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Here comes Vegas’ new breed of buyer
Investors are still mostly from California, but what they’re looking to gain from homes in Las Vegas has changed with the market.
Monday, Aug. 3, 2009 | 2 a.m.
Chris Morris
THE OLD WAY: BUY AND FLIP: As the Vegas real estate market sizzled, many Californians moved in for the quick kill, relying on fast price appreciation for their profits. Investors didn’t have to be particularly sophisticated as long as prices were rising each year by double-digit percentages. THE NEW WAY: IN FOR THE LONG HAUL: Now investors from California and elsewhere are looking at rental income, not appreciation, as the source of profits. Strong demand for single-family homes and low purchase prices allow landlords to cover costs and turn a profit in a bad market.
Southern California investors — a breed apart from those who contributed to the real estate collapse — are converging on Las Vegas, hunting for bargains on single-family homes and driving strong sales in June, housing industry experts said.
The number of investors buying new and existing homes in Las Vegas in June rose by more than a third compared with June 2008, according to San Diego-based DataQuick.
Investors’ demand for existing homes has helped that segment of the market fare the best when it comes to real estate investing over the past year and kept housing prices stable from April to June, analysts said.
Investors made up 38 percent of the buyers of both new and existing homes in June, DataQuick reported, compared with 25 percent in September 2008.
These residential real estate buyers are not the same ones who bought and flipped Las Vegas houses during the boom, said Steve Bottfeld, executive vice president of Marketing Solutions. These investors are looking to hold long term and earn money off rental income, he said.
Buying a home for $100,000 in cash and renting it for $1,000 a month equates to a 12 percent return before taxes and other expenses, Bottfeld said.
Glenn Plantone, a Realtor and president of the Real Estate Insiders Club in Las Vegas, said investors are taking advantage of a steep drop in prices since they peaked in 2006. Prices of some homes in the northwest have fallen by 70 percent.
Homes that sold for about $300,000 are going for about $110,000 he said.
“They are buying them for cash flow,” Plantone said. “We are not even talking about appreciation potential.”
The market to rent homes remains strong, with people who lost their home to foreclosure wanting to stay in a home.
“It is a lot easier to rent houses than condos,” Plantone said. “We are getting people who are walking away from a $2,000-a-month home payment and going across the street to rent a home for $1,200 in immaculate shape.”
Despite the interest in Las Vegas, it is not as strong as in Phoenix, where buyers in 40 percent of sales were investors, Le-
Page said.
Most of the investor buyers that Plantone said he has dealt with are Southern Californians. Many are small-businessmen who have several hundred thousand dollars to invest and have been waiting for an opportunity in real estate.
Plantone said these buyers are drawn to homes less than 7 years old and costing no more than about $120,000.
Robyn Yates, the broker-owner of Windermere Prestige Properties, said her clients include foreign purchasers, some of whom are buying homes without seeing them in person.
For as long as homes can be bought more cheaply than builders can construct them, there will be a market for investors in Las Vegas, Yates said.
Plantone said that many of these buyers will leave the market when prices go up $20,000 to $30,000 because their investments won’t pencil out for rental income as they will now.
“That’s why investors have been so aggressive,” Plantone said. “I am telling people they may not see a better time to buy since the Great Depression.”
Investors are winning out over frustrated first-time buyers for the properties because they are offering more than the list price and because they have the advantage of offering cash, Plantone said. It was only three months ago that buyers could get properties below list price, he said.
Any investors who bought in 2007 or early 2008 wouldn’t have had any luck with appreciation, although single-family homes fared the best out of all real estate investment categories over the past year, according to Larry Murphy, president of SalesTraq, a Las Vegas housing research firm.
“The single-family home has always been the preferred house of choice with most people,” Murphy said. “Most people want the picket fence and the back yard and not being attached to someone.”
From the first six months of 2008 to the first six months of 2009, the median price of single-family homes fell 34 percent, Murphy said.
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These residential real estate buyers are not the same ones who bought and flipped Las Vegas houses during the boom, said Steve Bottfeld,
Tell yourself another fairy tale, Steve-
The first to walk away from Las Vegas and start the ball rolling was the "California Investor".
As Forrest would say, "Stupid is as stupid does"
Who are the renters? The unemployed? Good future investment, cheap houses-no water
Homes that sold for about $300,000 are going for about $110,000 he said.
rubbish the homes that sold for 300k were overvalued by conning people who had a golden handshake
Although the low end of Las Vegas housing has probably ceased its price decline, the mid to high end has a way to go on the downside. The investors will have difficulty maintaining positive cash flow in a recession while rents continue to drop. And there is no way the Las Vegas economy can support all the homes listed for over 500K without move-up buyers.
a broker says it's a great time to buy...
shocking!!!
hey las vegas sun...
here's an idea...
go back thru all of your articles on real estate over the past couple of years...
pull out the quotes from all of the various real estate "professionals"...
and print it...
unfiltered...
now that would be interesting...
because...
quite frankly...
we are sick and tired of these hype pieces!!!
Hey Mark, I see your up early to spew your ignorance once again. Ever heard of competitive market analysis' and appraisers?
The MARKET drives the home values, otherwise known as supply & demand.
Please buy a clue.
It's another PR job by our local real estate people. Most of these California investors are the same investors that helped create the problem during the past few years. They are part of the ones who dumped their investments when the prices went south and now coming back like vultures to do the same. Buy now and dump later for cash. The group that got the bad end of the stick were the ones that has jobs, HAD good credit, and bought their homes when the prices were inlated. These group did not get help and were forced to foreclose by their banks who received stimulus money from uncle Sam. Until we can get people with incomes to buy and live in these houses, history will repeat itself in the near future.
jahreb
the market was fixed and pushed upwards not by demand, but by real estate agents advising a house should go on at a higher price, many valuers were given golden money to turn a blind eye and go with price, especially new builds, there were so many scams, etc
If there is / was demand where is it now? exactly too many houses not enough people..
you clearly do not understand what really went on behind the scenes, the public were just scammed from every angle and now they must foot the tax bill for it all
People are still having trouble accepting that a house that sold for $300k ,in the boom, that is going for $148k now, isnt even worth $148k. "Its such a deal!"
Most of these "investors" will find themselves making very little return on their "investments". Traditionally (unless you are a pro with good connections) homes were not the best part of any "portfolio". And being a land lord is not waht its cracked up to be, especially here with the deflating economy. They forget that just as home prices inflated so did rent values. Its just another bubble to pop. While someone might be able ro get $1200 per/mo right now, in about a year or 2 it will be $850.
I have a friend and a few in-laws that fall into this new breed category.
All of them think they can cashflow positive and to sell in a few yrs after the RE market returns. I almost fell for the hype earlier this year. And then, I realized that I was just another sheeple. When everyone wants to get a piece of the actions, you know it's a bubble in the make.
It will be a very nasty rental market in the next few months as the new investors try to lower their rental price to lure renters after a couple of months of vacancy. The apartments will try to match to lure those renters back. It's going to be a very vicious cycle, in my humble opinion. The overall vacancy will be stay the same or higher as long as there's no job growth. So, it's either the commercial side or the private side that's going to take a hit.
Good luck to this new breed
Illegals have no qualms about getting a number of people to share a rental, so their their share in the rate is small. But of course there is more wear and tear when you hav a bunch of bachelors sharing the same rental.
This is another bad move.When rental homes in one community overwhelm that community,this pulls that community down. Rentals of homes should be restricted in order to "protect" homeowners.This can do nothing to stabilize homeowners prices, something this state needs desperately.
fogcity, in most rentals where Nationals reside, if it has four bedrooms, it has four families.
I see it over and over and over.
'Investing for cash flow" Bwa ha ha ha ha. Spoken like a true NAR = RealWhore shill.
See you on the courthouse steps. These 'ivestors' will be the ones with wearing the barrels except for the always mysterious "foreign sight unseen buyer' Bwa ha ha ha ha
P.T. Barnum was Right.... America, what a stupid bunch of ignorant Rubes... Bwa ha ha ha
Not only will rents fall but these investors will be in for an unpleasant surprise when they factor in maintenance and cost of upkeep. They had better be prepared to work and deal with the headaches to earn their alleged 12% profit. They are taking a big gamble because we have yet to see the bottom of this market.
more bottfeld.
this guy has ZERO credibility.
god, markp is a rambling idiot. even his argument doesn't make sense.
if there WAS demand, where is it now?
well, let's see...how many casinos were built from 2000 - 2006?
palms
aladdin
new tower at mandalay
new tower at bellagio
wynn
encore
red rock
green valley ranch
city center
terrible's on flamingo
southpoint
aliante
a 2nd tower at palms
the cannery
do i really need to go on?
we had a boom in construction, idiot.
THAT brought new people to las vegas and they all needed a place to live.
and we needed dentists, and grocery stores, and starbucks for those people...and then the people that built THOSE needed a place to live...so we needed more construction workers.
do you "realtors are scam artists" people understand freshman college economics?
now those construction projects are over, and with the double whammy of tourism due to the bad economy being down...everyone is leaving town and no new jobs are being created.
Yep we are buying. Pay cash and you know you will get cash Flow.
There's something in the article that all of you missed. According to realtor Plantone many of those renting are underwater homeowners walking away from their home and mortgage. So for every underwater renter that means another home going into foreclosure.
With the economy being the way it is, what happens when City Center and other properties open? History has shown that new properties over hire in the beginning and cut back after opening. Plus most of the rooms at those venues will be filled with people that would have stayed at another property. So, how many of those at existing properties are going to get the axe and ride on the foreclosure train along with all those thousands of construction workers who will no longer have jobs. Hope those "investors" have plenty of blood to spare when the falling knives carve them up.
hey ive got a scumbag california investor who bought the house next door 2 mine.he rents it out 2 whoever he can.the front and back yard look like crap.think im on my 5th set of neighbors.each 1 worse then the last.he comes n whenever its vacant 2 re-rent it out.its the only investor owned property on our block.i wish hed' sell it 2 an owner occupant.may b theyd' take some pride n the place instead of this guy who rents out a slum property and sits back n his ca address and collects the check and we have 2 look at his run down rental.should b some kind of protections n place 4 the owner/occupants on the street.
Pump a lot of money into homes, then pump it out, them pump it back in again, it's called AIDS (appreciation, investment, depreciation, sell-or walk away).
It was out of state investors-speculators-flippers that drove up the price of homes beyond the local wages. They were following the overbuilding of rooms, like they now speculate on City Center opening.
The large volume of out of state investment into Vegas residential communities brings transience, crime and riff raff. It brings homes next door that are vacant, or with unfamiliar people and cars coming and going.
It's very true the new gaming executive strategic business plan ("selling lots of alcohol at high mark up" with employee T and A, and the escort industry) drove a lot of Vegans into buying homes at boom prices to get peace and quiet from apt and condo riff raff, only to get "bottled up" themselves by the downturn.
There are not even close to enough "real" Southern Nevada residents who qualify to absorb the homes on the market.
The problem with this market activity is the long time local gets screwed. They have had either transient ownership around them with the riff raff, or vacant houses. Both are bad. Now, those still clinging to homes know that, once again, the new neighbors will not be neighborly at all.
The only "potential" winners in all this are the owners-executives of bundled corporations like MGM Mirage who overbuilt on City Center, the ones who hired on all kinds of expensive legal and financial war room expertise at Bellagio to buy time on their own debts.
Homeowners cannot afford that expertise and partnership. And what good is low home prices now if you lost your credit, or job in the downturn? But, even MGM Mirage is not out of the woods yet.
Many future home buyers will again be "trust fund babies", the same casino customers who will be pouring the alcohol and maybe even making it rain on real estate appreciation, just like the old days. When the stock portfolio gets it's value back, they will buy. Or they will be retirees, who will create more drain on an already substandard Vegas healthcare structure.
Personally, I don't believe any buyer going to see the speculation they expect from those home purchases, for some time.
Wouldn't it be nice if so some of the people owning homes in Nevada had actually contributed to the tax base long term in their lives? Everything is consistently being dumped on hospitality labor, the ones who don't "come and go", or "arrive late in life".
One consideration is making these new speculators pay a fat one time sales tax for a non-resident purchases. Or make them pay a hefty non-resident property tax on the home. It they want to come in and dump, then leave, fine. But make them push something across the neighborhood felt.
Enact taxation to protect neighborhoods where local residents reside, taxation that will encourage investors to buy condos instead.
Sounds like the free market working has created some unwanted side effects. These new investors well find out about the rental market in the next year or two. Good luck on getting laws passed to create a perfect neighborhood. As the economy improves investor money will return to the investment markets stopping this craziness. Until then I would pay my house payment and build a tall fence if necessary.
House v. Apt situation:
My apt complex has some incredible deals going on right now. A 2 bedroom/2 bath 1250 sq ft for $725, a 1500 sq ft 3 bedroom for $900. AND the apts come with NO UPKEEP, ie taking care of the yard, the pool, cutting the grass, etc. Your refrigerator breaks, you get a new one, etc etc. The community is well-kept, beautiful with 3 pools, nice families and safe. Who can pass that up as opposed to renting a 1500 sq ft house for $1200 with a lot of upkeep? Our Management knows that they are up against these foreclosed homes and they did something about it to fairly compete.
My guess that at least 50% of the people renting homes do not do any maintenance around it or do they care to do any maintenance around it. (Do you really think these tenants abide by teh HOA rules and regulations? The OWNER is going to get dinged for fines, not the tenants.) And I'm not saying inside repairs etc because that is the responsibility of the management company or the owners themselves. . Why should they - it's not their's, they are just renters. Also, my ex had the distinction of having tenants move out of the house he was renting TWICE. They moved out in the middle of the night!! BOTH times!! The management company wasn't even aware of this. The next door neighbor called the Ex and told him what had happened! I'm sure at happens in apt communities, too, but I think it would be a bit harder to do since people watch in these communities. And we have security walking around at night making sure everyone that is here belongs here and we also have quite a few casino workers who come home at different times during the night so the security folks know this and watch out for them, too.
And where do these investors think they are going to find renters????? Unless, they all go Section 8 - THEN they will get renters.
The SO CAL buyer , I feel is the original start of the entire world global crisis. They think they are always ahead of the curve - but what they really are is a pack of sheep leading the other sheep over the cliff
check out this article on the SO CAL path to destruction
http://vegasandre.wordpress.com/2009/08/...
Not only were the 300K homes overvalued, if you go to buy one now that's in the low 100K range, it's trashed inside. We were looking at those when they were in the mid 100K range, and the cost to rehab them made it a bad proposition.
yep, a lot of this is people that can't afford...or don't want to afford the $1500 mortgage for the $300,000 home that is now "worth" $140,000 and instead they'll rent the same size home for $1100.
there are no NEW people coming to vegas. no NEW jobs are being created.
we're just moving the beads from one side of the table to the other.
I put in several bids for REO's listed at 99K. My bids were typically 20% above the asking price. NOT ONE was accepted! I gave up and bought new construction for $138K.
Just because properties are listed for say $100K on realtor.com doesn't mean they will sell for that unless they have an underlying problem (mold, torn out copper, etc) The nice places are going for much, much more. The 99K place I liked best has a nice pool (still maintained) and was in perfect condition. Local comparables were in the 190K range. They didn't take my $125 offer. The bank ended up getting 156, still around $50K below the true value.
I hear that now, the nicer REO's are getting dozens of bids and they're selling for only 20% or so below the market, not 50%/80% like before. This means we have found a bottom to the market. That doesn't mean that prices will go up, they won't. It only means that the great deals are not going to be as great as they were 6 months ago. Still get a good deal, below market, but not a steal like before.
You're all missing the point when you talk about appreciation. You need to look at buying a house for $100k as opposed to putting $100k in a CD at the bank. At the bank you get maybe 3% tops, for a 3-yr commitment.
Putting it cash into a house, even if rent falls to $850, means, even with taxes and upkeep, an earning of approx 9% off other people's money. That $850/month is pure profit. Over $10k a year. You can't get that on Wall Street or a CD.
Dodgerchuck....read his comments they only confirm what I've been saying. The sad part is the home prices on DOGERCHUCKS block suffer the most. Home rentals should not be allowed or at least severely restricted in areas were there are only residential one family homes.Leave rentals to apartment complexes. I hope he doesn't loss any more money on the value of his home...though I have my doubts sorry to say.
Re: the deterioration of the yard and upkeep of rentals -- if you live in a covenant-controlled neighborhood you can cite houses for upkeep issues. If the violation isn't taken care of you can eventually foreclose. So, there is incentive for landlords to keep the yard up. You just have to enforce it.
pure PR garbage, my house was owned by a realtor from Ohio. My friends house was owned by someone in Maryland, my other friends house was owned by someone in connecticut. why make Californians the enemy? I am not fooled by your bias. No one can tell me who to hate.
I lived for many years in an east coast city with a lot of universities. As it became more difficult for the schools to the build dorms today's students found "acceptable for their lifestyle," and parents became permissive about off-campus living, more and more city neighborhoods turned into rental areas. In fact, many colleges today only provide campus housing for freshmen and special needs students -- everyone else is encouraged to seek off-campus living. Schools also benefit from lower security costs.
Students/young people renting in groups can afford fairly high monthly payments, so homeowners had a financial incentive to move out and turn their homes into income property.
The practice has ruined entire neighborhoods in that city. No parking (each renter in the group has his/her own car); little maintenance on the homes and no care whatsoever of yards; constant partying, noise, and destructive behavior that spills onto neighbors' properties. A rule developed: once one-third of the houses on a block became rentals, get out because your property value was about to plummet. And don't think for a minute you'll be protected by zoning ordinances. Enforcement requires paid inspectors and lawyers no municipality can afford.
katey has a point about apts i own but shes right think about this no up keep
"Home rentals should not be allowed"
LOL God people wake up.
You cant be a waitress and a homeowner. What city is that possible? These homes are for retirees, second homes and landlords. How many professional jobs are in LV?
although it is nice to hear that some of our homes are being purchased, investors are not home-owners & renters do not take care of their property like actual owners do. its a shame really.
Too many Rentals will take the neighborhoods down. To those hoping to achieve 9% return on their money I say "Good Luck." Even if you will be able to get 850/month factor in the maintenance, upkeep, repairs, not to mention the major "headache" factor. Unless you can rent to family or friends who are absolutely trustworthy forget it. But then again if one rents to family or friends, profit should not be the objective.
Putting it cash into a house, even if rent falls to $850, means, even with taxes and upkeep, an earning of approx 9% off other people's money. That $850/month is pure profit. Over $10k a year. You can't get that on Wall Street or a CD.
*******
Maybe somewhere else in the country these calculations are good but not in Vegas. It is going to be one heck of an uphill battle. As many of us have said - if you don't have jobs, you won't have people moving here to rent or buy. When things start to improve (and they will eventually in many parts of the country) people will go where there ARE jobs and pay the same rent, if not less. And yes, we have those who are retiring and moving out here and that's good, but statistics show even with those people - a great majority stay close to family and won't traipse across the country. So those who think that their investment will pay off - guess again. Unless they bring JOBS with them, these figures don't mean ****.
Yep we are buying. Pay cash and you know you will get cash Flow.
******
And who the **** are you going to rent to when there is going to be a HUGE glut of rentals and NOT ENOUGH PEOPLE WORKING HERE TO RENT???
Just a few things that I think most of the folks commenting here are missing.
1. There are tons of people looking to rent where do you think all the people that lost their homes went? Most of them still have jobs and are good people with family to take care of and a 2K + a month mortgage was no longer an option so they had to walk away. In some cases one of the parents or partners lost their job and they now have to make it on a single income in others they were forced to take a pay cut to keep the job they have! That doesn't make them scum who will destroy your neighborhood! Renters are people just like you and the righteous attitude I hear is Very Very sad.
2. if there were to be further restrictions on rentals ( yes there are already restrictions in many community's check your CC&R's) the people would leave the city and where would that leave the local economy? Already this is happening look at all the closed grocery stores, clothing stores, etc". and when those stores close and those people lose their jobs and they cant get less expensive housing and they move away". See where this goes?
3. The investors that are coming in and buying up the homes are helping the economy! How do you not see that! Any competition in this market is good no competition no upswing in price get it? Yes it does make it harder on the little guy/first timer being up against higher than list cash offers but the investor often has to spend money in local stores, with local contractors, with local property managers (who should be looking out for the up keep of the property) this IS A GOOD THING!!!!! (even if they are from CA)
4. As to the folks that think the investors are stupid to expect a return. They are making a return and will continue to do so until the economy picks up and the rental market is not so healthy but more than likely the home will be close to paid off by then and the sales prices will be higher than what they bought at. The new breed of rental investor is not looking to make millions in this market just a steady couple hundred a month. Yes there is heavy competition in rent rates right now but for the middle American this is also a good thing! If you rent is low what do you do with the extra money? SPEND IT!!! Thus helping to boost the economy! HURRAY! Are you guys getting this yet?
OH and on a final note to the folks with bad owners that live out of state and don't take care of the property a new law was passed in October of last year stating that a rental property must have a responsible party ( read management company or owner) operating within 60 miles
Oh and one more thing I am a property manager and real estate agent here in Las Vegas I work with the people you claim are trashing your city/neighborhood (both the tenants and owners) and the MAJORITY of both groups are good people with the best intentions.
Ginteenie you have a good point and I'm sure many of the people renting are good people who are trustworthy and take pride in their homes but Las Vegas is a very transient town and many people are also losing their jobs as well as having their hours/salaries reduced. It is going to be a challenge for these investors to keep their properties rented and in good condition. Generally, owners keep their properties in better condition than renters. Neighborhoods made up primarily of rentals see their values decline.
Most of the comments on this page are not based on facts or research and are silly rants.
It is possible to make decent cash flow on some properties; however you have to know where to look. Some single family homes sell for 60K and earn 10K+ cash on cash return before taxes and HOA fees. E-mail me and I will show you proof.
Masoud at www.lasvegas4us.com/wordpress