An Open Letter to Appraisers In the Las Vegas Real Estate Market

For the last three years, my team and I have purchased, renovated and resold over 100 properties in the Northwest Las Vegas area. Currently, our greatest challenge lies not in construction headaches, buying competition or even the scarcity of financing but in obtaining fair appraisals for our renovated homes that are re-entering the market.

Our business model consists of purchasing homes at a discount (REOs, trustees’ sales, and short sales), fixing them up, and selling them at today's retail value. Our properties sell at the top of the market because of the quality that we put into them. Most of our homes are literally better than new construction. We only rehab houses that are 10 years old or newer, and then we put in lots of upgrades that builders do not: landscaping, ceiling fans, blinds, upgraded flooring and fixtures, complete appliance packages (often including washer and dryer.) Of course, we also include new carpet, new (non-white) paint, and the like.

Even though our properties are generally better than any other homes available in the neighborhood, we still generally price them below the highest recent comp for the area. This is because we know that because our property is a flip (being resold within 90 days of our purchase) it is going to be more closely scrutinized by the lending bank and will often require two appraisals.

Our request to you, the appraiser, is simply that you compare apples to apples when drawing up your appraisal. As you know, most distressed properties (REOs and short sales) are in very poor condition. Our homes are not distressed and as such they sell for a price higher than trustees’ sale purchases, REOs, and short sales. When you are looking at comparable sales in the area, we would ask that you compare non-distressed sales and not use REOs and short sales in your comps, just as you would not use trustees’ sale data. We understand that non-distressed homes are the minority at the moment and that REOs and short sales make up as much as 75% of the resale market at this time. However, there are sufficient examples of non-distressed sales in the area to paint an accurate picture of comparable value.

According to Larry Murphy (of Las Vegas Crystal Ball and SalesTraq) certain types of homes are currently selling for certain dollar amounts per square foot in the Las Vegas marketplace. As of June 2011, Murphy released figures based on his exhaustive database of recent sales that shows that trustees’ sale homes are currently selling for around $65 per square foot, bank owned foreclosures (REO’s) for about $71 per square foot, short sales for around $80 per square foot, non-distressed properties at $88 per square foot, and new construction at $100 per square foot.

We appreciate your efforts to use the right types of homes in your market research during this challenging period in the real estate market.
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

Great Las Vegas Investment Properties...But Will They Rent?

Real estate prices have fallen over 70% in Las Vegas, and aggressive investors are now flooding back into the market to snatch up bargain properties. Real estate experts are touting the strong cash flow potential that Las Vegas properties now offer. Still, I have found that of the dozens of potential Las Vegas real estate investors I speak to every week, most of them share the same concern: Will I be able to find tenants for my investment properties? This is a great question. Exactly how strong is the rental market in Las Vegas? How long will it take to get your investment home or condo rented? What is the vacancy rate in Las Vegas?

Rental vacancy rates are published yearly and I am still waiting to see the data for 2009. But vacancy rates don't tell the whole story. Because rental vacancy statistics are heavily weighted towards apartment buildings, a high rental vacancy rate for a particular city does not mean that rental homes and condos are necessarily experiencing high vacancy rates. With foreclosure rates in Las Vegas leading the nation for the last two years, many families who are used to living in houses are losing their homes. These families look to rental house and condos to find a new home that fits their lifestyle. So even when overall vacancy rates in Las Vegas have been high, we have continued to see strong demand for rental houses and condos. My personal experience has followed this trend as well. On the 80 plus homes and condos I helped investors purchase last year alone, we are currently running close to a 95% occupancy rate.

It is true that average rents have fallen in Las Vegas over the last two years. But rents have fallen only around 20% while home and condo prices have plummeted over 70% from highs of three years ago. This disparity has created a great cash flow opportunity for investors now entering the deflated market. Homes that were $300,000 are now selling for $100,000 and renting for as much as $1300 a month. Condos that were $225,000 in 2007 can be had for $59,000 and are renting for $900 per month. Homes and condos are experiencing tremendous cash flow that is well above the 1% rule. (Rents should equal at least 1% of the purchase price in order to cash flow positively.)

In the last year, I have sold to many investors, but one in particular has done something that I believe I will see a lot more of this year. He has cashed out around a million dollars from the stock market, purchased 10 single family homes (all around $100,000), and is cash flowing hugely at this time. Average rents on his properties are at $1150 per month and all of his homes are now rented out. If you consider the numbers on his particular investment: Rental income minus taxes, home owners association dues, insurance, minor maintenance, and property management... he is netting about $800 per month, per house. Multiply this by his 10 properties, and he is netting close to $8000 per month in returns. This comes to just under a 10% yearly return on investment. I don't know anyone right now who is making 10% per year on their stock portfolio. And these figures don't even take into account the appreciation that he will receive year over year on his properties as the market continues to recover. Nor does it take into account the tremendous tax benefits that come from investing in real estate. Once appreciation takes effect over the course of the next several years, and rents continue to rise, this guy will look like a genius.

This gentleman took a calculated risk and faced his fears about the rental market and is feeling pretty good about it at this time. (Amir, you are my hero.) Now that he has hit his goal of 10 homes, he is planning on buying 10 more over the course of the next year.

If you would like more information on the Las Vegas rental real estate market or investing in Las Vegas properties, please contact me.

Glenn Plantone
702-769-9872
teamplantone@gmail.com

Fierce Competition for Available REOs Means Investors Need to Change Course in 2010

I love the Las Vegas real estate market! Just like the city itself, the Las Vegas real estate market is always changing, always exciting. We saw the market reach bottom last year and begin to stabilize again as investors rushed back in to Las Vegas to snatch up foreclosure deals that generated phenomenal cash flow and excellent potential for appreciation. 2009 was definitely the year of the bank owned foreclosure property, or REO. In 2009, nearly 75% of all real estate sales in the Las Vegas valley were bank owned foreclosures (of the 71 homes I personally sold last year, 69 were foreclosures). However, towards the end of the year, these numbers began to change. Foreclosure inventories started to tighten up and as the year went on, the number of foreclosures as a percentage of total home sales continued to shrink. By January of 2010 only 57% of all Las Vegas real estate sales were bank owned foreclosure properties. Why?

The short answer is that there are fewer homes going into foreclosure. In December, 2009 there were only 1228 homes and condos foreclosed upon in all of Las Vegas, and in January, 2010 there were just 1352 homes and condos that made their way to the foreclosure trustees sale. These numbers are way down, to less than 15% of the total number of foreclosures reported in Las Vegas during the same months a year earlier. A major reason for this decrease in foreclosures, is the change in focus at the banks from foreclosing to short selling or modifying loans. As the Obama administration continues to push for banks to work with beleaguered home owners, short sales have risen sharply, as foreclosures have declined.

After having been in the low teens in early 2009, the number of short sales as a percentage of total home sales in Las Vegas rose to 22% in February of 2010.

I believe that short sales will be the answer in 2010 for investors looking to acquire property in Las Vegas at discounted prices. As REO inventory continues to shrink, even all cash investors are finding that while prices are low and cash flow is high, getting an REO under contract is a difficult and often unsuccessful prospect. By the end of 2009, homes listed in the multiple listing service (MLS) were, once again, like the old days of 2004 and 2005, getting multiple offers and selling for levels above their listing price. Houses that are priced right can be getting 10 to 15 offers within the first couple of days on the market. In February of this year, 50% of all home and condo sales were cash deals. The investors are back again in Las Vegas and they are dominating the market place. At this point, it is virtually impossible for a VA ($0 down) or FHA (3.5% down) buyer to get an REO home under contract. Both investors and potential owner occupants have a much better shot at securing a home if they go with a resale or new construction home. Unfortunately, resales and new construction do not offer the great prices that REOs do. So what is an investor to do?

I believe that the next great way to acquire properties will be through short sales. Short sales are gaining momentum as banks realize that they present a much better alternative for all parties involved than a foreclosure. Althoug short sales may sell for around the same price as bank owned REOs, the bank saves all of the fees and costs associated with a foreclosure, so their bottom line is much better. Plus, having a tenant or owner in place means the property will likely remain in better shape (less theft and vandalism) than a foreclosure. Short sales also represent a faster sale for the bank with no rehab and no down time for vacancy. Short sales are also great for investor buyers as they are much less competitive than REOs and in many cases they come with a built in tenant. Frequently, the owner or renter will wish to stay in the home they have already been living in and, in some cases, may even pay higher than average rent to do so.

New legislation, such as the Home Affordable Foreclosure Alternative Program (HAFA), which takes effect on April 5th, will aid homeowners in getting short sales approved and should keep more people from losing their homes to foreclosure. The banks are already receiving government incentives to negotiate with homeowners and facilitate short sales, so this new legislation should only further ease the process. Some banks are starting to implement new, more streamlined systems for short sale negotiations, such as Bank of America's new "Equator" system. It will take time to see how these new systems work, but I personally just got a B of A short sale approved at record speed this week.

In the last week alone, I have had 3 short sales approved and accepted by the bank. The first one was a 2200 sq ft. SFH at only $119K and the other two were 2 bedroom condos at $48K and $50K. All three of these were tied up by my investors in a matter of minutes after I announced them. This method of concentrating on bank approved short sales is undoubtedly the best way to purchase property in 2010. There are no multiple offers, no need to bid way over list price to secure a deal, just simply "I want it and I got it" at the approved price.

Being a small boat in the ocean enables me to quickly change and adapt to the continuous fluctuations in the Las Vegas real estate market with quick precision. This gives me a tremendous advantage over the large REO companies (ocean liners) that need to retool, chart their new course and attempt to change direction. Mark my words, short sales will be a very large part of the Las Vegas Real Estate Market in 2010. This is where we all need to be focusing our buying efforts.

If you are interested in purchasing short sales in the Las Vegas area, contact Glenn Plantone at:
(702) 769-9872 or teamplantone@gmail.com

Surviving and Thriving as a Real Estate Agent: Through Good Times and Bad

Surviving and Thriving as a Real Estate Agent: Through Good Times and Bad

It is no secret that real estate agents, as well as other real estate related professions, have had a difficult road over the last few years. The rise and fall of the national real estate market created a feast then famine scenario …and many agents have not survived the famine. Meanwhile, over the last 5 years, I have sold over 500 single family homes, condos, or land lots…including closing on 30 properties last month alone. This volume places me in the top 5% of all Realtors in the country (in both transactions and commissions.) I would like to share with you, over my next few articles, how I have been able to achieve this success. (And you don’t even have to buy a video course or purchase a web book!) My success through these difficult times has not been due to luck but rather due to a particular mindset that has worked very well for me.

Thinking As An Investor

This mindset has entailed thinking as an investor instead of as a Realtor. My career in real estate began as an investor. I enjoyed great success purchasing my own investment properties, and began to help other investors find deals for themselves. Several years later, the natural progression was to get my realtor’s license. As a result, I have never really considered myself a Realtor by trade, but rather an investor who helps other investors. At the moment I currently own over 20 investment properties myself. This helps me to understand what investors are looking for and the challenges they face in the current market. But owning your own investment properties is not a prerequisite to thinking like an investor. In order to position yourself as an investors’ Realtor you don’t have to own a lot of properties yourself, but you do have to develop a reputation with your clients for being more interested in their bottom line than you are in your commission. I have been able to do this, and in so doing grow a large investor database, by using the following strategies that I would like to share with you:

• Develop Your Niche

• Become An Expert in Your Field

• Be Mobile/Adapt

• Develop a Marketing Campaign

Over the next several articles, I will go over each of these steps in detail. Let’s start with the first one:

Developing Your Niche As An Investors’ Realtor

The first thing I have done is to develop a niche. I don’t try to know (or act like I know) everything about every area of real estate…rather I focus on a specific area. This area may, and sometimes must, change over time. In my case, I have always focused primarily on single family homes. For a while I worked on SFRs in CA, then I moved to AZ. I went through several other locales and for the last two years have focused on Las Vegas, NV. More specifically, I focus on the new Northwest area of the valley. 80% or more of my deals are located in this specific area. This is the area that I am comfortable with, knowledgeable about, and experienced in.

By becoming an expert in a particular area, I am better able to service my clients and identify for them the most profitable investments available. Reputation is everything in this business. You need to build a reputation for being well informed and very familiar with your area of expertise so that you can knowledgably and confidently advise your client whether or not a particular property will make a valuable addition to their portfolio.

In my next article, I will discuss how to become an expert in your chosen niche.