All Forum Posts by: Terry Lao

@Jacoby Atako

You live in Las Vegas, and should look in your local area first. Which you did in SFR, however, there are other options like multi's (2-4 units). I just did search on Redfin, for SFR, there are 5292 current listings without offers, for condos/townhomes there are 2226, and for multi's there are 87. Comparing SFR as percentage vs condos/townhomes, this comes out to 42% (2226/5292=.42). Comparing SFR as a percentage vs multi's (2-4), this comes out to 1.6% (87/5292=.0164). The glaring difference is in multi's (2-4), and in other words, there are roughly 2 multi's for every 100 SFR, and about 4 multi's for every 100 condo/townhouse.

When looking from a supply/demand, econ 101, perspective, you have a very limited supply of multi's. Even the fact there is only 87 multi's in all of Las Vegas sounds odd. Most 4plexs are older and in bad areas. However, there are a few in good areas and with value added strategy and increased to market rents, get you to your ROI goal.

Look at all your options before venturing out of state. It just makes sense, and if you can manage in your local area, can save about 8% in management fees.

I'm from southern california, have 4plexs, and manage myself. Fourplexs are considered same as SFR when getting a loan. You can use the income from the 4plex to help qualify for a loan. My ROI for last year was 15% and 16%.

Terry

Here's how to pick the right section 8 tenant. You will need to read between the lines of the below story.

I had a young section 8 tenant, who halfway through lease, got a pet dog and did not bother to mention. During the summer, where temperatures could get into 110-115 degrees, she went out of town, and left the puppy on the balcony. She also left another dog inside with the AC going all day and night. What was suppose to be a few days, turned into a week. As she ran out of money, car broke down, and had no way back. When she got back, puppy on balcony died. Dog inside survived. Then she tried to blame downstairs neighbor poisoned dog. 

The tenant was ending her lease early at end of month and the above story occurred during the last few weeks of lease. I emailed her section 8 case worker, who was transferring her case to the next city she moved to. I said, not sure that this matters, but this is what happened and she killed a puppy. The case worker replied, it matters to me.

Anyways, if you read above, there is a hint to what kind of section 8 tenant not to get.

Terry

Here are a few more item that most do not know about section 8 tenants. 

1. Section 8 gets about 10-15% more than market due to funding guaranteed by Federal government. 

2. Most landlords have negative image of section 8 tenants. However, the tenant takes more care of the property than normal tenants. This is due to having responsibilities place on tenant in exchange for paying 90-100% of rent. This is true of the landlord, who have to repair or replace any broken items. If both parties, do their part, could be long term mutual benefit. I had two section tenants since Dec'14, who both never missed a rent payment.

3. On annual basis, landlord can request rent increase. There is no set amount rent increase, but guidelines say need to provide two market comps, and if you ask too much they have right to decrease your amount.

Terry

@Maurice Smith

Hope all is well my friend. Coronavirus has thrown all markets into chaos.

I know we had a conversation regarding section 8 rents awhile ago. I mentioned that one of my 4plexs are all section 8, and get direct deposits the first of each month. Some section 8 tenants pay 10%, and section 8 pay 90%. This is what I call recession proof. Who knew that coronavirus would happen, but any event like 2008 during last recession, say the same cycle. People lost their jobs, tenants did not pay rent. Owners who had loan on property, and did not get rents, eventually lost to foreclosure. 

Not sure if they cycle will repeat, but similar. If LV strip can reopen soon and find vaccine to Coronavirus, then can avert repeat.

To address your question, getting section 8 tenants. The time to get section 8 tenants was before something like coronoavirus or recession occurs. Now, I would say nearly impossible. The Southern Nevada Region Housing Authority (SNRHA) is the office that administers section 8, is closed and maybe will re-open later this month or next. Perhaps some employees work from home. However, for most part, cannot sign up new tenants, and cannot process paperwork for new landlords.

In hindsight, need to think about problems before they happen, and have in place preventive measures like section 8 tenants when regular tenants cannot pay.

Terry

@Matt D.

There is a process for landlords to be section 8 approved. It's not hard, just need to sign up and provide paperwork. Then advertise that you accept section 8. The approved section 8 tenants will call you and if like, will start the section 8 paperwork process. It does take time to get a tenant into your property. Landlord needs to have property inspected and passed. Tenant needs to be qualified and keep property in good condition. Section will coordinate all, and pay direct deposit each first of the month.

I prefer section 8 tenants over regular paying tenants. Too much work and drama for renter with none or minimum wage job. The coronavis is unexpected, but section 8 is guaranteed money. You just need to get by the stigma of "section 8". Also, you get higher rents with section 8.

See link below for Southern Nevada Regional Housing Authority, SNRHA, it's the official name for section 8. 

Terry

http://www.snvrha.org/fh_housingchoicevoucherpgm.html

https://landlord.snvrha.org/

@Matt D.

I'm in southern california, and have rental property in Las Vegas. One tenant paid 50%, and said with pay other half next month. The problem with this is that what happens next month if he is short again? At least he paid something. 

To answer your question, there is not much you can do in the interim with the current coronavirus situation. Whenever the Las Vegas strip opens, then it will signal that things are getting better. 

Another property, I have all section 8 tenants. In April, and all previous months, got rent direct deposited on the first of each month. I would suggest getting section 8 tenants if you have apartments, 2bed/2bath.

Terry

Las Vegas was on a roll, before Coronavirus shut the LV strip and everything else down cold. Numbers for March 2020 SFR median house price was $319,000, which is all time high since Jun'06, up 6.3% for Mar'19 to Mar'20. If there were no Coronavirus, Las Vegas looked really good going into the spring busy season.

Crossing my fingers that the LV Strip gets opened soon, but first step is to have vaccine to slow virus.

Terry

https://www.westport-news.com/news/article/Vegas-area-home-prices-set-record-before-15184636.php

Cause and effect. The cause is Coronavirus. The effect fear and panic. The results stock market goes down, jobs lost, economy goes down. The virus will run its course, similar to a bell curve on a graph. Those who currently own real estate in Las Vegas will be affected in the short term. The reason the stock market went down so fast is because stock buy and sell are done in a matter of seconds. Real estate takes 30-60 days. Also, other factors include, jobs, local economy, interest rates, inventory, housing shortage, etc. 

Now, like stocks and real estate, there is no loss unless you sell. You panic and sell, then you have a realized gain or loss. You hold, then ride out this turbulence, then you should be okay. 

Warren Buffet said it best, be fearful when others are greedy, and greedy when others are fearful.

Terry

@Josh Rodriguez

All the information can be found online, but there are so many ways to analyze and interpret this information. Cash Shiller is a good way to track appreciation by cities, but publications are always two months behind. Local realtor associations are a good source, but often give positive outlooks due to inherit bias. 

The best single metric for appreciation is the median SFR price from year to year. Meaning measuring the change from Dec'18 to Dec'19 as a dollar amount and as a percentage. Therefore, I just keep my own analysis, forecast, and actuals.

Below is my analysis for the Las Vegas SFR median home price. Now, even if you look at the information below, how would you interpret and gain any insight compared to other markets?

Terry

@Josh Rodriguez

@Alex Alanis

Seems I can answer both your questions at the same time. The Las Vegas market is still a relative bargain compared to bay area and Southern California. The LV SFR investment is still a good long term investment. We are looking at list median price of $300k. However, the rents will only be $1500-$2000, depending on area. The best scenario is break even and appreciation via long term hold. However, the alternative is 4plex. This would increase your cashflow and net best case $500 per month. You will need to find 4plexs with you can value add like make improvements and raise to market rents. You can expect to pay $300-500k for a 4plex depending on condition and area.

There are 4plexs with and without HOA. If with HOA, can expect to pay around $650 per month. Try to find HOA's that include water, sewer, and trash. Those without HOA will still have to pay around $300 for this service. There are pros and cons for HOA's.

Terry