The remaining 65 units listed for sale are upside down owners who will not be able to resell their units at their asking prices for many, many years.
Anyone seriously interested in taking down a unit at today’s new lower prices should contact me as soon as possible as inventory is very light at this time. I am not sure how low the prices will go but I truly believe a studio at $100k and a one bedroom unit at $150k are very good deals.
This Friday the 24th of July there will be a third (silent) auction that will be taking place on 10 units at the MGM Signature Towers. You must be registered in advance in order to bid online. The highest bidder’s o er will be presented to the bank. If the bank accepts the bid, you will get the condo at your winning bid price. If the minimum (unpublished reserve bid) is not met, the deal will be renegotiated or you can walk away. There is no earnest money required for the silent auction. Call or email me for details to register.

How to Profitably Invest in Foreclosures

Within the realm of real estate investing, each type of investment (foreclosures, fixers, land, REITs, etc) has its good and bad times to buy. To be a successful investor you need to be able to identify not only which type of investment is the best at any given time but also which sub-category within that investment type you should look to specialize in, and when in the market cycle to buy.

Perhaps you are new to real estate investing (or not) and have heard that foreclosures currently abound and offer the best way for investors to gain instant equity in a property. This may well be very true. But the designation "foreclosure" is a general term comprised of many types of properties. Understanding the different types of foreclosures, where in the time line a particular foreclosure stands and which type of foreclosure offers the bet deal is critical to your success as an investor.

Along the time line of the foreclosure process, there are three basic areas that present buying opportunities for investors. The first of these has investors buying before the foreclosure auction. The second opportunity comes through buying homes directly at the auction. The third and final possibility is to buy properties after the auction is over, either directly from the bank or from an auction company. These bank owned properties are referred to as REO's or Real Estate Owned. Each of these stages in the process provide unique benefits as well as challenges. The smart investor will need to contrast the pros and cons of each method in order to find the best and safest investment opportunities within the broad field of "foreclosures."

The first opportunity for foreclosure investors, buying before the auction, encompasses the period of time when home owners are behind on their payments and realize they are in danger of losing their home but have not yet been foreclosed upon. This sub-category will include listed properties from the multiple listing service (MLS), short sales, notice of defaults (NODS) and notice of trustee's sales (NOTS). For a number of important reasons, this is not a good time for anyone to be attempting to sell a home through "normal" retail channels. The sluggish nature of the housing market, the excess low priced inventory on the market, lending resrictions, and the anxiety of potential buyers willing to sit on the sidelines and wait for conditions to improve combine to make selling retail nearly impossible for most home owners. Sellers cannot compete against foreclosures so unless they too become a foreclosure they have no viable way to sell their home. This means that we as investors will have a very hard time finding a property to purchase with equity in it, at this stage of the foreclosure process.

There is one segment within this first stage to which we should direct a little bit of extra attention: short sales. A short sale occurs when an owner is in trouble and a potential buyer comes in and negotiates with the bank to purchase the property for a value less than the amount owed on the loan. This provides both a potential solution to the home owner and a way for investors to get a home at below market value. The downside to this method is that with the huge amount of foreclosures blanketing the nation, short sales are taking way too long to complete (4-6 months on average) or aren't going through at all. Some recent statistics show that only about 20% of short sales actual close. There are still many companies, Realtors, and investors that are quite successful in short sales, but this niche is difficult and not one in which most investors find success.

The second opportunity for investors comes through buying properties at the foreclosure auction or trustee's sale. Note that some states liquidate foreclosures through judicial proceedings, while others, like California and Nevada, have trustee's sales that are held on the courthouse steps. The positive side of buying foreclosures at auction is that the competition for the property you are looking to buy is not usually all that stiff. However, in trust deed states you must have cash or the equivalent of at the time of the auction to be the winning bidder. This eliminates a huge majority of potential buyers as most folks do not have $100,000 or more easily accessible in cash. Because REO properties are now selling for levels under amounts owed on comparable properties in the (NOTS) stage, buying at the trustee's sale is not a viable way to buy in most situations. Most properties brought to auction at this point are failing to sell for asking price and are reverting back to the banks and becoming bank owned REO's. Again, there are professionals who are buying good properties at trustee's sales and auctions, but it is not an easy way for a beginner to break into the foreclosure arena and it is a very small segment of the market at this time.

By far the best, easiest, safest, and most lucrative way to buy foreclosure properties at this time is during the third and final stage of the process: when the properties that are not sold at auction revert to the banks and become REOs. Because of the huge volume of foreclosures now on the market and the record numbers that will be coming in over the next 12-18 months, banks are lowering their prices daily just to move inventory. Banks are also, in many cases, placing homes with listing Realtor agents that specialize in selling REO homes.

If the properties do not sell in a 60-90 day period (after initial price discounting) many properties are going back to the bank and being re-listed t an even lower price with an auction company or sold off in bulk REO portfolios of $5 million and up for literal pennies on the dollar. Another benefit of bank owned properties is that they are almost always vacant, making it easy to get inside and inspect them before purchasing. This is usually not the case when purchasing in other stages of the foreclosure process where most homes are still occupied by owners or tenants.

As an investor and licensed Realtor that has bought homes in all stages of the foreclosure process, both for myself and for my investor clients, I am advising my clients to take full advantage of what could be one of the best foreclosure buying markets we will ever see. I personally am based in the Las Vegas area and I have seen the Las Vegas real estate market go from the #1 hottest in the nation in 2004, to one of the slowest in 2007. In 2009 volume is increasing and Las Vegas is once again becoming one of the best and busiest real estate markets in the U.S. There is one thing and one thing only that is driving this change: foreclosures.

MGM Auction Sets New Low Comps for Signature Towers

I recently attended the public auction held to sell 20 units in the three MGM Signature towers located just off the Las Vegas strip. The auction was held on April 21st and was attended by about 125 people. All units were sold.

MGM has been forced to clamor for capital since its flagship project, the record setting City Center development in Las Vegas, ran into funding difficulties and innumerable construction setbacks and delays. MGM's major financial partner in the deal, Dubai World, announced that they would not honor their obligations to the project. This announcement brought the already struggling MGM Mirage corporation to the edge of Chapter 11 bankruptcy filings as they struggled to find alternative financing. MGM Mirage has financial covenants due to expire on April 29th and May 15th. There has been speculation that they may need to sell off some major assets, such as the Beau Rivage in Mississippi or the MGM Grand Detroit. Just recently, however, investor Carl Icahn and private equity fund Oaktree Capital Management have stepped up and acquired hundreds of millions of MGM Mirage bonds. Should this deal go through it might save MGM Mirage from having to sell further assets in order to stay afloat.

In the meantime, MGM's loss was investors gain in the Las Vegas condo market. The auction saw new record low sales prices for both one bedroom and studio units in the MGM Signature complex. The top one bedroom sold for $255K and the low sold for $185K. The previous low comp for a one bedroom unit was $274K. So this sale brought the comp down quite a bit from $274K to $185K. The top studio unit sold for $200K and the low sold for $142K. The previous low comp was $174K. So again the comp came down from $174K to a new low of $142K.

It will take approximately one month for these units to officially close and for the new lower comps to register in the MLS. There are still 24 REO/bank owned units available within the Signature towers. Once the new comps register, there will be another great buying opportunity for anyone still interested. I will then be advising my investors to put in some cash offers for lower than the new low comp prices and test the waters.

This MGM auction, and others that are coming up shortly at different locations, are proving that high rise prices in Las Vegas are finally coming down to levels where they are extremely affordable as a second/vacation home option and even as an investment. If you have any interest in the MGM Signature condos or other high rise properties please feel free to give me a call to discuss your options.