Las Vegas Real Estate – 9th Island of Opportunity

Okay, if I had to choose between other mainland cities or Las Vegas, I’d bet my stack of chips on Vegas.  It really does feel like home, only hotter, colder, drier, and busier.  My favorite airline goes there non-stop and since I have their VISA card, I use my Hawaiian Miles to upgrade to first class whenever I can – THAT is truly the way to fly!

In Vegas, the California Hotel is like a class reunion – more people I know and bump into there than at Ala Moana Center!  There might be better real estate markets out there such as Indiana, Texas, Ohio, Florida, Memphis, etc., but Vegas [*! see update at bottom of page] is my favorite market to shop and buy.  Yes, Paul and Co. (Realestate-Extreme), it is emotion not primarily the numbers dictating that strategy, but women are supposed to be emotional.  And Uncle doesn’t mind.

I believe in picking the best strategy for our situation, and go for it.  Believe me, there are different paths to take, different markets to seek, and more advice than I would like about not doing what we are doing.  We aren’t going in blind and deaf – we do listen to advice and continue to learn.  However, I believe one of the most important hallmarks of success is commitment.  We are not letting other people’s beliefs stop us in our tracks or veer us from our chosen path, as long as our plan is working.

Our strategy is to buy the bargains in Vegas, rent and hold for a few years, then sell and buy closer to home using 1031 exchanges (or not) – in Hawaii, cash flowing all the while.  This is banking on a few things – that we could rent for positive rental income in Vegas, prices in Vegas appreciate in a few years, and prices in Hawaii remain the same or come down a couple years out from now.  We will also keep our options open.  For now, we are getting decent rental income from the properties we do have in Vegas, and if that is how it remains, we will be fine.

Buying in Vegas is not a problem.  It is on sale.  Houses that were $400,000 or more a few years ago can be purchased for under $200,000 today.   Formerly $240,000 4 bedroom 3 bath homes are now available for $80,000 to $100,000 in some areas – fee simple, 5 years old, central heating and air conditioning, nice looking, 2 car garage, with or without pool, etc.!  Million dollar homes, gorgeous million dollar homes are $400,000!  [note update:  as of May 2013, prices in Vegas have risen – the market is heated up with a lot more cash buyer investors and less properties on the market.  As a result of this, rental rates have gone down because there are now more investor owned rental units available.]

Homeowners association fees are rather low, property taxes are similar to Hawaii, and insurance is very low since they don’t have hurricanes there.  If you run your rental business as a Nevada entity (see BOSS Business Services for info and support), open a business checking/savings account in Nevada (I use Wells Fargo), and use a Nevada property management company to manage your rentals, you can take advantage of Nevada’s business friendly laws.  Use a Nevada LLC if you are conducting real estate business in Nevada.  (Use a Hawaii LLC if you are conducting business in Hawaii.  It is possible to file as an alien, but for me it is not worth the hassle.)  I currently used BOSS to file my corporate taxes in the past, and now use Diane Sandlin for our business and personal taxes that have flow throw LLCs.  Diane is an excellent CPA and tax advisor knowledgeable in real estate investing and the reason we switched was because of the time difference communication lag that was occurring between Vegas and us here in Hawaii.

One of the advantages of investing in Vegas is that I am able to write off the expenses (air, hotel, car, food) to Vegas because I am doing business transactions in Vegas as long as I spend at least 4 hours in a day transacting business, i.e. looking at properties, meeting with our property manager, etc.  Sweet!

If you have some time, please read a piece on commitment.  Once we committed to building up our nest chicken, things started falling into place.  After stumbling through a couple of counter productive Nevada real estate agents, we found the best real estate agent in the world (or at least in Vegas) for our strategy, Martin Fajardo.  Young, energetic, honest, hard working, smart, and a great family man.  Investment minded, pushy when necessary, attention to detail, and totally knowledgeable about Las Vegas, its market, and its pitfalls.

The first house I fell in love with was a 4bedroom/3bath  house on the MLS on Bella Camrosa Drive.  OMG, it had a drop dead gorgeous kitchen and an asking price of $191,900.  We offered $175,000 and were rejected – twice.  I was so sad.  This was in August 2009.  My first love and first rejection.

That was a year ago from the time I have begun this info site.  Since then, we have acquired and rehabbed 7 properties in Vegas, and sold 1.  Within 3 weeks or less from rehab completion, properties have been put under lease contract with qualified tenants.  There is a rental market in Vegas – many of our tenants are former homeowners who lost their homes in foreclosure proceedings.  Rent prices are a bit soft, but prices are so low, and it cash flows nicely.  To me, it is an ideal time to be buying in this fast flashy city.  There is even a seller’s market, just not as good as a buyer’s one.

Here’s a audio file from a very astute investor/trainer talking about Vegas investing.  I don’t know how long this file will be available so please listen to it if you are even just thinking about investing.  Thank you dear friend for sending this to me!

I couldn’t have done this without Martin.  I wouldn’t have taken my first step without Rich Dad.  I continue to learn from people like Paul, JT, Michael & Gavin and talking story with new found investor friends.  Having Uncle in step and supporting this new venture of taking charge of our financial future makes it just fine and most important to success.  The combination of all these blessings gives me great odds, far better than betting my favorite numbers of 6 and hard 8’s.

Speaking of 6’s and 8’s, here’s a page on my theory of craps and real estate.  Thank you to my craps mentor, Chang, for putting up with all my questions and allowing me to tag along.

I just bought ANOTHER program, lol.  But really, this one I had to get because I was dying of curiosity about the Las Vegas market.  It is Ken Wade’s Housing Alert program.  He is a graph/numbers/trend cruncher, and a master reader of the candlestick chart theory.  He uses red dots for bad, yellow for neutral, and green for good, using almost the same kind of parameters as stock market indicators (MACDs, pricing, etc.) to determine an upward or downward move/trend in specific cities.  Well, I can’t legally show you the picture, but currently as of March 2011, Las Vegas is moving from previous quarters of all red to the current quarter of 4 greens (2 each in the short and intermediate terms) and 2 reds (in the long term).  The long term rating will be much slower to change because it is still accounting for that rapid downward slide in prices and stability over the last few years.  It always lags the current and intermediate market because of the time frame it measures.  Check out Aunty’s review of Ken Wades’s Housing Alert program.

What this means is that Aunty is happy.  The bad stage is turning into a good stage.  Buying is smart, and when the market’s indicators start to turn yellow, it will be time to sell.

Click < here > for a more detailed page on the steps involved in buying real estate in Vegas.

I do things the easy way, but I try to do them well.  One of the secrets to that is to find good people that help.  I have been blessed with good luck in finding great people.

My realtor, Martin Fajardo (martin@rarealty.net) is the number one key element in my Vegas real estate ventures.  Smart, young, awesome.  His motto is to under promise and over deliver.  That he does, time after time.

It does help to do your own homework.  Before you decide to invest in Vegas real estate, think about what your end plan is, what your finances are, and what you want – i.e. cash flowing rental properties, buy low and sell properties, or joint ventures where the decisions are out of your hands and you just make profit and/or cash flow.

We did buy one property and sell it a few months later in Vegas last year – just to see and also to get our cash back out.  It was a break even sale after the rehab and closing costs.  This taught me not to listen to the news and the naysayers with their one sided pessimism about Vegas real estate.  There is both a buyer and seller market right now, granted the buyers do have the upper hand.  It’s also not a market where you get stuck holding onto real estate in case you want to sell.  Some people are successful in making money doing flips (buy low, fix, sell higher) but it really is a better market for buy and hold – to cash flow.

So how do we buy?  I let my realtor Martin know what and where we are looking for.  Las Vegas is broken into MLS areas with numbers.  Areas 101 & 103 are up north, Henderson has several areas such as 606, 605 (my favorite) and Summerlin is 403, etc.  People don’t go around saying “I live in area 103,” but will give out the area name, like Summerlin, South West, etc.  Kind of like how we say Manoa, Ewa Beach, etc.

It helps to limit the area searches or you might get hundreds of listings with your overly broad criteria.  I usually ask for 3+ bedrooms, 2+ bathrooms, single family homes, at least 1600 sq ft, under $180,000 in my favorite areas.  For cash flow, 5+ bedrooms are awesome, thought your search would have to include more areas.  Once you start getting the daily lists from your realtor, you can adjust your search if you are getting too few or too many.  Figure out what you want, and ask your realtor to find all of them online.

When Martin sends me the search results of my criteria, the first email list from him is usually quite big – because it is all the properties that are in the system that I have never been sent (since it is a new search).  Subsequent email lists are much smaller – sometimes only 1 or 2 properties, depending on how much I have narrowed the search.  If I get too few properties to look at, I broaden the search by increasing neighborhoods, maximum price, or dropping the number of bedrooms or square footage of land and/or building.

I look at each property sheet on the list and determine if it is something I might like.  After awhile you will be able to “judge” the property but at first EVERYTHING looks good.  That’s the honeymoon phase, and it is quite wonderful.  Las Vegas real estate shopping is like being in a candy store.  It comes down to figuring out which is your favorite areas or what your focus will be – higher cash flow, or potential of higher capital appreciation.  You will find both components in all areas, but you will probably not find one with both the highest cash flow and highest capital appreciation potential.  In general, homes in the North Las Vegas area will cash flow beautifully well because the homes are new, large, and inexpensive.  Homes in the more desirable neighborhoods with the higher price tags such as Seven Hills, Anthem, Southern Highlands will not cash flow as beautifully ( they still cash flow nicely) but the upside potential in these gorgeous neighborhoods with lots of trees (I like trees) is potentially fantastic.

When you find a property on the MLS listings that you like, click on the “printer friendly this page” at the top right corner, and the print.  If you don’t do that, the page will be printed with a dark grey background making it harder to read and also using up a lot of your ink.

Circle the things you like about the property (i.e. large lot size, number of bedrooms, gated, pool, area, etc.) and also the things that concern you (i.e. high monthly HOA fees, notes on condition, age of house, etc.)

Sometime the listing will have a “click here for map view”.  It helps to have maps of Las Vegas handy.  One map will show the areas by numbers (101 – 606) which correspond to the sub-areas within the broader areas such as Henderson, North LV, Summerlin, etc.  Another map I have is one with zip codes – this helps me narrow down the area within the area in which the house or property is located.  The third map(s) I have are from AAA (free with membership) on the Las Vegas areas.  Currently, AAA has 3 maps for Vegas – one for Central Las Vegas (North, Downtown, Strip), Western Las Vegas (SouthWest, Summerlin), and Henderson (showing the South part of Vegas).

I also like to “look” at the property, and either go to Trulia.com, type in the property address and zip code, and see a map and other information.  Or, I type the property address into the Google search window, and if the Google truck was on the street, I see the property, its neighbors, and the streets around.

(to be continued – have errands to run, people to see, etc….)

I use Wells Fargo in Las Vegas for our Nevada real estate entity.  Their online ease of use and level of customer service are exceptional.  My personal banker is Giovanni Anacta of the business banking division.  Giovanni helped me set up my business checking account and introduced me to a commercial lending officer as well as a mortgage loan officer.  I felt like the red carpet was rolled out for us.  Contact info: giovanni.l.anacta@wellsfargo.com  (702) 382-8722.  801 South Rancho Lane C-3, Las Vegas, NV  89106.  [Wells Fargo has now extended our business entity a business line of credit and credit cards!  Maybe that doesn’t sound exciting, but it really is a great program for building business credit and potential funds for investing needs.]

One avenue that I have yet to check out is Aloha Pacific Credit Union.  Big banks are very limiting to investors like me.  I have been told to try small community banks instead.  Aloha Pacific now has a branch in Vegas so I plan to open an account at a branch here in Hawaii and start establishing a relationship so they will be happy to lend me money in Vegas for properties in Vegas.

Our realtor Martin Fajardo wears many hats and has renewed his mortgage broker license!  Martin is our all-in-one in Vegas.  Of course he takes care of Uncle and me because we are mutually beneficial for each other, but more than that, Martin is the best of the best.  I am almost hesitant to leave his contact info because he is so good at what he does, and is always busy for his good clients.  (Okay, okay, I am being selfish..)  His email is martin@rarealty.net – he might not respond to you right away, or at all since he doesn’t know you, but if you are serious about investing in Las Vegas, keep trying or contact Aunty.

Vegas is still very much a “cash is king” place when it comes to buying deals.  Getting financing is tough, but do-able.  Getting a 70-75% LTV (loan to value) loan is ideal.  Also, most banks won’t lend you money if you have 4 or more outstanding loans.  Getting a 70-75% LTV loan after you’ve paid cash for a property is really tough.  One way around this is to purchase the property in cash, then get a HELOC on it.  I have done this but run into very stingy banks, and the LTV was only 55%.  Still, 55% is better than having to maintain 100% of the equity and tie up your cash.

[In 2010, it got pretty tough to get loans from conventional sources such as banks.  However, my first choice for financing would still be banks because they have the lowest rates, though also the most hoops, and it takes longer to get qualified – unless you have very little debt and stellar credit ratings (not me).]

Many financial celebrities will tell you to pay off all your debts with whatever cash you have so you can have a debt-free life.  That is Grandpa economics (from Jeff Brown of BawldGuyTalking).  What worked for Grandpa doesn’t work anymore.  Robert and Kim Kiyosaki talk about knowing the difference between good debt and bad debt.  Pay off your bad debt, grab as much good debt as you can.

If you can’t get a loan from the bank, you need to get creative.  Aunty is not in the creative stage of the game yet.  Instead, I am still like the turtle, plodding along, slow but steady.  There are many mentors out there that can teach the no money down, creative financing deals – and if you are more like the rabbit, that may be the path you might want to consider.  Just be sure to run the numbers, and have an exit strategy just in case.

Aunty still loves Las Vegas real estate as the current vehicle of choice for cash flow real estate.

The problem is that there are not too many properties for sale because of new foreclosure rules that are enforced to help homeowners stay in their homes.  This is good, and I do hope that most of the income producing homeowners do get their loans modified and adjusted so they can live in their own places.

Interest rates are super low – so if you do have a mortgage, think about refinancing – maybe even doing a cash out refinance in order to get capital to invest – but NOT spend on doodads.  If you can afford the monthly payments, and your investments can generate cashflow that help pay those monthly payments, then it is a great strategy of building and saving at the same time.

However, since the Vegas REOs (real estate owned meaning the bank took back the property and is selling it) have begun shrinking, investors options in Vegas are fewer, and more competitive.

So, Aunty’s strategy will be going after short sales of single family homes – which takes longer because the price point is negotiated between the buyer, seller, and the bank, and the banks do tend to take their time in agreeing and settling on a price.

However, what makes a short sale one of the surest bets in Vegas is when the previous owner (the seller) still wants to live in their old house, and they instantly become the tenant of the new owner (you).  In many cases, this means no rehab costs, no down time because there is no vacancy, and the new tenant is already in love with their abode and paying far less in rent than they did towards their old bank mortgage.

Also, because it is a wait and wait some more kind of sale, getting the deal financed through conventional 30 year mortgages as an investment loan is possible and one of the best ways to acquire real estate.  This is what Rich Dad calls leverage – using other people’s money (the bank’s) to get cash flow (the difference between the rental income and the expenses such as mortgage, property management fees, etc.)

An even sweeter plan is to offer the old owner/new tenant the option to rent-to-own their old place, with an agreed upon future sales price (should be higher than the price you paid) and arrangements that are suitable and amenable to both parties.

If there were a table game in Vegas called Real Estate Rental Hold’em, Aunty would put most of her chips on the table and let it ride.

Even Uncle would join in – and he never gambles.