1: Because Las Vegas housing market has over corrected and is undervalued (according to Case Shiiler) by at least 25%

2: Double digit cash on cash return is possible on one of the safest investment opportunities in today’s economy

3: Las Vegas economy has passed the bottom and is rebounding

Here is the proof;

The following graph shows the Case-Shiller Housing Price Index from January 1987 to December 2010.

Case shiller Las Vegas housing graph 2011

 The Case Shiller graph shows the median price for homes sold in Las Vegas and compares it with a ten city composite of other major cities in the United States which is shown by dotted lines.  The flat line which closely followed real pricing for Las Vegas homes up to 2002 is the median price of homes if the housing bubble and following crash did not happen.

As you can see the Las Vegas housing prices matched or were higher than the 10 city composite until 2007. Both peaked at about $225,000 in 2007. However the 10 city composite median price has fallen to about $150K which is a 36% decline from the peak values.

Las Vegas median home prices have fallen to about $100K and this represents a 56% drop from peak values. Additionally, had things progressed normally (the only thing that we ain’t got in Vegas is normal) the median prices would have been at $130K. The $30k discrepancy represents OVER CORRECTION which results in Las Vegas housing prices to be undervalued by about 30%.

Now you understand why Las Vegas real estate in general and housing in particular are such a great investment opportunity.

This is the reason that real estate investors worldwide are investing in Las Vegas housing, more than 50% of Las Vegas homes are sold to cash investors.

Conclusion: Case Shiller graph shows why Las Vegas is one of the best bets for investing in United States real estate. Since the Las Vegas housing market has over corrected it is less susceptible than the 10 city composite and cash flow is better.

I have mentioned Larry Murphy’s name as the only Las Vegas real estate analyst whom I truly respect and the following was in his last e-mail.

“If you want to look like a genius in 5 years from now, buy all the Las Vegas real estate you can buy today”.

 I couldn’t agree more, but not all real estate, or for that matter homes or condos, are the same. For example cash flow for a $300K home may not be as good as cash flow for a $125K home, however a flipper may make better margins by buying the more expensive home.

You need a Las Vegas real estate agent who can tell an investor what he/she should invest in and why and all you have to do to find one is to call Masoud at 702-478-7800.

Let me know who you are by becoming my friend on my Las Vegas real estate Face book  page or Masoud’s Las Vegas real estate tweeter page.

In the last blog post,  $1 Billion Las Vegas real estate note auction, Retail I stated that I picked 10 good Las Vegas retail properties that will run in the note auction. Please e-mail me for additional info about them.  You can find my contact links on top of the left column.

By far and away the best Las Vegas commercial real estate deals are foreclosures or bank owned properties and there are less than 40 listed in Las Vegas the commercial real estate MLS for the whole valley. Non-distressed retail properties that are listed in the Las Vegas commercial MLS sell for around $60 per square foot for class (C) buildings in low income areas, better class (A)retail properties sell for about $250 per square foot. The asking price for a retail property in Rampart Street in Summerlin is $800 per square foot.

Conversely, comparable bank owned (REO) retail properties to those running in the Las Vegas note auction sell for $80-$180 per square foot which is 25%-30% discount over non-distressed. I project that the note for the retail properties will offer investors an additional 20%-30% discount over the comparable bank owned (foreclosure) properties.

 However, there has to be a good discount for buying the note and going through the foreclosing process (it is not as bad nor as expensive or time consuming as judicial foreclosure states) as opposed to buying the property as bank owned after the bank forecloses on the property or buying the property from the Las Vegas Trustee Sale Auction. By the way, the act of foreclosure which changes the owner of the property from the borrower to the lender takes place in the Nevada trustee sale auction.

I called several attorneys to ask about the foreclosure process for commercial properties in the State of Nevada.  Jim Smyth and Josh Correlli of Kaempfer, Crowell Law Firm in Las Vegas were kind enough to answer my questions while a few others weren’t. They said that if there are no complicating factors the commercial foreclosure process takes less than 6 months and could cost less than $20,000, due to the fact that Nevada is NOT a judicial foreclosure state. However, complicating factors which are beyond the scope of this article can make the foreclosure process much longer and costly. Only a foolish investor will bid without having lawyers involved from the beginning and I have a couple of great ones for you. Actually a couple of owners (borrowers) had tried to turn in the titles of their properties to the lender more than a year ago and the lender refused.

The other issue is that many borrowers declare bankruptcy to avoid specific performance (the lender can sue the borrower to make up the difference between the loan amount and sold price of the property). This is NOT an issue here since these are non-recourse loans and the lender can NOT bring up the issue of specific performance.

Many of the 10 retail properties that I have picked should be priced at about $150 per square foot and I project they can be purchased at below $100 per square foot, now that is called a DEEP DISCOUNT.

Summary:

 I have picked 10 of the best listings for Las Vegas retail properties which will be run in the biggest commercial real estate auction ever in the US.

These ten listings are mostly over 70% occupied and in some of the best retail locations in Las Vegas, North Las Vegas and Henderson

The reason for the note auction is that many of these listing were either refinanced or purchased in 2004-2007 and now their value is less than 40% of the mortgage.

These Las Vegas retail properties will provide the new owner with double digit cash flow.

Due to confidentiality agreement I can’t write about specifics of each property. Viable investors can call me for further info 702-478-7800. Masoud

For one thing, Las Vegas is no Detroit, there are very few undesirable properties here and the majority of retail properties are in good locations and 3-4 in the most desirable locations. For example the property that is located at 11105 South Eastern in Henderson is located at the mouth of and serves the huge Anthem community, awesome location.

  I have picked about 10 of the best listings and my picks are viable, occupancy is over 70% and are money making Las Vegas commercial properties.  Some with 70% occupancy and in the best locations, however the income gained from these operations can’t service their outstanding loans. In some cases the borrower is two years late and in one, the owner wanted to turn in the title (Deed in Lieu) and the lender refused, why? See Effect of Zombie Loans on Las Vegas real estate market 2011

 So if these are great properties, why are they broke, why are banks auctioning off their notes?

1: Well many of these properties have been refinanced in 2004-2007 for stupid amounts of money and the owner (borrower) has already taken their original investment out of the property. In other cases the loan was used to purchase the property at the peak of the real estate bubble.  If that was NOT the case many of these properties would NOT be in trouble today. Loan to value (LTV) ratio for some properties are in the 150% range while the property is 80% occupied.

2: The real estate market crash that added to their vacancy, however I highly doubt if these properties would have been viable without the crash. Banks were throwing money away in 2004-2006.

For example; one would be hard pressed to find a better located retail property than one on the corner of Sahara and Decatur. Check out the traffic count: about 90,000 vehicles a day and around 150,000 people within the 3 mile area. Now a foolish bank made a $56,000,000 or about $170 per square foot loan on this property and the post real estate crash has left it with 150% LTV. Auction.com puts the real estate value for this property at $33 million now! I wouldn’t hold my breath to see such a bid. The owner (borrower) has offered to buy back his loan at discount and the bank rejected it because it is NOT in their DNA to cut principal for a borrower, although it has happened for some other large properties in Las Vegas. Now if someone ends up with this property at, say at $15-$20 million, then the LTV ratio will go down noticeably and make this property viable again and a good investment candidate.

I will discuss other Las Vegas Retail Properties in the note auction later

PS: Nevada is NOT a judicial foreclosure state and call me 702-278-7800

I discussed what happened in the first Las Vegas real estate note auction and why it provides Las Vegas real estate investors with an unequalled opportunity to invest in Las Vegas commercial real estate at deep discounts. But first things first.

What does a commercial real estate note buyer really buy?

The investor buys an amortized schedule of future monthly payments for a loan that is backed by commercial real estate.  For example, the investor buys $1000 monthly payments for a period of 15 years. However future money must be discounted back to the present time due to inflation. We can calculate the return, by determining the net present value of an investment property’s cash flow and sale proceeds for periods of X number of years. The value of any investment is simply defined as the total cash that an investment will throw off during its existence.

A few listings in the Las Vegas real estate note auction are performing loans and will be sold as such.

Big deal so where is the opportunity?

The vast majority of properties auctioned off in 3 weeks are non-performing loans and great candidates for foreclosure. Some property owners haven’t made a payment on their mortgage for two years and there is little chance of saving the property from foreclosure. There is no reason for the borrower (current owner) to want to keep making payments on a property that is 100% upside down. These notes will be sold at deep discounts for several reasons.

1: Most real estate investors are not familiar with buying notes, thus less competition.

2: Banks do not expect full market value for these loans, if the note was performing, it wouldn’t get more than 80 cents on the dollar and these notes are non-performing.

3: Most institutional note buyers are NOT familiar with Las Vegas real estate market, and newspapers have scared that heck out of them.

4: Relatively straight forward process of foreclosing on a Las Vegas property scares investors and the reason is lack of knowledge.

Some asked me why all these banks are selling their loans now. My answer was see Effect of Zombie Loans on Las Vegas real estate market 2011.

I will discuss Las Vegas note auction that starts on May-17 further

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%.

City Place Apartments’ note was sold in a Las Vegas note auction

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.

What are Zombie loans in Las Vegas real estate?  Zombie loans are non-performing real estate loans that the borrower has stopped payment on a long time ago (in some cases for two years) but banks refuse to foreclose on the loan. These are dead mortgages that the owner (Borrower) wants to get rid of and the banks don’t want to foreclose on.

Why are banks refusing to foreclose of non-performing loans?

1: All of the sudden banks have found God and started to love their customers? Wrong

2: Banks can’t afford to foreclose on these loans? Probably right

I have heard this from two people that I highly respect and would appreciate input from those who know more than I do about this.

When the US government went over the banks books they learned that if all their assets were depreciated to present value, most banks would go out of business. So they let the bank keep the original value of their assets until it changes hands. For example if they foreclose on the property.

I am NOT an economist, however what they said matches reality, and this is the reason that it takes about two years to foreclose on residential properties in Las Vegas. Additionally, there are many commercial properties in Las Vegas where the owner (borrower) quit paying their mortgage 2 years ago while the building is sitting empty doing nothing. When I try to contact the bank, asset managers will not talk to me to sell the note (mortgage, loan) while they refuse to foreclose on the non-performing loan themselves.

Additionally, if they have to foreclose on the property they put the full loan amount as the minimum bid which assures that no other investor would bid on the property at the Las Vegas Trustee Sale auction. This way they do not have to depreciate the loan on their books and this is exactly what happens at the trustee sale auction a majority of times.  A good example of banks refusal to foreclose would be a 178,000sf industrial on Wynn Road which has been sitting empty for a couple of years and when I had a viable owner user with proof of funds and contacted the trustee in the matter, the bank refused to talk to me. Why, because they had to depreciate their books by $6,000,000 if I was successful in doing the transaction.

Now those who are making a living as a Las Vegas real estate analyst by predicting a tsunami of foreclosures obviously are ignorant of the above and it is their job to know. The astronomical bank profits that news channels report will eventually give the banks the ability to get rid of more bad assets and it is happening in real time in Las Vegas.

Las Vegas commercial real estate note auction

The best opportunity to invest in Las Vegas commercial real estate is coming up next month in the form of a non-performing note auction for tens of millions of dollars in commercial real estate notes. These are non-performing loans for multimillion dollar office, retail and industrial properties. In this auction investors can purchase non-performing loans which they can foreclose on later and get the property at deep discounts from other buying opportunities in greater Las Vegas including bank owned commercial properties. I will explain this process in a future blog.

Anyway, now you know why I titled the last blog post Las Vegas Voodoo real estate market, because we got Zombie loans all over the Las Vegas area and no one can see them.

If you want more info about the Las Vegas commercial real estate note auction, call me at 702-478-7800, Masoud.

We have 125,000 empty homes and condos in Las Vegas, the property values will go down by 1000%, shadow investors want to unload 500,000 homes and condos in 3 years and we have zombie loans (loans in default that banks do not want to foreclose on) walking around in the day time around the Strip and nobody can see them. We got it all in Vegas, baby!

There was an article in the Las Vegas Review Journal on April 16^th that I will not give a link to which discusses the Las Vegas real estate market in the next 3-5 years. It claims that Las Vegas has about 65,000 vacant homes and assumes that if 1500 homes are absorbed per month we have a 4 year inventory.

Man it is getting so deep that I’ve got to wear fishing boots.

Silly season is on and so called Las Vegas real estate “analysts” that can’t see past the tip of their nose and have been WRONG at every turn, now are predicting what Las Vegas real estate is going to be like in 3-5 years. This is really silly because no one can predict what Global economy, which US economy and Las Vegas real estate pricing is a function of, will be like. Why global economy? Well, if gas prices stay in $3-$4 range, Las Vegas would be doing far better than if gas prices went to $7-$8 per gallon.

The other reason is that these guys assume that the Las Vegas economy will be static, meaning the same economy in 3-5 years. It may or may not be, however current numbers are showing decent gains, such as large gains in convention attendance and gaming.

Here are real numbers for you:

Total number of foreclosed (bank owned) residential properties sold through Las Vegas MLS in Greater Las Vegas since Jan, 1, 2011 = 11900

Total number of properties foreclosed by the banks and sold back to the in Greater Las Vegas since Jan, 1, 2011 = 8000

Total number of properties foreclosed by the banks and sold to the third party in Greater Las Vegas since Jan, 1, 2011 = 2385

Banks have sold 3,900 homes, condos and townhomes through the Las Vegas MLS than they have foreclosed on and purchased at the Las Vegas trustee sale auction. The mountain of foreclosures that these silly guys are predicting is failing to materialize again, for the second year in a row.

Given that these so called real estate analysts have been regurgitating the same stuff (I am being polite and didn’t use crap) in the last 3 years, don’t take what they say seriously.

I do not know what will happen in 3-5 years, or if we are at the bottom. Additionally, I am not silly enough to claim otherwise. However the best real estate deals in Las Vegas are getting multiple offers. I e-mailed 16 very good investment home listings to a Canadian investor and in 3 days 5 of the 16 were under contract.

The most important factor that governs real estate pricing in Las Vegas is zombie loans which I will discuss in the future. As for me after a very difficaut 6 month, this is the best I have felt in 15 years, Thanks for all your prayers, may the Good Lord bless you all and I love you one and all.

Investing in Las Vegas homes which have a strict home owner association (HOA) is one of the best tools to increase the odds of future appreciation

Before moving to Las Vegas I lived in Nebraska for 20 years, much of it in a log home that was 1000 feet from the nearest road, free as a bird and private as private gets. No HOA there as in many other parts of United States. When we chose to buy a home in a Las Vegas common interest community with an HOA, I had serious reservation about a home owner association dictating to me what I could or couldn’t do with my own property, but had no choice as I loved the location, plan and all other things about my home.

What is a Las Vegas home owner association? Home Owner Association controls a common interest community which normally is separated from others by a common wall around the community. Good HOAS force home owners to keep up their property and disallows activity such as parking 3 broken down cars in the drive way or front yard or someone coloring their home pink. HOAs act as an arbitrator when a problem arises between neighbors too.

Although HOA fees can run from $10 per month to hundreds of dollars per month, depending on amenities and services rendered, this fee is well worth the price. A good HOA is the best tool that an investor has in order to increase the odds of future appreciation.

We have one of the most draconian HOAS and they have upset me a couple of times with demands that I found to be excessive, but I didn’t fight them because I knew it was the same for everyone. The other side of the coin is that I live in one of neatest and best kept up Subdivisions (another name for common interest communities) in the Las Vegas area.

 Las Vegas homes for sale that are listed in my subdivision go under contract in less than a week, sell quickly and for top price.

Isn’t future appreciation one of the most important goals that a Las Vegas real estate investor is looking for?

The other point is that more than 90% of newer homes in Las Vegas are built in common interest communities and trying to avoid them will result in buying older homes or in less desirable areas as far as a Las Vegas real estate investor is concerned.

Lastly, best kept up communities demand the best rental rates and in many cases the HOA fee can be built in the rental rate as good, strict HOA communities bring more rental income than similar properties that are not in a HOA community.

Conclusion: A smart Las Vegas real estate investor not only doesn’t avoid HOAs, he or she should look for strict HOAs and they are easy to find. All an investor has to do is to look at the neat front yards and well kept common areas. Non HOA communities lack both and it will translate to lower rental income and less future appreciation.

Silly real estate pundits have been writing about how bad Las Vegas real estate market is in the first few months of last year. Well a whopping 41,915 single family Las Vegas homes, condos and townhomes have been sold in Las Vegas, North Las Vegas and Henderson through the Las Vegas MLS and another 5,945 properties were sold to a third party in the Las Vegas Trustee Sale Auction with additional properties which have been sold through various bank owned auctions which should put the total number close to 50,000. The supply of distressed properties in Las Vegas area is not endless and we have easily burned though the majority of these.

The total number for foreclosed properties in Las Vegas was 23,920 and 19,180 of these have sold through the Las Vegas MLS in 2010. Some of the rest have sold in bank owned auctions and some are not ready to sell yet. I have shown that home prices have been going up and down in a narrow range (10%) for the type of transaction; see Las Vegas homes market for foreclosures, short sales, auction homes. Condo prices in lower price ranges are up about 10%-15% in many cases.

We are witnessing a serious attempt by the banks to raise prices in all types of residential real estate and all price ranges!!! Time after time we see Las Vegas bank owned listings have been withdrawn from the market and re-listed at 5%-10% higher. We used to have a real estate tradition in Las Vegas pre-2008 and it was; if the property didn’t sell within three months, raise the price by 10%!!! I don’t think bank attempts can succeed in the current market but banks are playing hard ball now.

We have had a couple of complaining e-mails from the listing agents along with rejection letters for offers on $400,000-$500,000 Las Vegas bank owned luxury homes because our offers were 10% below the lowest COMPS. These listing agents were attempting to teach me how to calculate the correct COMPS!!!! Unless these complaint letters are really snobby, I don’t answer them. But while I do not have any problems about paying COMP prices for $150,000 single family homes offers should be made with future direction of the market which is totally different for single family homes that are priced in $150,000 range rather than homes that are priced in $500,000 price range.

As for Las Vegas real estate market for 2011

If things go the same way they have been, we will start a slow recovery in prices which will go on for a year or two, I have explained in Las Vegas economy and its effect on Las Vegas real estate that four levels of trickle downs have to happen and we have started seeing the second level which is a double digit increase in casino and convention business. Now our casinos have to feel good enough to give their workers more hours (I am not talking about new hiring) and employees have to feel good enough and pay down some debt before they start spending money.

I will write about why I expect Las Vegas foreclosures to down drastically in the future.

We are a couple of years away from sharp recovery in Las Vegas real estate and when it arrives it will not be linear. Masoud

Have you ever wondered why you see so many different figures quoted in the media regarding home prices in Las Vegas?

Some quote “Average Price” and some quote “Median Price”, and some don’t say!

There is no ONE price for EVERYTHING! Las Vegas homes prices are the function of:

1. Transaction Type: Auction, REO, Short Sale, Normal Non-Distressed Sale or New Homes

2. Time Frame Measured: For the Month? For the Quarter? For the Year? Last Year or This?

3. Type of Structure: Single Family Detached or Traditional Condo/TH or High Rise Condo?

4. Area Measured: Clark County? Las Vegas-Paradise MSA? Henderson? North Las Vegas?

5. Data Source: MLS? DataQuick? Case-Shiller? County Assessor? US Census Data?

Below you can find the median home prices in Las Vegas by transaction type.

Las Vegas home market by transaction type, foreclosure homes, short sale homes, auction homes and classic sales

As you can see this graph shows a stable market, jumping UP and DOWN in a narrow range (about 10%).

The other graph shows market shares by transaction type. Although foreclosures make up only 20% of total residential listings, still more than one third of homes sold are foreclosures.

Las Vegas homes sold market share transaction type, foreclosure homes, short sale homes, auction homes and classic sales

 The other point is that competition for homes that are priced less than the median number for each transaction type is still fierce and we are yet to get an acceptance without multiple offers;, however we win our fair share of deals even after multiple counter offers because we have become experts in writing foreclosure offers.

Lastly, I have told a couple of perspective buyers to GO FISH rather than looking to buy homes here. These buyers want to get an additional 40% discount from current prices for Las Vegas homes while there is absolutely no reason for any seller to even consider their ridiculous offers when they are getting multiple offers for their homes that are near or higher than comparables. When knowledgeable buyers talk about 40 cents on the dollar, they are talking about prices in 2004-2007 and not now.

Property taxes for many Las Vegas homes and condos have been cut by 15%-25% or more, however many listings show 2009-2010 taxes instead of the new rate. Thus property taxes have to be verified when showing or making offers on homes or condos since a $500 per year reduction in taxes for a $125,000 home can significantly affect the loan amount for buyers who want to finance their home and can equally affect cash flow for Las Vegas real estate investors.

Masoud’s Law:

A: A Las Vegas home, condo, high rise condo or commercial property seller is NOT stupid, even if it is a bank selling foreclosures.

B: Most Las Vegas real estate deals are ZERO sum deals and thus adversarial.

This is the reason that a seller would hire one or more real estate professionals to help them set a proper price for their property. Banks get at least two broker price opinions (BPO) before they list their bank owned Las Vegas home or condo. Nowadays the banks get an appraisal for short sale Las Vegas homes or condos before they OK a short sale. The buyer or his agent will not fool anyone.

Furthermore, banks have been doing foreclosure sales for a while and by now they have a pretty good idea about Las Vegas property values. However, while some banks and their agents would market the property for far less than the desired price to get bidding wars going, others will put a higher price and expect to get lower offers. Asking prices mean nothing.

70% of my time is dedicated to researching the Las Vegas real estate market. Why would I spend so much time doing research? Because an intelligent offer on  Las Vegas homes, condos or high rise condos should be made with several factors in mind.

1: COMPS or comprehensive market analysis of the property. We look at the prices that similar homes or condos in the immediate area have sold for in the last 1-6 months. By similar, I mean the same floor plan and square footage and the 1-6 month period depends on how dynamic the market is; if there are enough sales we try to keep in the last 90 days.

2: Las Vegas real estate market trends: If the market is going down quickly, we need to protect the buyer, thus the upper limit on the offer would be COMPS minus 10% or more for the offer. A couple of years ago we helped a disabled veteran buy a home for 28% below COMPS. His deal still stands as a great deal today. However, instead of paying rent he has been paying his mortgage for a couple of years now and has paid far less than he would have paid to rent the same home. Instead of paying a land lord by now he should have a bit of equity in his home. If the market is appreciating then COMPS become the lower limit for the offer.

3: Price range and type of the property: Many buyers ignore this important factor. Las Vegas foreclosure homes for sale get offers that are very close to asking price in all price ranges, however competition for homes priced under $100,000 is fierce. Buyers who think that they can lowball a bank property significantly will not succeed. Conversely many non-distressed Las Vegas luxury homes that are priced higher than $500,000 are priced unreasonably too high, we would lowball the heck out of these.

4: Condition of the property: The more work a property needs, the lower the price since the buyer has to put in his/her time and money to fix it. Furthermore, fixer upper don’t qualify for a loan, unless it is eligible for a construction loan to fix it. Fixer uppers or Las Vegas auction homes that have to sell for cash provide for some of the best deals to found today.

5: How many offers a property has: If the property has multiple offers, forget about low balling.

6: Intangibles: No two persons have the same taste, if a buyer falls in love with a Las Vegas property and tells me “Masoud, GET it for me”, then a premium has to be paid to GET the buyer the property.

7: Tangibles: Views, Las Vegas homes or condos with Strip views command a premium as well as homes with larger lots or that have a great back yard, pool, spa, etc.

8: The seller: Is the seller willing to get into protracted negotiation? No if the seller is a bank. Yes if the seller is a private individual selling a non-distressed home or condo.

Picking the right price to make an offer is NOT done through reading newspaper articles or taking guesses. A Las Vegas real estate buyer’s perception of the market condition could be their worst enemy. Only accepted offers lead to deals, not rejected offers. So here is our policy regarding making offers on behalf of our clients.

• We try to make the lowest possible offer that has a chance at getting the offer accepted

25,941 Las Vegas homes have sold so far in 2010 which is 2,114 less than 2009, this is due to the lack of foreclosure inventory through 2010. However the number of homes sold in Las Vegas in 2010 is twice the number of homes sold in 2007 (12458) and much higher than homes sold in 2008 (17525). If the market doesn’t change drastically 2010 will have the highest number of homes sold in the past six years. 

Why is Las Vegas real estate market for homes is stable?

The average price for Las Vegas homes was $169,825 for September 2010 which remains within the same narrow range that it has been at since March 2009. This represents a 60.3% drop from the record “average” high of $428,817 in June of 2007 which was followed by significant monthly price drops until March 2009. The average price for Las Vegas homes has continued to fluctuate by only a few thousand dollars representing a 2.0%- 2.5% fluctuation each month. Proof of what I have been writing about for about 15 months, except it took guts to say the Las Vegas home market is stable more than a year ago, I hope fear mongering media publish these numbers, but then again how can they sell  papers without fear mongering.

Total sales of single family homes in September stands at $476,528,134 which reflects only a slight +0.1% increase from August 2010, total volume of sales through October 2010 is $4,205,383,551.

I will discuss Las Vegas condos that rent for more $500 per month and higher as the inventory of condos that rent for less than $500 is low and most units are in duplex or four-plexes.

A look at condos that have rented in the last couple of months shows those condos that have been purchased for $30,000-$50,000 and rent for $500-$750 or a bit higher. Let’s look at a real life example.

A two bedroom, two bathroom Las Vegas condo that was purchased in 2010 for $45,000 rented this month for $725 per month. Gross income from this condo is $8,700, HOA fee (condo fee) is $135 per month and taxes run about $650 per year, owners Insurance and home warranty, run about $75 per month. Home warranty is important as it protects the owner from large repair costs. The net income after deducting costs is about $460. Cash on cash return for this condo is 12.25% and cash flow from this condominium depends on the owner’s tax bracket, etc.

12.25% cash on cash return is a great return on investment in today’s economic conditions but not all investors will end up with this kind of cash flow. One of the highest prices paid for a condo that rents for $550 was about $64,000. The cash flow for this condo is low. Conversely someone purchased a condo for $38,000 and rented it for $800 per month (one of my clients) and she will get a much better cash flow than 12.25%.

The trick is to know which condo communities and areas offer the best return on investment and we have done the research to identify these condo communities.

Las Vegas condos that have been purchased for more than $100,000 in 2010 rent for about $1,100 plus-minus 150 per $100,000 in purchase price however cash flow is a bit less than condos in the $30,000-$60,000 range due to higher HOA fees and taxes.

Las Vegas real estate market for condos that are priced higher than $125,000 is far slower than condos that sell for less than $50,000. Some of these higher priced condos have sold for over $500,000 just 4 years ago and will appreciate far more than cheaper condos when banks start financing condos again.

A few points about investing in Las Vegas condos first:

1: How to depress the heck out a product’s pricing? Make buyers pay in cash.  This is the case with Las Vegas condos for sale, except for a small segment of the market. I sincerely think that if most condos could be financed in Las Vegas, prices would go up by 20% or more overnight. I did a series of blog posts about Las Vegas homes and condos market conditions for condos priced over $150,000 that mimics Las Vegas luxury homes market while Las Vegas homes for sale priced $100,000-$200,000 are selling more than any other price range.

2: Luxury condos, such as condos at Lake Las Vegas, are being marketed for 20 cents on the dollar while Las Vegas homes that could be financed easily are selling for 35-50 cents on the dollar.

3: Lack of financing for Las Vegas condos cannot last forever; actually there are ongoing discussions to remedy this.

Facts above, combined with Las Vegas residential real estate being undervalued by about 18%-20% make Las Vegas condos a good real estate investment opportunity. However, the investor has to pay for condo in cash and in full. This brings up the following question.

Is it better to buy a condo in cash or use the money as down payment and finance a home as an investment?

This is very good question and subject of a few future blog posts but we are discussing condos now.

As for owner occupied condo investors, I did a blog post about making double digit cash flow on Las Vegas duplex and four-plexes along with an example for buying a $100,000 four-plex.

Generating cash flow from owner occupied Las Vegas condos or homes

There is no need to discuss this further.

I will discuss making cash flow on Las Vegas condos next.

This is a real life example about how an owner occupied Las Vegas home buyer can buy a 4 bedroom $100,000 home, rent two rooms and pay about $100 per month per month in out of pocket expenses.

 Example:

Rooms in single family homes in Las Vegas rent for about $400 dollars per month and a decent one bedroom condo rents for $600 or more. If a buyer buys a 4 bedroom home for $100,000,(it is possible to get a nice home for that price) and rents two rooms, he/she earns $800 per month .

The investor pays 3.5%, for down payment and borrows 96.5% at 6% interest rate per year. Let’s say the buyer had the seller contribute all his closings costs in order to keep this example simple. Annual taxes run between $1300-$2200 for homes in this price range, so let’s say taxes for our home are $1800 per year, or $150 per month and HOA fee of $50 per month, insurance and home warranty run about $100 per month. Since the buyer didn’t put down 20% then he/she has to pay Private Mortgage Insurance (PMT) that can run up to $600 per year of $50 per month.

Example home:

Down payment = 3.5% or $3,500

Loan Term =30 Years

Taxes = $1,800 per year or $150 per month

HOA fee=$50

PMT=$50

Insurance=$50

Home warranty = $50

Loan amount=$96,500

Monthly principal and interest payment=$ 580

Total Monthly Payment for principal, interest, tax and insurance PITI and home warranty= $930

Minus rent collected -$800

Total out of pocket expense to own home = $130

Not bad.

Las Vegas real estate is back to being a great investment opportunity due to the economic crash that in some cases has seriously overcorrected real estate prices in Las Vegas, Henderson and North Las Vegas, Nevada. I have discussed this in detail in Invest in Las Vegas Real Estate – Las Vegas Investment Properties see Case Schiller index that does a good job of showing that the Las Vegas housing market is about 18%-20% undervalued compared to 10 major cities in the US.

Different types of Las Vegas real estate investors and different types of properties to invest in

What to invest in is directly related to how much money an investor wants to invest and how he/she is going to invest it.

Invest in Las Vegas real estate series 101 that I am starting at the introductory level will discuss:

1: Investing in owner occupied Las Vegas homes or condos, lofts and high rise condos.

2: Investing in Las Vegas commercial real estate that an owner can live and work in the same unit (CRT zoning) that is only available in Un-Incorporated Clark County and NOT in Cities of Las Vegas, Henderson and North Las Vegas, or living in one unit and working at another unit in the same building (Mixed Use) zoning, that is allowed in all of the Las Vegas Valley.

3: Investing in Las Vegas residential real estate including homes, condos, lofts, townhomes and luxury high rise condos on the Strip and elsewhere for non-owner occupied investors which should include the vast majority of investors.

4: Investing in Las Vegas commercial real estate.

1: Owner occupied Las Vegas real estate investors: Investors who would live in their home

 It is important to look at an owner occupied home as an investment, because it is the biggest investment that the majority of people will have in their lifetime and I will explain owner occupied homes from the investment point of view.

Most investors or owner occupied home buyers don’t know that any residential building with 4 units or less are treated as one single family residential home as far as US government and banks are concerned. Additionally, Fair Housing laws don’t apply to these types of residences either.

Thus an owner occupied investor in Las Vegas can legally buy a home, live in one room and rent the rest. Or buy a duplex or four-plex apartment building, live in one condo and rent the other apartments. I have written a blog about these which show how an owner occupied Las Vegas real estate investor can generate double digit cash flow by having his renters pay the mortgage and have a few hundred dollars in income.

So why is this important? The reason is that the prospective owner occupied investor can obtain a mortgage with low down payment and interest rates that are reserved for owner occupied home or condo buyers. While an investor has to put up 20% plus for down payment, owner occupiers can buy a residence with as low as 3.5% down payment and enjoy a much lower interest rate than other investors that provides for a better cash flow..

I will show through a real life example how an owner occupied Las Vegas homes for sale buyer can buy a home with as low as $7,500 in their bank account and decent credit (620 FICO score), or better, can buy a 4 bedroom home for $100,000, rent two rooms and end up paying about $100 in total payments (mortgage payments, HOA fee and private mortgage insurance and home insurance) to own his/her home.

Dave K is one of my favorite people on earth and lives in Minneapolis, he and young guys/ladies like him are the greatest assets that United States has to help it overcome current problems.

Dave picked about 4 homes to make an offer on, however one of them was by far and away the best and we tried to get him that one. However, the listing agent was not the best and it took us about one month and many e-mails, including an angry call from me to get the offer accepted. But this is not the end of story.

If someone asks me “what is the best reason for buyers to use a good Realtor?” my answer is the escrow process. Dave had to obtain an investment loan and these are more problematic than owner occupied mortgage loans.

One of the drawbacks of buying bank owned homes in Las Vegas is steep fines imposed by the bank (seller) if the deal doesn’t close by the deadline stated in the contract and Dave’s loan didn’t come through on time. However we knew about a big mistake by the seller and didn’t bring it up until the day before the deadline which killed all the fines and allowed Dave to close his deal without paying the fines, thus saving him about $1,800.

At any rate, listen to his testimonial and learn that success doesn’t come to the meek. If you want a good Las Vegas real estate deal, you MUST be prepared to fight.

Please watch Dave K’s testimonial below and see: How we get difficult foreclosure deals done in Las Vegas

How Dave got a great deal for Las Vegas investment property, this is a You Tube video

I am still learning the video editing program and will upload videos from One QueensRidge, the most luxurious high rise condo towers in Las Vegas hands down, which is located in Summerlin about a 20 minute drive from the Las Vegas Strip with fabulous views of the Strip too.

I wanted to do blog for $150,000-$200,000 price range but since we have only 38 properties available for sale and only 4 sold in August-2010 the sample size is too small to analyze, so I will cover all condos that are priced higher than $150,000. It should be noted that this series doesn’t include Las Vegas high rise condos and lofts. I will discuss them on an individual basis.

Las Vegas inventory of condos and lofts listed for more than $150,000 is 96 and 10 condos sold in August. This puts our inventory at 9.6 months. However, to have a meaningful discussion I will go back 2 months.

The table below shows inventory of Las Vegas condominiums and lofts for August 2010 by type

Only three luxury condominiums are priced higher than one million dollars, one in Mira Villa at Summerlin and two are at Lake Las Vegas. 84 out of 96 are priced below $500,000. Even though foreclosures and short sales still offer the best deals, asking prices for regular sales condos compete well with distressed sale pricing. However, some non-distressed condominiums in the same condo community are price at 200% or more of distressed or reasonably price condos.

The highest asking price per square foot is quite a bit more than $500, while the highest price per square foot paid in Las Vegas is $357. I f your asking price is 30% more than the highest price paid in the Valley in the last 6 months, chances are it will not sell.

Two short sale condominiums at Meridian sold for $115 dollars per square foot and you saw $140 per square foot paid for two bank owned condos there in the last blog post. Now you decide the following:

Is investing in Meridian condos a good idea or not?

Clearly it is in the first case and probably not a good idea in the second case, since they are already in the hole for $15-$20k when compared with comparable units.

The reason that I will not discuss sold numbers is that there is just not enough data to do it right. However, I will discuss the reason for lack of activity in this segment and it is simple. It is next to impossible to get financing for these condos and lofts except in two cases and one is builder financing, call me for the second.

In order to buy a home that needs a JUMBO loan, the buyer has to put up a significant down payment, say 40%. So for someone that wants to buys a $600,000 condo, he/she has to put up $240,000, which they could use to buy a $240,000 condo and not have any payments.  Check out my blog about Las Vegas real estate market – homes for sale priced $500K-One Million and you will see it is similar to the condos and lofts market report for this price range. Some of these below $250,000 condos or lofts are truly luxurious and can’t be built for the asking prices, ever. There are four bank owned lofts at L0ft 5 are listed in the Las Vegas MLS. Asking prices for these luxurious, highly upgraded condo lofts start at $75 per square foot which is a true bargain. Lack of financing has badly hurt this sector which makes for a great bargain for cash investors.

Related Web-Site links and blog links:

Las Vegas condos, lofts for sale $100,000-$150,000 market report

Las Vegas condos, lofts for sale $50,000-$100,000 market report

Las Vegas condos, lofts for sale priced below $50,000 market report

Las Vegas Condos – Lofts– Luxury Condominiums for Sale

Las Vegas real estate market report for bank owned (foreclosed) condos and lofts, short sales and (non-distressed) condominiums or lofts for sale in Las Vegas, Henderson and North Las Vegas priced at $100,000-$150,000. Our total inventory in this price range is 197 which are available in 63 different condo communities. 8 are clustered around Village Center and Summerlin Pkwy. Three are at Lake Las Vegas, 2 in N.W. Las Vegas and 8 in S. Las Vegas and 10 in the Henderson area.

38 condo and loft units have sold in August-2010. This puts condos, lofts inventory at 5.2 months.

Check out the significant drop in the number of inventories as our inventory in this price range is 20% of condos for sale inventory for the $50,000-$100,000 price range. This is the reason that I am doing Greater Las Vegas condo and loft market reports in $50,000 increments.

Midrise Luxury lofts at Loft 5 and condominiums at Park Avenue and Manhattan and The District show up in this price range. The table below shows sold numbers for August 2010 for bank owned, short sales and traditional sale condos and lofts.

Did bank-owned condos really sell for 106% of asking price? Are results accurate for this segment? Yes and no. If one takes a closer look, he/she will find that the condos sold at Meridian are skewing results since our sample size is not large enough. One Meridian condo, with an asking price of $107,000 sold for $150,000 and two others sold for $16,000 and $12,000 over asking price, these buyers paid about $140 per square foot and didn’t get a good deal, even though they purchased foreclosures. This goes to show you that buying a foreclosure in Las Vegas doesn’t mean that you automatically get a bargain.

Other than Meridian and Manhattan condominiums, the rest did not sell for the asking price. Sold condos have been priced well and this can’t be said about condos that are currently listed, as a significant percentage of the non-distressed condos are priced so unreasonably that their chance of selling is zero.

A few condos that are currently listed in one condo community that I will not name are listed at 300% of sold prices. I am discussing condos in $100K-$150K price range and we just had an offer accepted on a move in ready bank owned condo for $26,500. I am always perplexed at why a Realtor would list a condo that has no chance of selling. However, one short sale agent that only wants to be contacted through e-mails and (too busy to take phone calls!!!) has listed the condo as both a short sale and a foreclosure at the same time takes the top honor. This short sale condo will get foreclosed upon. I wonder if a Realtor is too busy to answer phone calls about his listing, why is he in this business?

The majority of condo communities in this price range have all the amenities, such as pool, clubhouse, exercise room, etc. HOA fees are from $125 per month to $700 range in The District.

Related Web-Site links and blog links:

Las Vegas condos, lofts for sale $50,000-$100,000 market report

Las Vegas condos, lofts for sale priced below $50,000 market report

Las Vegas Condos – Lofts– Luxury Condominiums for Sale

Las Vegas new condos, lofts for sale