Cash is king in Las Vegas foreclosures

In the last 5 years I have sold many properties in many different markets across the country. In 2003, hordes of investors entered the Las Vegas market buying single-family homes and condos. In 2004, the scene repeated itself at the Phoenix market. In 2005, markets like Albuquerque and Austin had large numbers of investors snapping up new housing. In 2006, the Carolinas were heating up and East Coast investors were investing heavily in many Florida markets.

While I bought and sold in many of these markets myself, I sat on the sidelines in the Las Vegas market because real estate prices were too high and just didn’t make sense for good investor cash flow. That all started to change in the summer of 2008 when prices started falling faster than normal and the cash flow point was reached again. This point of cash flow I’m talking about is a simple equation in which the amount of money an investor can get from renting a home exceeds his/her operating expenses. These operating expenses include the mortgage, taxes, insurance, repairs, and property management. With a down payment of 20%, a positive cash flow can now be achieved in this market for the first time in several years. Las Vegas has been the national leader in foreclosures for over a year, and the volume of foreclosures entering the market is almost three times what it was a year ago. Almost 1 in 70 homes here in the Las Vegas market is in a foreclosure state. The median home price in Las Vegas has fallen from a peak of nearly $300,000 to nearly $10,000 per month over the last year to a new average price of just $189,000.

As a full-time investor and licensed real estate agent, I spend my time here in this market looking for the best deals for me and my investors. Local newspaper articles and analysts speak of a 30% loss in value. The reality is that we are seeing prices that are 50-70% lower than they were 2 years ago. Many of my deals in the last month or two are well under 50% of older higher values ​​from 2006. I just sold a one bedroom condo for $53,000, that was $148,000 two years ago. This is close to 35 cents on the dollar folks. New 2 year old 3 bedroom homes that cost $300,000 just 2 years ago are now under $120,000.

This opens the doors to virtually anyone to re-enter the Las Vegas market and start buying again. Due to the government’s Home Foreclosure Foreclosure Bill, first-time buyers have a $7500 tax credit to take advantage of. Baby boomers and retirees looking to relocate to a warmer weather destination need not head south of the border as the South West has become affordable again. The holiday capital of the world is now making sense again for second home and holiday home buyers and of course investors are happy to get their investments flowing again. Of course, all of these groups will benefit greatly, since the possibility of appreciation over the prices of 2 years ago is guaranteed. Let’s face it, everyone who bought in 2006 or 2007 bought at the peak of the market and saw their equity evaporate almost overnight.

We all know that lending has tightened over the past year. But the prices are ½ of where they were. If you have a good job and good credit, it’s a good time to buy a home. Interest rates are at an all time low so I suggest you invest in a fully amortized 30 year bond to lock in the historically low interest rates as they literally only have one place to go and that is up. Earlier this week I spoke to one of my executives at my title company and she informed me that 85% of their closures are funded by a lender. I suggested to her that she should attract more cash buyers since only 2 of my 11 deals last month were funded and the other 9 deals or 82% of my deals were all cash deals. The old saying “cash is king” has never been more relevant in this market than it is now. Not only do I get more deals accepted, but in most cases I get them for less than list price and get them enforced quickly. My buyers are very happy because they get a great deal at a very low price, close quickly, have great cash flow and also get tremendous upside potential. I just had a lender over the weekend who told me they would take our offer below list price but wanted to close in 10 days with our cash offer. They had two other offers on the table, but the banks don’t want to mess around with the financing either. They want to accept the safe sale of cash, even if it’s at a huge discount.

So folks, if you’ve been able to save some money, haven’t spent it in the last few years during the great housing boom, or you still have a line of credit outstanding, I suggest you come back to the Las Vegas market and get started look for real bargains. The banks are ready to do business and the timing to buy a great foreclosure is as good as it gets.