The first Las Vegas commercial real estate note auction took place a couple of months ago and City Place Apartments that is located a few hundred yards from the UNLV (University of Nevada at Las Vegas), at 1550 East Harmon (awesome but low income location) was sold.
City Place Apartments has 224 studio, one and two bedroom units. The rental average was $500/month and occupancy rate was 56%. The place was run down due to the current owner’s inability to keep the place up. I went and talked to a couple or residents there. The gross income generated from this property was $67,500.
Upon close inspection I estimated that if the owner spent $1 Million more to upgrade appliances and kitchen cabinets, carpets and common areas, the occupancy rates would go much higher than current 56%.
The Las Vegas real estate auction didn’t heat up until the last couple of hours from dead line, the reserve (minimum price set by the note seller) was met and one very lucky Las Vegas real estate investor purchased a seriously non-performing note for this apartment building for $3.8 million dollars. Assuming that the new buyer would immediately move to foreclose on the property and would spend the additional million dollars to upgrade the property, the total cost for the new owner would run about $4.8 million dollars that when divide by the number of units his costs per unit would have run about $17K per unit. It is IMPOSSIBLE to find such pricing for an apartment complex in Las Vegas, even in rough areas.
Of course the winning bidder only purchased the note and now has to foreclose on the property, which may be time consuming, but the legal fees shouldn’t be that bad. Now let’s look at the income generated by 80% occupancy which is not unreasonable after upgrading the property. The gross income runs about $80K/month and assuming 25% (very conservative) in expenses, 60K net income per month or $720,000/year is possible. Even though I gave you the worst case scenario about the money needed to upgrade the property or 25% in expenses, still cash on cash return for this property would be 15%.
Now another Las Vegas commercial real estate note auction is coming up where hundreds of million dollars in office, retail, industrial and multifamily properties will be auction off in Las Vegas in 3 weeks.
If you are an institutional investor or have many millions sitting in a bank account which give 1% interest, you should not miss this opportunity. This is by far the best way to invest in Las Vegas commercial real estate that I have ever seen. If you are interested call Masoud at 702-478-7800.