HOA Foreclosures in Las Vegas - Part 2

There are four primary scenarios encountered as we pursue clear title on a property:

1. Our attorney pursues quiet title on the home in an attempt to get a 100% free and clear title on the property that is marketable, can be insured, and allows us to resell the home at any time.  Although it is not the norm, there have been many cases when this method has worked and the buyer of the HOA delinquent receivables has walked away with a free and clear title from the quiet title procedure.  Since many investors are buying these HOA receivables at 5-10 cents on the dollar, when quiet title does occur, it generates a huge return on investment.
2. If a lending institution still holds a lien (1st or 2nd mortgage) on the home, a second strategy is to hold onto the home to generate cash flow for as long as possible while the bank tries to foreclose on the property.   If properties are bought at a low enough price, and the foreclosure is not completed quickly (as they usually are not,) there is a very good possibility that this will end up being a positive return situation for our investor client.  In addition to rents collected, the probability of receiving the majority of the investment back from the bank during negotiation is also very strong.  The bank may have to pay the investor the super priority lien amount plus the overage of what was paid at auction.  If this is the case, the investor receives all of their money back, less the rehab costs, plus any rental cash flow generated during the foreclosure process.   This seems to be what most investors are banking on and are now starting to bid properties up to 20% of the property’s value at these HOA auctions.
3. The third scenario is one that has generated personal success for my clients and I and one which I believe will become the most profitable and prevalent of all.  Once an investor has possession of the home, and has hired an attorney, it becomes very costly and time consuming for the bank to battle to get their home back.  If the bank were to foreclose on the home, their goal would be to eventually list and sell the home anyway.  So why not sell the home to the investor that currently has possession of it?   We have successfully negotiated with the bank through our attorney to buy a home at 70% of BPO.  On this particular home, the client had only put a little over $4000 into the purchase.  This $4000 includes the cost of the lien at auction, rehab, maintenance, management for a year, and attorney's fees less the rental proceeds from the months the home was rented.  The bank agreed to sell the home to our investor for $84,000 and the home is worth about $145,000 in today’s market. 

Another example of the benefits of having a good attorney can be seen in a recent transaction where our client purchased liens for two condos and after negotiation the bank simply wrote off and completely released their liens on the properties.  In that case it appeared that the bank understood that it wouldn't be economically beneficial for them to fight and spend upwards of $30,000 in legal fees for a $50,000 condo. 
As you may have gathered from trying to understand this new form of investing, there is a tremendous upside to it and very little downside based on current legislation, court cases, and history that we have seen so far.  I have personally been involved in approximately 30 of these transactions and have sold around 50 others to my client base of investors. 
If you are interested in learning more about the HOA foreclosure process and how you can use it to generate returns, please give me a call directly and I can answer any and all questions you might have.  I can also describe in detail how we are able to partner with investors to buy these homes, townhomes, and condos at 5-20 cents on the dollar and manage them effectively while getting the maximum return out of each home that we obtain, manage, or sell. 

Second Bubble Far From Bursting

 

 

Las Vegas home prices continue to rise, outpacing all other metro areas nationwide.  In fact, residential home prices gained an unbelievable 2% in February alone, the largest single month gain since May of 2006.  Economists attribute the gains to continued low inventory in the valley, historically low mortgage interest rates, and improving employment numbers.

In an odd twist of fate, improving home prices might actually help add to housing inventory as homeowners who have wanted to sell, but have been underwater on their homes, find price points at which it makes sense to finally put their homes on the market. It remains to be seen if this potential increase in inventory will slake demand and push prices down again in the ultra-hot Las Vegas housing market. Many homeowners are also expressing confusion as to whether current market conditions are right for listing their home. Many are just beginning to reach the absolute minimum price levels at which they could list their home and not take a significant loss on the transaction.  Many have been waiting years for this moment.  But then they pause to wonder if prices are going to continue to escalate at their current rate.  If so, why not wait a few months before listing their property?  Perhaps they could actually make money on the transaction?

It is very difficult to spot absolute market peaks, perhaps even more difficult than spotting bottoms. While I have said for months that I don’t believe that the oft-mentioned “shadow inventory” will ever make an appearance here in Las Vegas, I do believe that current market conditions are unstable, unpredictable, and being driven by more than just hard economic data. That being said, I can’t tell you if this is the perfect time to sell your Las Vegas home or not.  What I can tell you is that this may be the perfect time to refinance.  Home prices are attractive, and refinance rates are at all-time lows.  There really seems to be no better time to initiate either a rate and term refinance or a cash out refi...especially if you are going to use that cash to re-invest in Las Vegas properties.  It might seem hard to believe in this extremely hot market, but we are still finding great investment deals for our clients.  If you are interested either in Las Vegas real estate investing, or in a great referral for your refinance deals (I have a wonderful broker I’ve used for years), give me a call.  I’d be happy to chat.

In Real Estate Good Things Come to Those Who Don't Wait

They say that good things come to those who wait, but lately good things come to those who pounce quickly.  Real estate has become a hot commodity once again, and houses that once languished months, or even years, on the Las Vegas MLS are now being snatched up in days or even hours.  We have certainly observed this phenomena first hand, especially in the last six months, as we watch foreclosures and REOs being bid up and short sales being submitted with multiple back-up offers.  

The following graphic is constructed off of data from the latest Realtor’s Confidence Index.  As you can see, nearly ⅓ of all homes on the market are selling within one month.  This is a huge departure from sales data one and two years ago.

Why are homes selling so quickly here in Las Vegas?  Affordable housing and attractive interest rates.  Interest rates remain the lowest they’ve been in years, and housing is extremely affordable even after the 20% gain in median home price we’ve witnessed in the last year.  What is interesting to note in all of this, is just how strong the rental market in Las Vegas continues to be, even with low home prices and even lower interest rates.  

Traditionally, as home prices drop, if interest rates are low, it becomes cheaper to buy than to rent.  This is definitely true here in Las Vegas.  The average home-owner can save between 50-100% monthly on their mortgage versus rent on the same property.  When this occurs, typically rents will fall as landlords are forced to make their product more competitive.  For the most part, this has not happened in Las Vegas.  Rents have dropped very slightly, but nothing compared to the plummet in home prices, and even as interest rates remain low, rents have remained strong.  This is due, no doubt, to the large percentage of the Las Vegas population who are currently ineligible to purchase a home because of recent foreclosure, bankruptcy, or other negative credit activity.  

As a result, it continues to be an excellent time for investors to enter the Las Vegas real estate market, although it is much more difficult to find affordable properties than it was one or two years ago.  Gone are the days when investors had multiple Las Vegas foreclosures to cherry pick.  For those who are interested in Las Vegas investment real estate, I recommend “alternative acquisition strategies.”  We have had to get very creative in order to find properties for our clients in this market.  Give me a call if you’d like to hear more.

Timing the Bottom of the Housing Market Unimportant

“Are we there yet?”  This is a question fielded to me almost daily by investor clients wanting to know if now is the right time to step into the Las Vegas investment real estate market.  Have prices started rising again?  Have we (finally) reached the bottom?

Over the last year or so I have answered this question by providing my clients with a barrage of data supporting the notion that we have, in fact, reached the bottom of the real estate crash in Las Vegas and that we are headed up.  (This data has only become more compelling in recent months.  Median home prices in Las Vegas have risen for the past eight months in a row.)  

But, perhaps my answer, accurate as it is, is not the most informative.  Perhaps the best answer to the “Are we there yet?” question is “It doesn’t matter.”  Lawrence Yun, chief economist for the National Association of Realtors, wrote an article recently discussing real estate trends over the last 30 years.   The statistics he shared were surprising even to a die hard real estate proponent like myself.  Yun revealed that in the 30 years from 1981-2011 home values more than tripled!  This to spite enduring the worst real estate crash on record.  This means that households who purchased properties 30 years ago are seeing a nice return on their investment.

Yun also highlighted an enlightening fact contrasting the financial position of home owners vs. renters.  Renters’ typical net worth today is $4,000.  This hasn’t changed much over the last few years, as renters have remained mostly insulated from the losses sustained by the housing market.  However, while the average net worth of home owners has dropped significantly since the housing bubble burst, it remains around $160,000, significantly greater than a typical renter.

These facts illustrate an important principle of long term real estate investment strategy...if you buy to hold it doesn’t matter if we’ve reached the bottom or not.  Those who bought real estate 30 years ago made a very successful investment even though their home values declined dramatically as a result of the housing bust.  Obviously, in order to turn a profit, it is important to avoid buying real estate at the absolute top of a precipitous market, but if you make sure that your properties cash flow at the time of purchase, you are virtually guaranteed that you will see positive appreciation over the near and long term.

Property Management - The Glue That Keeps Us Together

You may realize (because we’ve repeatedly told you) that Glenn Plantone is the 7th busiest real estate agent in all of Las Vegas and that he specializes in rehabbing distressed properties and turning them into beautiful homes.  What you might not realize is that Team Plantone at VIP Realty has quietly grown into one of the premier property management firms in all of Las Vegas.  

It was a business that developed out of necessity.  After Team Plantone finished a renovation project, it became necessary to place a quality tenant in the home in order to hand over the property to an investor buyer as a turn-key investment opportunity.  Many of these investor clients were located out of state or even out of the country.  Glenn found himself spending countless hours meeting with property management firms, handing out business first to one and then another, trying to find a PM company that would take good care of his clients and their tenants.  Glenn quickly discovered that nobody can take care of your valued clients as well as you can yourself.  And so VIP Realty’s Las Vegas Property Management Division was born.

VIP’s Las Vegas Property Management team offers all the services you’d expect from a first class PM firm: full service property management, rehabs, application processing, marketing, repairs, and tenant screening.  VIP does not charge set-up fees and offers multiple property discounts.  VIP will also help to market self-managed properties for a reasonable fee that includes the rental agent’s commission.  

Because of our reputation for performing high quality renovations, we always have a waiting list of potential tenants looking for the perfect rental property.  This reputation helps us to fill our client’s vacancies quickly.  

If you are a property owner looking for property management that was developed for the express purpose of catering to your needs, contact our Property Management team today for more information.  If you are a renter looking for a great property to call home please call us for more information on our current availabilities.