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In my last article, I discussed how to calculate the three most common ratios used to determine the rate of return on real estate investments: Capitalization (CAP) Rate, Return on Investment (ROI), and Equity Return Rate. Of these, the most commonly used is CAP rate. However, it is actually the ROI that provides you with the most accurate picture of whether or not a particular income property will make a good investment.Because it is so popular, we will discuss CAP rate first. A 10% CAP rate is often referenced as a goal to shoot for. In general, most areas of the country will have CAP rates that max out at 8-12%. Because Las Vegas has led the nation in foreclosures for the past three years and counting, home prices have plummeted to as low as 30% of their former highs. Rents, however, have only declined moderately. As a result, Las Vegas is currently offering the highest CAP rates available in the United States. For the last three years, I have specialized in purchasing Las Vegas income properties dirt cheap at the foreclosure auctions, renovating them to move-in condition, placing renters or lease option tenants in them and selling them to my investor clients as turn-key investment opportunities with CAP rates that average 10-20%. If you are interested in this type of investment opportunity, please contact me for more information.Moving on, the better way to evaluate potential investment properties is by calculating Return on Investment or ROI. (If you aren’t sure what this is or how to calculate it, see my previous article on the topic.) ROI portrays what your return is on the money that you have actually put into the project. This provides us with an interesting comparison. If you purchase a property for cash and that property provides you with a 15% CAP rate, then your ROI will also be 15%. However, if you purchase that same property using some form of financing, then your ROI will be much, much higher. As long as you are purchasing properties that have positive cash flow, after all mortgage notes and other expenses are paid, it is always better to purchase using financing in order to maximize your rate of return. We are currently offering our investor clients Las Vegas rental properties that are providing annual ROIs with 25% down of between 20-40%.The important thing to remember when shopping for investment properties in Las Vegas, or anywhere, is that good deals will always stand up to scrutiny. You should always ask for a detailed proforma or create your own for any investment property that you are considering purchasing. This will insure that you find the best investment properties for your investment dollars.If you are interested in learning more about investing in the Las Vegas real estate market please contact me for more information.Glenn PlantoneWynn Realty(702) 656-3264gsplantone@gmail.comwww.glennplantone.comIf you’d like to see more of Glenn’s articles, follow his blog at:www.vegasforeclosures.blogspot.com
When you are looking to purchase income property for investment purposes you are bombarded with various statistics designed to show you the strength of the investment you are considering. These numbers can be very helpful IF you understand exactly what they mean and what constitutes a “good” rate of return. To help you accurately evaluate potential investment properties in Las Vegas and elsewhere, it is important to start with a working knowledge of the three main formulas used to evaluate potential real estate investments.First is the Capitalization Rate or CAP Rate. You will probably see this formula used more than any other when describing the investment potential for a particular piece of real estate. The CAP rate is determined by dividing the NET Annual Operating Income by the Acquisition Cost of the property. NET Annual Operating Income is defined as the total of rents collected in a year minus all expenses associated with owning the property. These expenses may include: property taxes, HOA dues, any utilities paid by the owner, vacancy allowance, repairs/maintenance allowance, property management, and property insurance. Acquisition Cost is defined as the total cost necessary to purchase the property...so purchase price plus all closing costs, title and escrow fees, etc.Using the above formula, if you acquired a property for $200,000 and the NET Annual Operating Income of the Property was $20,100, then you would have a property with a CAP Rate of 10%. In my next article, I will discuss how to determine a good rate of return.The second type of return discussed with regards to income properties in Las Vegas and elsewhere is ROI or Return on Investment. If you paid cash for your investment property, then your ROI and your CAP rate will be identical. If, however, you purchased a property using financing, then your ROI will be the NET Annual Operating Income of the property divided by your initial equity investment (cash in the form of down payment, any out of pocket closing costs, etc.) Using this formula, we can see that if we purchased the same property as above and put 25% down ($50,000) then our ROI would be $20,100 divided by $50,000 = 40% ROI. As you can see, financed investments can allow you to leverage yourself into a much higher rate of return for your money than all cash purchases. We will touch more on that topic in my next article.Another evaluation tool that is extremely useful in determining how much bang you are really getting for your buck is the Equity Return Rate. This is a slightly more complicated formula. The first step is to add your Cash Flow After Taxes with your Amount Paid Towards Principle and Change in Value to the Property. Cash Flow After Taxes, or CFAT, is simply your NET Annual Operating Income minus whatever taxes you paid on that income or plus whatever tax benefit you received because of your deductions for the income property. (During the first several years of property ownership, you will likely show tax savings and add them to your NET Operating Income in order to obtain your CFAT. In subsequent years, as your deductions mature, you will start subtracting taxes paid from your NET Operating Income to obtain your CFAT.) Amount Paid Towards Principle represents the total amount of your mortgage payments over the year that were applied to your principle balance. (On the first year of your property ownership this number will most likely be quite low and will grow each year.) Change in Value represents the amount that your property has appreciated or depreciated in the previous year. Once you obtain this sum, you divide it by your initial equity investment in order to obtain your Equity Return Rate. Using our previous example again: If your CFAT is $20,100 plus your Amount Paid Towards Principle of $1,627 and an appreciation of $6,000 (totaling $27,727) divided by your initial equity investment of $50,000 gives you an Equity Return Rate of 55% for your first year of ownership. I specialize in offering quality, turn-key investment properties in Las Vegas to my investor clients worldwide. I ensure that all of my properties have a great ROI and Equity Return Rate. Tune in to my next article to learn how to determine what makes a “good” rate of return!Glenn PlantoneWynn Realty(702) 656-3264gsplantone@gmail.comwww.glennplantone.com If you’d like to see more of Glenn’s articles, follow his blog at:www.vegasforeclosures.blogspot.com
You may have heard the term “Participating Mortgage” lately in conferences on real estate investment opportunities...but what, exactly, is a participating mortgage? And, more importantly, is it a good investment?Participating mortgages have become more popular lately as investors who are frustrated by historically low returns in savings accounts and money markets, but who are unwilling to risk their funds in a very volatile stock market, look for secure investment opportunities that pay more than 1-2% annually. As with traditional mortgages, an investor in participating mortgages lends money for the purchase of a home and receives, in exchange, a security interest (mortgage lien registered on title) for a specific real estate property, along with regular monthly payments at a given interest rate. The original investment is returned to the investor at the end of the loan term or upon the sale of the property. A participating mortgage, however, provides a greater benefit to the investor because it recognizes that the value of the real estate securing the mortgage loan may have increased over time. With a participating mortgage, when a property is sold, not only is the original capital paid back to the investor, but a portion of the profits realized from the increased value of the real estate as well. This profit sharing aspect, allows investors to capitalize on the appreciation of real estate without the responsibilities of finding a property, managing tenants, paying bills and maintaining the property.Whether or not these investments are profitable depends almost entirely on whether or not the property securing the participating mortgage is acquired responsibly and at a reasonable price. Real estate investments in general have received a lot of bad press in the wake of the housing market decline, but the truth is that real estate remains one of the safest, most consistently returning long term investments available. The key elements of participating mortgages are safety of capital, fixed monthly income, and profit sharing. If you think that participating mortgages might be a good fit for your investment portfolio, or are just interested in learning more about how they work, please feel free to contact me directly. I specialize in Las Vegas real estate investments and utilize participating mortgages for some of my investor clients.Glenn PlantoneWynn Realty(702) 656-3264gsplantone@gmail.comwww.glennplantone.com or www.vegasforeclosures.blogspot.com
I have been an avid fan of “Flip This House” since it debuted several years ago on A&E. I have watched as Than Merrill, Rudy Martinez, and the rest of the gang flipped foreclosures for profit in cities across the U.S. And sometimes, I’ve wondered to myself, where do they find these guys? Some of the decisions that I watch being made on the show are questionable at best, and the outcomes often seem a little...hmm, shall we say, overly optimistic? Many times, when they tally the expenses at the end of the show, there seem to be quite a few fees that are left out of the equation in order to make it look like the flips turned a profit, or perhaps a larger profit than they actually did.As the marketing director for Team Plantone of Wynn Realty, I work for a house flipper here in Las Vegas that I would bet puts up numbers that can rival any of the stars on “Flip This House.” I have worked with Glenn Plantone for the last four years, and have watched him grow his team and refine his methods to best serve his investor clients. Last year, Glenn successfully flipped 31 properties in Las Vegas, mostly foreclosures and short sales, and this year he is on track to double or triple that figure.Glenn actually has a very unique method for acquiring, flipping and reselling properties. Glenn starts by acquiring the properties either through short sales, at the foreclosure auction, or post-foreclosure through bank-owned REOs. Once the properties have been purchased, like the flipper on “Flip This House”, Glenn rehabs the properties to better than new condition. At this point, the similarities end. Most flippers, including those on the show “Flip This House”, liquidate their renovated properties to traditional owner-occupant buyers. Glenn takes the system a step further; by first, placing long term renters or lease option tenants in the rehabbed property; and second, selling the property as a turn-key investment property to his investor clients. Since Las Vegas has led the nation in foreclosures for the last several years, there are many displaced families looking for rental housing. Glenn’s method provides these families with quality, affordable housing. Simultaneously, Las Vegas continues to be a hot spot for investors looking to capitalize on historically low home prices and high rates of cash flow return. Glenn’s method provides them with turn-key investment properties that couldn’t be easier to own...they are already renovated, professionally managed, and have a cash-flowing tenant in place by the time Glenn offers them for sale to his investors.I have really enjoyed working with Team Plantone over the last several years and watching a true flipping professional in action. Maybe the “Flip This House” producers will take notice some day. After all, Glenn is posting numbers that should make him the number one buying agent in all of Las Vegas this quarter. Until then, we’ll continue to do our thing...flipping houses, Las Vegas style.If you are interested in purchasing one of Glenn’s turn-key flips or, if you are interested in investing with Glenn, please contact him for more information.Glenn PlantoneWynn Realty(702) 656-3264gsplantone@gmail.comwww.glennplantone.com or www.vegasforeclosures.blogspot.com
We recently received a notice from our lending partner that they have expanded their Foreign National Loan Program to include non-resident and non-U.S. citizens borrowing for second homes in the United States. This is great news for our Canadian clients (and other Foreign Nationals) who are looking to purchase a vacation home or first investment home here in Las Vegas.We have sold a lot of properties lately to Canadian clients who are taking advantage, not only of the historically low prices and available foreclosures in Las Vegas, but also of the unprecedented strength of the Canadian dollar at the current time. This “perfect storm” of buying opportunity will not last forever. If you are a Canadian looking to purchase a great second home for yourself, for income, or both, now is the time to buy. We specialize in helping out of town investors understand all their options in the Las Vegas real estate market and we offer the best buying opportunities possible by taking advantage of Las Vegas foreclosures, REOs and traditionally listed properties.Michael Lembo, loan officer at iMortgage, has outlined the following major qualifications for the Foreign National Loan: Maximum Loan Amount of $417,00030-year Fixed Rate Mortgage30% Down Payment Required from Borrower’s Own Funds and 6 Month’s Reserve in a US Bank Before Closing700 Minimum Credit Score with at Least 4 Trade Lines36/45 DTISingle Family Homes or Condos AllowedMust Not Own Any Additional U.S. PropertyIf you would like more information on this loan product, or to discuss the current purchasing opportunities in the Las Vegas real estate market, please contact Glenn Plantone of Wynn Realty.Glenn PlantoneWynn Realty(702) 656-3264gsplantone@gmail.comwww.glennplantone.com or www.vegasforeclosures.blogspot.com
There has not been a better time to purchase investment real estate in Las Vegas in the last quarter of a century. Over the last few years, home prices plummeted to those seen 20 years ago in 1991. But prices have now stabilized, and investors are finding that rents did not fall nearly as much as purchase prices. This means that investors are now able to purchase Las Vegas investment properties with extremely strong cash flow.As the fourth busiest buyers’ agent in Las Vegas this year (and on my way to being the busiest agent in all of Las Vegas this year), I have purchased two suites at the MGM Signature Hotel Condos to accommodate my clients when they come to town to look at real estate. If you are a serious investor looking to explore the possibilities of the Las Vegas market, I would love to have you as my guest for a complimentary night’s stay at the MGM Signature Hotel Condo. We will spend the day touring properties in the valley that meet your investment criteria and you can spend the night enjoying all the amenities that the MGM Signature has to offer.I have created a niche by catering to investors looking to purchase turn-key investment real estate in Las Vegas. I do this by acquiring properties at wholesale prices (purchasing them as REOs, short sales, or at the foreclosure auction), I then completely rehab the properties to like new condition and then place a long term lease option tenant in the property. This means that my investor buyers are able to purchase a property that has been completely rehabbed, already has a tenant in place with strong, positive cash flow, and is professionally managed and ready to go. This strategy makes it possible for out of town, out of state, and even international buyers to easily and profitably purchase Las Vegas real estate.If you are interested in learning more about Las Vegas investment real estate and staying as my guest at the MGM Signature Hotel Condo, please contact me for more details. Of course, certain restrictions and conditions apply to the MGM free night offer. Call for more details.Glenn PlantoneWynn Realty(702) 656-3264gsplantone@gmail.comwww.glennplantone.com or www.vegasforeclosures.blogspot.com
Fourth quarter sales for 2010 at the MGM Signature Hotel were a bit of an anomaly. Sales of any real estate product are always lower in the first and last quarters of the year than the second and third, however I did expect increasing foreclosure rates to drive sales numbers higher than usual in the last part of 2010. What happened instead, was yet another foreclosure stall in the wake of the Bank of America robo-signing fiasco. With foreclosures slowing to a trickle, the inventory of bargain priced units in the MGM Signature complex dwindled considerably. This created an interesting paradigm in which sales volume and average sales price dipped in the final quarter, but lack of new foreclosure inventory created a new framework for sales expectations moving forward into 2011.More specifically: The 4th quarter of 2010 saw the fewest number of one-bedroom sales in well over a year at only 15 units. The average price for a one-bedroom MGM Signature unit (847-874 sq. ft.) in the 4th quarter was $218,000...well down from the 3rd quarter average of $227,000. The average price for a studio unit (520 sq. ft.) was $151,000 down from the third quarter average of $155,000. Sales on studios (also referred to as junior suites) was down to 48 units from the third quarter volume of 53 units. What is extremely interesting however, is that although sales volume was down in the 4th quarter...new listings were down even more. At the close of the third quarter, there were 73 units listed for sale at the MGM Signature Hotel Condo. By the close of the fourth quarter, there were only 55 units listed for sale. This is a drop of 25%. Also interesting to note is that the percentage of listings that are conventional (as opposed to short sales or foreclosures) is climbing as well (usually a sign that precedes price recovery). At the end of the third quarter, 40% of the units listed for sale in the MGM Signature complex were short sales or REO properties. At the close of the fourth quarter, that number dropped to 22%. It’s tough to say exactly where things will go from here at the MGM Signature. If inventory remains as light as it is now, I believe that we will see prices begin to steadily climb. However, if foreclosures accelerate in 2011, we may continue to see some deals holding prices steady. I continue to believe that we have bottomed out on prices at the MGM and that we will hold reasonably steady or begin to climb. It is a great time to purchase an investment or second home property at the MGM Signature...both interest rates and prices really have no where to go but up.I was the second biggest mover of MGM units in 2010 and the fourth busiest buyers’ agent in all of Las Vegas. If you are interested in purchasing a unit (or a fractional share of a unit) at the MGM, please contact me for more information on the property and all your available options.Glenn PlantoneWynn Realty(702) 656-3264gsplantone@gmail.comwww.glennplantone.com or www.vegasforeclosures.blogspot.com
