Over the last 5 years I have sold many properties in many different markets across the country. In 2003, a large number of investors entered the Las Vegas market and purchased single-family homes and condominiums. In 2004 the scene was repeated in the Phoenix market. In 2005, markets like Albuquerque and Austin had a slew of investors snapping up new-build homes. In 2006, the Carolinas became hot, and investors from the East Coast invested heavily in many Florida markets.
While I was buying and selling many of these markets myself, I was sitting on the sidelines in the Las Vegas market because home prices were too high and just didn’t make sense for a good investor’s cash flow. That all began to change in the summer of 2008 when prices began to fall faster than normal and cash flow point was reached again. This cash flow point I’m talking about is a simple equation in which the amount of money an investor can make from renting a home exceeds the investor’s cost of ownership. These property costs would include the mortgage, taxes, insurance, repairs, and property management. With a 20% down payment, positive cash flow can now be achieved in this market for the first time in several years. Las Vegas has led the nation in foreclosures for over a year, and the number of foreclosures coming to market is nearly triple the number it was just a year ago. Nearly 1 home in 70 is in some stage of foreclosure here in the Las Vegas market. The median home price in Las Vegas has dropped about $10,000 a month over the past year from a high of nearly $300,000 to a new median price of just $189,000.
As a full time investor as well as a licensed real estate agent, I spend my time finding the best deals for myself and my investors here in this market. Articles in local newspapers and analysts speak of 30% falls in values. The reality is that we are seeing prices that are 50-70% off what they were just 2 years ago. Many of my offers over the last month or two are well below the top 50% of 2006 values. I just sold a one bedroom condo for $53,000 which was $148,000 two years ago. This is about 35 cents on the dollar, folks. New 2-year-old, three-bedroom homes that cost up to $300,000 just 2 years ago are now priced under $120,000.
This opens the doors for virtually anyone to return to the Las Vegas market and start shopping once again. Due to the government’s Home Recovery Foreclosure Bill, first time homebuyers have a $7500 tax credit to take advantage of; Baby boomers and retirees looking to move to a warmer-weather destination don’t have to head south of the border, as the Southwest has become affordable once again. The vacation capital of the world is now making sense again for holiday home and second home buyers and, of course, investors are delighted to be able to get cash flow back from their investments again. Of course, all these groups will benefit greatly since the possibility of appreciation is guaranteed over the prices of 2 years ago. Let’s face it, anyone who bought in 2006 or 2007 bought at the height of the market and has seen their wealth evaporate almost overnight.
We all know that lending has tightened over the last year. But the prices are half of where they were too. If you have a good job and good credit, now is a good time to buy a home. Interest rates are at all-time lows, so I strongly suggest you put up a fully amortized 30-year note to lock in historically low interest rates, as they literally only have one place to go and that’s up. Earlier this week, I was chatting with one of my title company’s officers and he informed me that 85% of his closings are financed through a lender. I suggested that he get more cash buyers as only 2 of my 11 deals in the last month were financed and the other 9 deals, or 82% of my deals, were all cash deals. The old phrase “Cash is King” is never more relevant than it is now in this market. Not only am I getting more accepted offers, but I’m getting them at less than list price in most cases and pushing them fast. My buyers are very happy because they are getting a great deal at a very low price, closing quickly, getting great cash flow, and also getting tremendous appreciation potential. I just got a response from a lender over the weekend saying they will take our below list price offer but want to close in 10 days on our cash offer. They had two other offers on the table but the banks do not want to play with the financing either. They want to take the safe cash sale even if it’s at a deep discount.
So folks, if you were able to save some money, not spend it all in the last few years during the great real estate boom, or if you still have an open line of credit, I suggest you go back to the Vegas market and get started. looking around for real bargains. The banks are ready to negotiate and the timing to buy a large foreclosure is as good as it gets.