CNN Money Labels Glenn Plantone One of the New Vulture Investors? Oh Well, I’ve Been Called Worse

They say any publicity is good publicity, and I couldn’t agree more. So when CNNMoney.com featured me in an article titled “Vulture Investors: They're Back - And Making a Bundle” I was...well... pleased. If by vulture, they are implying that I am swooping in to find life and profit in properties that are regarded by many as dead and worthless, then I can live with that analogy. And they certainly are right about investors in this market being able to make a bundle. I believe we are currently living in the best real estate buying climate since the Great Depression...perhaps better.

So, it is with great pride, that I re-post excerpts from the CNNMoney.com article:

NEW YORK (CNNMoney.com) -- These are the glory days of the residential real estate investor. Low prices, rock-bottom interest rates and stable rental markets have created huge buying opportunities.

Although conditions are very favorable, investors have to be adaptable because the market is evolving rapidly... Foreclosure auctions are no longer a fertile hunting ground... Tanya Marchiol of Team Investments, which has operations in about 10 states but focuses mostly on the Phoenix market, says, “"Amateurs have come in and run up the prices. In 2009 I bought 76 properties at foreclosure auctions, at an average of about 60 cents on the market dollar. This year, I've bought four."

Glenn Plantone faces a similar situation in Las Vegas. A veteran real estate broker and investor, he has switched from buying mostly foreclosures and repossessions to short sales almost exclusively. That's because the inventory of distressed properties available in Vegas is way down, to about a two-week supply.

"The banks make better profits with short sales, so they're not foreclosing," Plantone said. "They've switched staff to processing short sales and they've gotten faster at processing them."
He tries to purchase properties for at least 10% less than what he considers to be true market value, then he does some light rehabilitation and sells them to some of the 3,000 buyers he works with.

Since prices have fallen about 70% in some Vegas communities and rents have only declined by about 20%, it's possible for his investors, who are cash buyers, to make money from the first month the homes are rented.

"We're getting cash flow (net return on investment) of 12% to 14%," he said.
He doesn't completely ignore potential profits from home price appreciation because he believes the town is bouncing around the bottom. (Homes already sell for below what it would cost to build new homes.) He does not, however, emphasize that aspect of the investment.
It's the income from rentals that's paramount right now.

The beauty of cash flow, of course, is that even if the prices decline another 10% or 20%, the investors should be able to live with that.

"I tell them to plan on holding for five years," he said. "With cash flow, there's no need to worry about price drops."

To receive more information please contact me.

Glenn Plantone
gsplantone@gmail.com
(702) 769-9872

How to Buy Investment Properties in 2010

For much of 2009, the quickest, easiest and best way to purchase an investment property in Las Vegas, was to purchase a bank owned foreclosure, or REO. In fact, 75% of all sales in Las Vegas in 2009 were bank owned REO foreclosures. In some individual months, this number was as high as 85%.


But then a funny thing happened...Banks started to realize that short sales present a viable way for them to receive money on their loans without having to go through the hassle and expense of a foreclosure and resale. The government also stepped in with a series of new regulations aimed at slowing the nation's foreclosure rate and encouraging banks to negotiate short sales. These factors, combined with sustained high demand for REO properties, has pushed REO foreclosure inventory in Las Vegas to unbelievably low levels.


As of this writing, REO inventory listed on the MLS in Las Vegas stands at 1331 single family homes available for sale (not counting contingent and pending sales.) This number has been decreasing for about a year and now represents less than a two week supply of REO inventory. 3429 homes sold in Las Vegas in January, 2010. During the same month, only 1352 foreclosure homes went back to the banks. This represents an amazingly low supply of only 11 days of REO inventory on today's market.


Investors and realtors are seeing firsthand the results of this dramatic decrease in inventory. With prices in the Las Vegas valley continuing to hold at record lows, the competition for available REO inventory has been extremely stiff. Many investors, including my clients, are having to put in upwards of 10 offers to get just one accepted. Cash buyers continue to represent about 50% of the market and primary occupants or investors with financing in place are finding it very difficult to compete. Of the nearly 75 deals I closed last year for my investor clients, only 5 were not all cash deals. And even with all cash buyers, I have found it more and more difficult to secure properties.


As a result, I believe that 2010 will be a big year for short sales. A short sale is when a bank accepts a sale price that is less than the amount owed on the home. Short sales can be a great win-win situation for both buyer and seller. The seller is able to get out from under their loan without the negative effect on their credit that a foreclosure would have. The buyer is able to purchase a property for much less than current market value. Once a home or condo is approved for a short sale by the bank, the buyer will typically have 30 days to close on the home.


As available REO inventory in the Las Vegas valley continues to shrink, I am expecting the number of short sales to continue to increase. The amount of short sales this year is already close to double month-over-month from last year's totals. I am currently getting two to three short sales approved per month.


By way of example, I have a short sale available now that is a 2221 sq. ft., 4 bedroom/3 bath home for $119,995. This home sold new three years ago for $329,000. It is now priced at only $54/sq. ft., well below builders' replacement costs. This home only needs about $2500 to be fully rent ready (carpet cleaned, repaint, a couple of appliances) and then it will rent for $1295 per month.

Mind the Gap

Mind the Gap

You know you've arrived in London when you step out of the "tube" and hear the oft-looped pleasantry over the loud speakers, "Mind the Gap!" The announcement is referring to the gap between the subway platform and the train. In the current Las Vegas real estate market, we must mind a gap of a different sort. Let me explain.

As a full-time real estate investor and investor agent (of my 80 sales so far this year, only 3 were to owner occupants) I am used to observing market trends first hand in my hometown of Las Vegas. As our market began to reach bottom 6-8 months ago, investor money from all over the country and internationally began flooding back into the valley looking to snatch up bargain priced Las Vegas real estate. For months, it was relatively easy for me to find great REO / bank-owned deals for my visiting investor clients. 85% of my clients were (and are) all cash buyers and I entertain an average of 4-6 investors each weekend. Las Vegas was (and continues to be) the foreclosure capital of the world, and for months REOs were in great supply.

But over the last several months, things have steadily begun to shift. I have had to work harder and harder to find good deals for my clients. I have repeatedly found myself in multiple bid situations and the competition for REO / bank-owned foreclosure properties has begun to drive up prices. September saw the first increase in median home price in Las Vegas in over two years. More and more investors are fighting for the properties that are available and potential owner occupants are becoming increasingly frustrated as banks accept one of the multitude of "sure thing" cash offers that seem to be present at every REO listing.

The reason for this feeding frenzy is simple: Demand is far exceeding supply. In the month of September 2009, nearly 3500 single family homes sold in Las Vegas. By contrast, only around 1800 homes went back to the banks through the foreclosure process. This creates a large "gap" between supply and demand. At first glance, one would think that this gap represents good news for primary residents struggling to sell properties through the "normal" sales process. For the last two years, it has been virtually impossible for normal listings to sell in Las Vegas as they had to compete with the overwhelming numbers of foreclosure properties that were making the market. So now that the supply of foreclosure homes is beginning to slow and the demand for properties is increasing, we should begin to see more homes selling through traditional listings right? Maybe not.

In order to understand this phenomenon, we need to be mindful of another "gap." The gap between the prices of bank-owned foreclosure properties and the prices at which owners can afford to list their homes. Prices have dropped so sharply in the Las Vegas valley over the last three years, that many properties have lost 70% of their value. Homes that were selling for $300,000 in 2004, are coming back on the market as foreclosures now for $110,000. This means that anyone who purchased property in Las Vegas in the last 10 years is probably upside down on their home. Those who purchased 3-5 years ago are drastically upside down.

This gap means that even as demand for property in Las Vegas increases, and supplies of bargain-priced foreclosure / REOs decrease, we are still likely not to see many traditional listings and closings for quite some time. The gap between what is owed on the homes and what the market will pay is just too great. The exception to this might just be the short sale, which is making a comeback as I addressed in my two previous articles.