All Forum Posts by: Robert Adams

Details on LLC's can vary per state I would get advice on the best way to protect your assets and to get the best tax benefits by talking to a professional in your state.

William,
You can make any property a good deal at the right price. The agent may be sending you homes so you can pick out the ones that you like. From there they can research the property and figure out how to make the home you like a good deal. Auto searches are a good way for you to constantly see what the market has to offer in your price range. It is up to you and your agent to get on the same page about what homes you like and its up to your agent to go after them and get you a good deal from there.

Pick out a few homes you like and tell them you want more info on those homes. From there you should know the listing price, the comp price, what the agent is recommending to write it up at, and what kind of rents you can expect once you own it. If you are unsure about the agents advice you can ask a second agent to give you a free CMA on the same property. See if their figure are similar or way off.

Hope this helps!

I am in the Las Vegas/Henderson market but I like to keep tabs on the available listings to see whether it is increasing monthly or decreasing as this affect the supply of homes. I also like to track the amount of foreclosures monthly to see if it is increasing or decreasing as this will affect the supply and prices. I also like to see how many homes are in escrow as a percentage to those homes available.

For example:
In Las Vegas over the last 6 months available listings have been decreasing month after month. This means the inventory of available homes is decreasing month after month. Even with new foreclosures added in each month the
number has still been shrinking.

Secondly, the amount of foreclosures has also been decreasing month after month. As this number continues to get smaller it in turn makes the number of available listings (our supply) fewer and fewer.

Thirdly, the number of homes in escrow, in pending or contingent status, in relation to the available listings has grown each month for at least the past 8 months.

What I conclude from this is that the market is absorbing the inventory faster than the new listings are becoming available. If these trends continue we will begin to see the Las Vegas / Henderson market really start to improve.

A good Property Manager is well worth the 8% to 10%. A bad Property Manager can cost you waaaaay more than 8% to 10% and may still not get the job done. either make sure you PM is good or do it yourself.

Asher,
If you are planning to use an agent to purchase the property you should ask him/her to give you the details as to what properties in that neighborhood are renting for. Zestimates are often misleading so I would not recommend basing your investment strategy on inaccurate numbers.

I find the 50% rule to over estimate expenses but I would rather over estimate expenses and be prepared for the worst case scenario and be happily surprised when my reserves are higher than expected vs the alternative. The 50% rule takes into account repairs and vacancies.

I would not count on appreciation. I would count on positive cash flow with P+I payments paying off the property. If you gain future appreciation it should be a bonus.

I like to think about the worst case scenario and if I can make the deal profitable like that, then it will be easy to make it profitable if things go right.

Hope this helps.

It's all about cash flow and future appreciation. In the Vegas market you get better cash flow with multiple lower priced homes. Also, the prices of the high end homes still have some room to come down in price in my market in my opinion. The lower priced homes are already dirt cheap and there are a lot more buyers that can afford these homes. When you go to sell the demand will be higher for the homes that more people can afford.

Depends on the property and who you are marketing that property towards.

We used to put in marble, granite, and even hang new plasma tv's on the wall back when plasmas were a hot item.

This is how I see this property cash flowing using the 50% rule:

Rent collected from all 4 units: $550+$550+$650+$650 = $2400 x .5 = $1200 for P/I+PMI and cash flow. Which is:

$1200mo NOI - $900mo P/I+PMI = $300mo reserves

If you are living in one of the units, subtract the remaining 50% on that unit from the reserves which is $225. This leaves you with $75 reserves monthly. However, I think you will be actually realizing more profits than this due to these facts:

-Tenants are already in place so immediate vacancies will be minimized.

-You can still collect rent from the tenant you are kicking out from 1 additional month. (I would give them plenty of notice but no free rent)

-You are doing your own property management so the exclusion of the PM fees will decrease your 50% rule expense.

-You are doing your own maintenance so the reduction in maintenance costs will decrease your 50% rule expense as well.

With this being said I would anticipate at year end you will be happily surprised that you have substantial reserves (much more than $75x12mo=$900).

Hope this helps.

Rich,
Great post!

I would just like to add that the very low inventory and the very high demand right now should balance out when the REO mess gets sorted out and we have a new wave of REO inventory hit the market. A lot of people are saying that it will dip again when the REO invetory hits the market but I doubt it will (at least in my market Las Vegas). If it dips at all it will be slight and temporary as even before AB284 stopped NOD's, inventory was still decreasing monthly and demand was still growing monthly.

I agree that is always best to have a back up plan with plenty of reserves and don't go too hard too fast. We are running a marathon here not a 50 yard dash. It is all about longivity.

Tony what is the median price of homes there currently?