A long, long, time ago (2003-2007) in a distant planet (Las Vegas), Manhatanization was all the rage and Las Vegas was going to look just like New York. Many speculators purchased land and entitled them for high density housing. Then they pre-sold their imaginary high rise condominiums and ended up not building them. Or those who managed to build these high rise condominiums sold what they could to other speculators who purchased preconstruction and finished units in hopes of re-selling them to make a profit. That did not happen either.
Many of these high rise condominiums in Las Vegas either failed to close due to repeated delays by the builder, buyer’s remorse (the buyers forgo the deposit), or due to the sharp price drops. I did not recommend buying any condo units until prices came down. I am still recommending that investors should avoid City Center.
Blind speculation was the downfall of many investors; most of those investors are no longer, because they lost their money. The reason for their loss was that they got into the Las Vegas high rise luxury condominium market with no plans except for an eternal hope of unending price increases. Those investors who set themselves apart from loser investors plan to win before they invest.
How the losing investors lost their behind on Las Vegas high rise condominiums: an example
The history of a 1356 square foot high rise loft at Soho Lofts which has sold for $141,000 in August 2009
This loft or condo unit at Soho Lofts originally;
- Sold for $675,000 in 08/01/07,
- Was foreclosed for $304,000 in 09/01/08 by the bank, this means a bank had loaned the original buyer $304,000 to buy this loft unit.
- Sold for $141,000 in 08/01/09 as a foreclosed high rise condo unit.
A 1352 square foot loft was recently leased for $1800 per month, the term of the lease is one year and this condo-loft was on the market for 64 days before it was leased.
Investors gross income for this unit is $21,600, deduct annual HOA fees (condo fees) of $5280 and $5385 in annual taxes and the investor is left with about $10,900. I am not going to discuss other expenses such as leasing real estate agent’s fees or property manager fees or repair costs, etc, it is not needed for this discussion.
Let’s say the investor will end up with $9,000 net cash on cash return on his/her investment. The investor is getting about 6.3% cash on cash return for his/her investment, this is way more than a bank would pay him for parking his/her money in a bank account or CD and he is protected against upcoming inflation and can realistically hope for profit when he/she sells her loft in a few years.
In what world would someone invest $675,000 to make $9,000 a year on his/her investment and what sane bank would make $304,000 loan on a property with a cash flow of $9,000 per year? Like I wrote at the beginning, “A long, long, time ago (2003-2007,) in a distant planet (Las Vegas).
This is the reason United State’s economy came to the brink; blind speculation.
Well, the Las Vegas high rise condo market is coming back to life and 128 high rise and luxury condominiums have sold through the Las Vegas MLS in the last three months. I am neither including builder’s sales in this blog post, nor going with the Las Vegas MLS definition of high rise condos being 4 stories or more (like Manhattan condos and Park Avenue). I am counting real high rise condos.
4 condos sold for multi million dollars, the most expensive was a 9125 square foot Penthouse condo at Turnberry. This luxury condo sold for $5,780,000. The asking price was 2 million dollars more. The least expensive was a 970 square foot condo hotel at Platinum Resort Condo that was sold for $99,000, asking price was $108,000.
In our example, the price of the Soho Loft condo was about 20 cents on the dollar as compared to the original purchase price. This is the reason that I say Las Vegas high rise condos are a viable investment option at this time. I like the fact that an investor can make a small positive cash flow and then wait for the future appreciation as many of these units cannot be built at the price per square foot cost that these high rise condos are selling at. No one can say for sure when and by how much Las Vegas high rise condominiums will appreciate.
In conclusion, the last buyer of the Soho Lofts has a heck of a better shot at future appreciation when he/she bought the loft for $141,000 that the last buyer ever had when he paid $675,000 for his long gone high rise condo.
Related web-site links: Las Vegas homes, condos, land and commercial real estate for sale, buying Las Vegas condos for sale
Please find our contact info in the bottom the left side bar or call me at 702-478-7800. Masoud
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1 Twitted by firstrelease // Sep 11, 2009 at 3:23 am
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