Too Chicken To Step Out Of Box - Should I Do This In LV?
Help Please! I have lost out on so many opportunities for being too afraid to step outside of my box. I feel I need to just do something to get out of my shell.
I am in escrow to purchase a condo conversion in Las Vegas for $163,000. 2bed/2bath. The unit is very basic, not much style. It would be a rental.
Appraisal provided by seller is showing $205,000. Looking on MLS I see condos selling in the area for $185,000 and up.
Rent is going for $1,020. May have a monthly out of pocket of $150.
Should I do this?
Also, was considering doing as a land trust. Possibly could get a slight monthly positive it done as land trust. Anyone have comments on their success with land trusts?
Thank you for your help.
Valerie
Thank you both for your replies.
First, what is IMHO? My guess would be it is used as a strong "no".
The down is 10% ($16,300)
Condo fees are $185 month
Insurance is included for outside. Would need inside coverage - $100 a month?
Taxes are $163 month
It is a large complex, about 280 units. There is a property mgmt company who are renting at $1020. They are offering two months free rent.
Also, I would loose $8,000 if I cancel ($5000 deposit, and $3000 assignment fee). Knowing I would loose $8,000, would you still cancel so not to loose more money?
Thanks again.
Hi.
More thoughts on this...
1. Do you own any other real estate? If not, AND you have taxable income, this will change your numbers as this will affect your tax return based on many deductions.
2. Is there a chance that you can NOT get financing? Is there a contigency in your contract that will return your funds to you if you are not approved?
Q. If you have been afraid to invest, why did you pick this property? Maybe you are forgetting why you moved forward on this deal. Long term? You want to live there one day? Other...
I would seek legal advice on getting out of the contract. If it came down to losing your $8,000 deposit I would go a head with the deal. Maybe consider doing a lease with option to purchase
I dont understand where are all the doom and gloom is coming from, appreciation in LV was 54% last year. I just bought 2 more uits with a developer who is doing a mixed resort, short term vacation rental project. I am purchasing at 189K appraised value is at 239K, so i walk into this with instant equity. The developer then offers a 24 month leaseback, equal to 15% of the sales price. This gives me 2 years of guarteed income, why he revamps the place. There are phenomenal deals out there...
From a market value point of view, you are buying into a quickly appreciating niche ( apartment-condo conversion in the low-mid income range). Everyday I hear of a new conversion project or new development in the works targeting this niche. From North Las Vegas to Boulder City to Bullhead. If you are walking into equity, 11-20% using either $185,000 or $205,000 as the sells price, you are still ahead of the game. I would focus on limiting your out-of-pocket expenses, i.e. closing costs and eventually selling costs, and make as much return on this as possible.
I do think your negative cash-flow is underestimated. I think it will be closer to $250.00 per month. [ Edited by jfoley on Date 03/24/2005 ]
I just bought 2 additional units with a develper in LV doing mixed use, conversion. I bought in at below appraised value and they have histroically appreciated well. What areas in Vegas are you looking at?
Dear Valerie,
I understand your problem, for I have had the same one. Is it possible for you to find a partner to go in with you. For future purchases, always have a contingency clause in your purchase contract that allows you out of contract and get your money back. For your current deal in Las Vegas you might consider an option/purchase. This is where you set the price of the condo rent it for up to 2 years with a portion of the rent going towards a down payment. The people going into this kind of a deal should also put up several thousand $ for the option consideration. This consideration is nonrefundable if they do not complete the buying of the unit in the specified time. Then they would move out and you could do an option/purchase again. On this kind of a deal you can also usually charge more than the market rents because you are dealing with buyers not just renters. You also usually get people who will take better care of the unit since they are planning on buying it.
Is your property in the area of the new Furniture Market arena? If so, you may have another option. Here in High Point many homeowners rent out there properties during markets to out of town business people. Maybe you could do corporate leasing. Check your area Chamber of Commerce or area Convention centers to see if this might be an option for you. Yes, maybe sporadic. Sometimes companies lease spaces year round if in good location. Worth checking into...
I have been investing with a developer that offers a optional 24 month leaseback (equal to 15% of sales price). This gives me 24 months of guarenteed income to cover all expenses during the build out of ammenities and conversion of units, if he never lifts a finger to do any of this, i have 2 years of payments and i bought under appriased values. Buying anything with a negative cash flow is ludacris in these times with such a strong market, i think you need to do some more investigating. He is not doing anything special, i have seen a few others do the same thing, with near same results. I just researched this guy exclusivly, you have to be comfortable and confident in the investments you are doing, there are to many great oppurtunities to settle for par...[ Edited by cbrechbill1 on Date 04/28/2005 ]
I dont understand where are all the doom and gloom is coming from, appreciation in LV was 54% last year. I just bought 2 more uits with a developer who is doing a mixed resort, short term vacation rental project. I am purchasing at 189K appraised value is at 239K, so i walk into this with instant equity. The developer then offers a 24 month leaseback, equal to 15% of the sales price. This gives me 2 years of guarteed income, why he revamps the place. There are phenomenal deals out there...
Its just that many people believe that investing in certain areas today is like playing the musical chair. When the music stops, do you want to sit in the chair or do you want to be standing..
Real Estate Speculators[/B] = people who buy "hoping" prices will continue going up. Never mind tennants divorcing, sickness, job loss...not to mention "bubbles bursting".
Non-paying tennants happen...stuff happens! You can end up having 0 monthly income from a property followed by the cost of borrowing $ to keep the property from foreclosure, legal fees (thousands) and court costs. Did I mention maintennance? Do you think non-paying tennants care about maintaining your property?
Real Estate Investors = People who do the necessary research to know they are making a profit going in. They are not at the mercy of a market they cannot control.
Rule #1: Never invest where there is a negative cash flow!
Investors make profits at the front end.
I would let the povrtysux (?) guy have this one...or possibly cbrechbill1. Maybe you can salvage most of your investment...but it sounds like a large hole to fill.
I have a friend who moved to LV recently. They told me that while they were looking to by the house, if they go after 2 -3 days house would be sold and next one will be much more. They bought the house by looking in the morning and signing up contract in the afternoon. I think in this kind of market valarie should be alright. One other thing, the $ 100 for insurance per month seems way too high. In addition if you are in 25% bracket part of your loss will be back , and considering what I heard a double digit appreciation is not impossible.
I dont know if that is a knock on me tigs, but i welcome anyone to challenge the research i have done. Listen, it takes hard work and dedication as an investor to find and be involved with the right people and right deals. I will be the first to say, i have been burned and made some unwise decisions, but as the whole have been very profitable and blessed. Las Vegas is on a gain again and while the housing market has cooled, condos and high rise hotels continue to be a strong purcahse. Las Vegas is in a constant tear down and build. Good luck to everyone, and i would be more than happy to share my research, i think we all need to stick together and make infomed buying decision. Best of luck
My apologies to Tigs (publicly), I may have taken your comments incorrectly, i had just hung up after a nasty person basically used my help and then blasted with me for doing nothing more than extending a hand to help, sometimes people take free opinions as a scam??? Anyway, my apologies Tigs...
Respectfully,
Colin
I agree up to #4, there is nothing wrong with investing outside of your backyrd. If i lived in rural kansas, you can bet the farm i am looking elsewhere. Heck if all the Northern folks didnt invest outside of their back yard, places like Florida, Arizona and Texas would be hurting, these are second and 3rd homes (investments) for folks. Yes, do your due diligence, grab a plane ticket and talk to others in the area, this will also help you personal skills ....I live in a great booming market, but i keep a steady pulse on other areas and invest in them when it is the best move for me.
Bill,
I agree that it is okay to break rule 4, but only after you are a seasoned investor who has invested in your own back yard. I know people who are really getting taken advantage of paying way too much in areas like Las Vegas, accepting negative cashflow as a good thing, because they were new to REI, and some national speaker told them this is where to buy. In this case, Valerie is not a seasoned investor. It is better for her to stay in her back yard, or other local areas she knows well.[ Edited by bnorton on Date 06/03/2005 ]
Hello, Valerie
First, I think that you have gotten some good advice. However, living in California it is extremely hard to find "back yard" investments that can be used as rentals. Here is an alternative suggestion.
You might find someone who knows the Las Vegas market really well and who can act as a shepard for your investment. Real estate markets usually have reasonable inertia. I am doing this for my son on a Phoenix pre-construction investment along with some friends who really know Phoenix.
Do listen to some of the other posts. You do want to be careful of your cash flow. In your situation you want your LV team to keep you on top of the market conditions so you can sell well before you have cash trouble. I am guessing, but you will likely have more difficulty finding renters than buyers.
The only major market that I have heard about that is not sizzling is Atlanta.
I know you can short sell shares in the stock market to hedge against a downturn. How would one do the same in real estate?
I might be interested. Where are you located?