This post on Las Vegas will only be on the IHB for one day. It's a secret revealed only to regular IHB readers.
Irvine Home Address … 7677 ALEXANDER HILLS ST, LAS VEGAS, 89139
Resale Home Price …… $135,900
Listen, do you want to know a secret?
Do you promise not to tell, whoa, oh
Closer, let me whisper in your ear
Say the words you long to hear
Beatles — Do You Want to Know a Secret
As most of you know, I have formed an investment fund to acquire auction properties and flip them for profit. I have been very busy since mid-September when I turned my attention from raising money to actually doing the work. I have been intentionally mum on the blog about this endeavor; although, I will feature properties I acquire there from time to time in the future. Quite honestly, I don't want to attract too much attention to this opportunity for fear of competitors entering the market and driving down the margins. Due to that concern, this post will only appear on the IHB today, and tomorrow morning, it will be taken down. I want to inform my regular readers, who are most of my investors, without giving opportunity for potential competitors to review days later.
I would also like to start by saying the two properties I am featuring today are not typical. These were both outstanding deals for different reasons. The typical margins I am obtaining are about half as large. That being said, both of these properties are in escrow, so I have good reason to believe the margins presented are real. There is still a chance that either or both will fall out of escrow, but Alexander Hills is scheduled to close on November 18. When it does close, I will no longer be able to accept new investors into the fund.
Home Address … 7677 ALEXANDER HILLS ST, LAS VEGAS, 89139 
Resale Home Price … $135,900
Home Purchase Price … $86,000
Home Purchase Date …. 9/24/2010
Net Gain (Loss) ………. $41,746
Percent Change ………. 48.5%
Annual Appreciation … 308.5%
Cost of Ownership
————————————————-
$135,900 ………. Asking Price
$4,757 ………. 3.5% Down FHA Financing
4.23% …………… Mortgage Interest Rate
$131,144 ………. 30-Year Mortgage
$25,725 ………. Income Requirement
$644 ………. Monthly Mortgage Payment
$118 ………. Property Tax
$11 ………. Homeowners Insurance
$280 ………. Homeowners Association Fees
============================================
$1,053 ………. Monthly Cash Outlays
-$58 ………. Tax Savings (% of Interest and Property Tax)
-$181 ………. Equity Hidden in Payment
$7 ………. Lost Income to Down Payment (net of taxes)
$17 ………. Maintenance and Replacement Reserves
============================================
$838 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$1,359 ………. Furnishing and Move In @1%
$1,359 ………. Closing Costs @1%
$1,311 ………… Interest Points @1% of Loan
$4,757 ………. Down Payment
============================================
$8,786 ………. Total Cash Costs
$12,800 ………… Emergency Cash Reserves
============================================
$21,586 ………. Total Savings Needed
Property Details for 7677 ALEXANDER HILLS ST, LAS VEGAS, 89139
——————————————————————————
Beds: 3
Baths: 2 F 1 H
Home size: 1502
Lot Size: 0.15
Year Built: 2003
——————————————————————————
Clean, beautiful 2-story home situated in the gated community of Lamplight Cottages. Desirable floor plan with 3 bedrooms, 2-1/2 baths. Open kitchen with a built-in island, granite countertops, built-in microwave, custom cabinetry, and tile floors. Living Room and stairs have dark chocolate hardwood floors and dramatic vaulted ceilings. Great Community with Pool, Clubhouse and lush green park. This home is owned by equity seller and available for quick close.
Bullish on Las Vegas's low end properties
Everyone is worried that Las Vegas prices will never bottom. In my opinion, properties in this price range are already there. The higher price ranges, like the second property I am going to show you, still has air to deflate, but the properties under $150,000 are not going to go much lower if at all.
I say that for one simple reason: prices are very affordable. Look at the income requirement on this house. With current interest rates this detached single-family house is affordable to someone making $25,725. That is a full-time single breadwinner making $12.86 per hour, or two breadwinners making that combined. That is affordability.
Further, the cost of ownership is much lower than comparable rents:
| 10483 CAROLINE ROSE ST | 1,095 |
| 10439 MORNING SORROW ST | 1,095 |
| 7570 GRASSY BANK ST | 1,195 |
| 6191 BROKEN SLATE WY | 1,100 |
| 8432 RAVENCREST ST | 1,300 |
| 8225 GOLDEN FLOWERS ST | 1,200 |
This property should rent for about $1,200 per month, making it a good cashflow rental property even at full retail cost (these properties have tremendous cashflow value at auction prices).
The combination of excellent affordability and the huge savings on the cost of ownership versus rental is prompting every renter with good credit to buy. The large positive cashflow is causing many cashflow investors to buy these properties both at auction and on the MLS. Between the local owner occupants and the outside cashflow investors, there is real demand at these price points.
I know I plan to buy several just like this one.
Selling to the tenant
The second property I have in escrow is a good deal that became a great deal because I sold it to the tenant.
Whenever I bid on an auction property, I always include a renovaton budget, and if the property is occupied, I budget cash-for-keys to pay the occupants to leave without trashing the house. In cases like this one where I was able to sell the property to the renter that lived there, I avoid both of those costs, and the savings falls to the bottom line.
Home Address … 7888 SPINDRIFT COVE ST, LAS VEGAS, NV 89139-6109
Resale Home Price … $295,900
Home Purchase Price … $201,700
Home Purchase Date …. 10/4/2010
Net Gain (Loss) ………. $76,446
Percent Change ………. 37.9%
Annual Appreciation … 253.5%
Cost of Ownership
————————————————-
$295,900 ………. Asking Price
$10,357 ………. 3.5% Down FHA Financing
4.23% …………… Mortgage Interest Rate
$285,544 ………. 30-Year Mortgage
$56,013 ………. Income Requirement
$1,401 ………. Monthly Mortgage Payment
$256 ………. Property Tax
$25 ………. Homeowners Insurance
$280 ………. Homeowners Association Fees
============================================
$1,962 ………. Monthly Cash Outlays
-$126 ………. Tax Savings (% of Interest and Property Tax)
-$395 ………. Equity Hidden in Payment
$16 ………. Lost Income to Down Payment (net of taxes)
$37 ………. Maintenance and Replacement Reserves
============================================.jpg)
$1,494 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$2,959 ………. Furnishing and Move In @1%
$2,959 ………. Closing Costs @1%
$2,855 ………… Interest Points @1% of Loan
$10,357 ………. Down Payment
============================================
$19,130 ………. Total Cash Costs
$22,900 ………… Emergency Cash Reserves
============================================
$42,030 ………. Total Savings Needed
Property Details for 7888 SPINDRIFT COVE ST, LAS VEGAS, NV 89139-6109
——————————————————————————
Beds: 4
Baths: 3 F
Home size: 3314
Year Built: 2001
——————————————————————————
This is a non-MLS sale, so there is no property description nor is there a link to
I think properties at this price point in Las Vegas still have some air in them. Of the properties I have purchased for the fund, the ones in this price range offer the greatest potential margins because so few auction buyers have the cash to trade these. Higher margins means it is easier for a flipper to lower price to move the property if necessary. That in turn means that prices for these will likely head lower. Further, the price-to-rent ratio is not good at these higher price points:
| 7871 SPINDRIFT COVE ST | 1,850 |
| 7831 ABALONE BAY ST | 1,850 |
Cashflow investors will not be attracted to these properties, so it is up to owner-occupants to clean up this mess. There is much more supply than there are buyers ready, willing, and able to absorb it. Prices in this range will fall.
But that is the risk of being a flipper. Catching falling knives offers great margins to those with the dexterity to juggle. Also, the margins provide more room for error or later price reductions.
Investor site up soon
I want to thank all the investors for their patience while I prepare the website to report on all the fund's properties. My attention has been on acquiring and processing these properties so far, but developing the investor website for reporting is now my priority. I have developed the report which will serve as a template, and I have the accounting system in place to track the details of the individual properties. You will be receiving an email from me soon with details on how to access the member's site. If you want to see the PDF reports on these properties, I have those available for your review. Email me and I will send them to you. The website will have all the same information when it is ready to go.
Great post. Excellent breakdown on what is going on in Las Vegas. It obviously illustrates your expertise in comparing total monthly costs of ownership vs. renting. If only more people knew this…….
Sometimes the best action is no action, IMO. My Wife (46) and I (47) were so darned busy with work from 1998 until now that we always threw away or ignored those ‘refinance now’ or HELOC flyers. We simply sat it out and paid our monthly mortgage (boring!). BTW, we live in Los Angeles County. Based upon the recession (depression), we agreed to de-leverage and pay off our remaining balance on our mortgage. We plan to be out of all debt by January 15, 2011. Of course we will still have food, insurance, utilities, healthcare, etc., but it sure does add a whole new dimension to having choices.
Keep up the great website!
Best Regards,
Hootie
All I can say is I’m envious of those prices! Cramped Irvine condos in the same age-range (2000’s) would still cost half-a-million plus over here 🙁
Why???
Las Vegas does not have a shortage of land to build on (to put it mildly), nor does it have one giant corporation controlling supply and pricing (like Irvine does). It also has high unemployment and recent overbuilding.
In 2006 everyone in Las Vegas was clamoring about how the valley was getting built out and they were running out of land. They were drinking the same kool aid as California.
The west side of Las Vegas has a community called Summerlin that was developed by the Howard Hughes Corporation just like Irvine was developed by TIC. The quality of these neighborhoods is consistently high, and the prices have held up there relative to other areas — the prices still crashed, but not as bad as undesirable areas of Las Vegas.
Actually, Irvine has no shortage of land (do you even know what that word really means?) and the Irvine Company has nothing close to monopoly pricing power. Irvine’s more expensive because it’s more desireable, just like any other expensive city.
The TIC-controls-pricing myth in particular continues to amaze me with its staying power. Let me get this straight… 10-12 years ago, they were happy to sell new homes at one third of what they sell them for now. But then all of the sudden they woke up and realized that they were a monopoly, that they can limit supply and charge much higher prices? And it’s just an amazing coincidence that this discovery coincided with the great housing bubble? Come on people you’re smarter than that. TIC benefited greatly from the housing bubble but didn’t have anything to do with creating or maintaining Irvine’s inflated prices.
The entire town is surrounded by govt owned land. You’re right, there is no (current) shortage of available land in LV, but I’d be willing to wager that more available private owned land is in OC than Clark County.
What is truly amazing is that people in NV make on average half as much as those in the OC but, pay 1/5 on average for housing! In NV (Las Vegas) you can buy a house now for LESS than it costs to rent. But, in Irvine and many parts of the OC it costs twice as much to own as it does to rent!
Clearly, prices in Irvine and other premium areas have a ways yet to fall.
Just my .02
BD
For the life of me, I will never understand the appeal of Las Vegas as a place to live and raise a family. No price would be low enough to entice me (as a business professional) to move there. No matter how Irvine-like those condos appear to be, you are still in hot, dusty Vegas! Scroll down on the map and take a look at the desert adjacent to the tract.
It does look like there are opportunities for the vast number of retail, service and casino workers to live in lovely homes.
Congrats to IR on this venture!
This time of year the weather in Las Vegas is beautiful. Whenever I go there in the summer, I ask myself why anyone would live there too.
If you look at the price-to-income relationship in Las Vegas, you see that the average income is about half of Irvine which is reflected in the lower rents, but the home prices are one-fifth of Irvine. There is no kool aid in Las Vegas. The crash has purged it.
IR,
What factors made some locations good and other less desirable other than holding up in value? Construction quality, neighorhood design, instructure (parks, roads), schools/students/parents, class of people, debt to income ratio…? What are the rent to expense ratio’d on both of the houses? Skiming rents for two and half year. Rental income without expenses — A great business model — all that model needs is a federal bailout, but then contributions would be required.
The $26,000 yearly income and $21,000 down to afford a condo is a big attaction to getting employees. I recall engineering firms lack of desire to make offers to superior experienced engineers from the mid-west because after a few years in CA their families got tired of the low qualitiy house comparied to their old houses in the mid-west on an engineers salary and moved back to the mid-west or south. In other words, the CA’s higher salary did not make up for the higher cost of living in CA.
Summerlin is the Irvine of the Las Vegas area. The streets are well landscaped, the commercial centers are clean and nice, the houses are subject to stricter controls, and so on. It has all the characteristics that make Irvine desirable.
The capitalization rate on the Alexander Hills property is about 9%, the other is about 6.5%. That is net income divided by investment price.
The rent skimming is pretty bad in Las Vegas because so few loan owners are paying their mortgages. As long as they have owned the property for more than one year, there is nothing illegal about it. It does seem like theft to me, but that isn’t the law.
The affordability in Las Vegas is very attractive. When gaming revenues pick up, it will be relatively easy for the casinos to attract new workers given the low cost of housing.
I second everything you said IR. In fact, I think as things continue to grind down in OC, it’ll make Summerlin more attractive for young families.
A lot of OC’ers would rather live in a new Irvine like house (Summerlin), than a Garden Grove condo.
JMO, The writing is on the wall … I’m bullish on Summerlin too.
Not sure about LV gaming revenues going up anytime soon. Many are angry at Harrah’s and the corrupt gaming interests for their open support of Harry Reid.
Already I’m reading a number of assertions regarding avoiding Nevada and Las Vegas in particular due to Reid’s re-election.
I’m aware that some of this may be just “talk” however when people said that they’d vacation in AZ due to SB1070, they really did and State revenues from hotel receipts (2010) increased about 11 percent over the same period for 2009.
Further, enough tax revenue ($650k+) from the sale of gasoline was collected to re-open most of the rest stops in AZ especially since professional truckers support AZ politically.
My husband just got back from Las Vegas last night and said that he would never consider buying a home there. Landscape is just too ugly,
temps were in the low eighties.
~Misstrial
Comparing hotel receipts to 2009 is not sound because 2009 was the worst year for hotels since the Great Depression. Overall hotel revenues are up 12.5% vs. the same period in 2009, so a mere 11% increase is actually below trend and not showing the effect you think.
Saying the 11% increase is due to SB1070 ignores the overall improvement in hotels, and isn’t a whole lot different than saying that the rooster crowing made the sun come up.
Not to criticize, however with the re-election of Reid, I would say that there is plenty of kool aid in Las Vegas.
LV has very high winds in December through March and sand storms.
OK if you don’t mind your car getting sandblasted.
~Misstrial
This is another reason after a lifetime of travelling to Vegas on a regular basis I dont drive. If you havent had the experience of losing a windshield or a paint job. Just wait. It will happen. I had to drive back last June. Still have a huge pit in my Mercedes windshield from a rock kicked up. Hey whats $ 1300.00 ?
Only 2 places in Vegas I would live. Summerlin or Sunrise. The rest is like living in Riverside or Fontana. Yuck.
IR. Drive down Sahara from Summerlin to the Strip. Count all the closed businesses in those strip malls. 35% maybe ? Never mind all the damn lights and the 35 Minutes to go maybe 10 miles.
Vegas is still really in trouble. I just dont see a bottom yet. Especially with what appears to be a population thats finally going negative for the near future. Once the hotels start showing a profit again. Maybe. But the Hard Rock is about to go under too.
Prices are low but we are definitely not out of the woods.
Well, Reid’s opponent was simply crazy. That sure helped him. He probably would have lost to a sane moderate.
So was the renter of the second property still paying rent while the property was being foreclosed? While the bank owned the property? How long did the bank own it?
$75k profit on $200k invested for maybe 2 months, and with selling to the renter, taking little risk. I can’t imagine that there isn’t a river of money flooding these opportunities. Those profits support a lot of months of returns if you’re holding properties for a while.
I had to blink at the first prop’s income requirement. Two full-time (40hr/wk) breadwinners can’t equal $12/hr, because minimum wage has gone up to $7.25.
The renter on Spindrift Cove was paying the former owner. The former owner was skimming renters for about two and a half years. This particular renter was only being skimmed for about six months. I purchased the property in the last week of September, and the former owner actually showed up at the door and demanded the tenant pay her for October. She didn’t own the house!
That behavior should be criminal.
She walks away and pockets the banks “mortgage money” for two years… Renters should have the option of paying rent to an escrow company or something.
Did the renter know the home was in foreclosure? Is there anything illegal about skimming (it’s definitely unethical)?
Would a renter be able to contact a bank to direct their payment to the bank instead of the delinquent borrower? Could the delinquent borrower evict a renter that was paying rent to the bank or had some other agreement?
Did the dq landlord show up when you were there? Did you get to ream them?
The renter saw the auction notices, but the rent-skimming landlord assured him there was nothing to worry about and that she was “taking care of it.” It isn’t illegal, but it sure feels like theft to me.
A renter cannot make their payment to the bank. The renter has a contract with the loan owner, and that contract is independent of that loan owners contract with the bank. A delinquent borrower can evict a renter and do anything else a title holder can do. The delinquent borrower is still the owner on title until the foreclosure takes place.
I wasn’t there when the former owner showed up. The renter is too nice a guy to tell her off. She is still illegally withholding his security deposit, and he may never get it back.
IR…
Advise your former renter to immediately send his former landlord a demand for the security deposit. She has no claim to this deposit since she lost the property in foreclosure and has no damages to repair. He should also demand refund of prorated rents he may have prepaid after the auction date (i.e. if rent was $1,200.00 and he paid on the 1st and you took ownership on the 15th then he is due $600 back). If she doesn’t pay in 30 days he should file in small claims. She may also have criminal liability since it is illegal to collect rent on property you don’t own so if he still can’t pay I would report her to the police for theft. This behavior should not be condoned, rewarded or tolerated. You may be amused at her actions but I am not.
It is my hope that lenders will soon redraft loan contracts and provide a clause for direct payments by tenants to an escrow account in the event of mortgage default by the purchasing party.
This clause would allow lenders to be able to communicate directly to the tenant and vice-versa, thereby bypassing deadbeat loanowners who have generally failed to inform tenants of the property’s true disposition.
~Misstrial
Never happen…
What’s going on now is an abberation. Lenders make a loan. The property is mearly collateral. If they chose to delay reccouping collateral that’s their business. Now they are delaying because they would have to write down their notes and that would make them insolvent (hence Zombie Banks). Banks have no interest in the day to day management of the collateral behind the note.
the former owner actually showed up at the door and demanded the tenant pay her for October
LOL! Unbelievable.
I thought that took a lot of nerve too.
I’m confused as to your purchase price on
7677 Alexander Hills property
It showing as sold to a 3rd party for $270K on 9/20
Also,the #2 loan sold to a 3rd party for $86K on 9/21
Are you in it at the higher price point?
This property has unusual mortgage and title issues. The $270,000 was a foreclosure on what the lender thought was a first mortgage. My purchase for $86,000 was an old second mortgage that was in first lien position because it was improperly closed out in 2007. The lender who paid $270,000 is going to file a title insurance claim to recoup their losses.
How did you manage to figure out that an old second mortgage was in first lien position and that it had been impropery closed out. If you really are that good maybe I really should invest with you after all. There has to be a story here.
I researched title prior to the sale and confirmed it with a local title agent. I knew the lien was in first position when I bought it, but it wasn’t until later that I heard the gory details on how exactly it came about. The escrow officer forgot to record one vital paper when the house was purchased in 2007. That mistake is going to cost the title company a great deal of money.
Long time lurker, first time poster. Great blog. I appreciate your candor, and willingness to put yourself and your money on the line.
Also funny to read about someone whose life is similar to ours…lots of driving, cheap lodging, budget meals. Both my job and my spouses job are gone, reinvention in middle age and lucky we saved for a rainy day. We buy income properties out of CA (not Las Vegas), rehab them, and plan on holding long term to fund a modest retirement if all goes well. Rehabbing foreclosures is nasty, grinding work, nothing like those TV shows where a group of happy elves show up and make it a showplace in a day or two. It’s not pretty and not for the faint of heart. But the end results have been successful and I’m proud of what we’ve accomplished. Hopefully we will continue to have good tenants with stable employment.
Good luck; I wish you and your investors success.
Yield is king!
$135,900 Cash Buy
$14,400 = gross rent (10.6% yield)
$1,416 ~ Annual Tax
$500 ~ Annual HO Insurance
$3,360 ~ Annual HOA
$5,276 = Total Annual Fixed Expense
$14,400 Gross Rent minus $5,276 Fixed Expense
=$9,124 (6.7% Yield)
Try getting a 6.7% yield with ANY PROPERTY in Orange County.
BTW, both of these homes are located in the best neighborhood in Las Vegas, Summerlin. I know several former OC’ers that live there … in fact, the entire community is full of people from So Cal. As for me, I could never live there because of the heat and cold, however it’s got some incredible golf courses, parks, new roads, great shopping, the best restaurants, and it backs up to the beautiful Red Rock State Park.
That’s surprising,
Looks to me like the best neighborhood in Vegas is getting murdered.
The sheer volume of bank owned homes in this area is already massive.
Not to mention, the pipeline looks full even with the number of investors buying.
Agree. That is what I’m reading in other news reports too.
http://www.theaustralian.com.au/news/opinion/poverty-takes-the-shine-off-vegas/story-e6frg6zo-1225922896912
http://www.thedailybeast.com/blogs-and-stories/2010-08-31/20-cities-with-worst-mortgage-housing-problems
http://www.lasvegassun.com/news/2009/jun/26/housing-problem-wont-go-away
http://www.themoneyillusion.com/?p=7311
But I guess if that’s what you can afford….*shrugs*
~Misstrial
I hope the prevailing sentiment remains bearish on Las Vegas for a long time. It will prevent money from coming into the city and driving down my margins.
Contrarian investors typically make more money than the herd followers. People that follow others, are typically slaughtered by bubbles.
The upside of LV is appealing.
This was a very interesting post.
I’m not really pro Vegas-investing but these two properties are compelling stories.
Will you also be reporting on the misses as well as these hits?
The investors will know about them all. If I have a miss, I may write about it if there is an interesting story involved. Me screwing up and blowing the comps would certainly be interesting to my detractors.
I purchased one property in Henderson that is requiring a complete cosmetic do over. The before and after pictures should be interesting. I have comps in the neighborhood that show me making anything from zero to 20%. It could go either way.
Is this some kind of new math where negative numbers dont exist ? I hate to be Devils Advocate on ya. Its not if you have a miss. Its when. After being in business on my own for 10 years I can tell you about some healthy misses. Its part of the reality of making money and owning a firm/corporation.
Thanks for the response.
Good luck and I admire you pushing through despite those of us who don’t believe in the Sin City bull market.
And just remember, 3-car wide garages (3CWG) retain the most value of any housing species… heh.
I know you are kidding around, but I wonder if big garages really are still a big selling point? (More so than location, age, condition, number of beds/baths, the fanciness of the kitchen, etc.)
@geo:
Partly kidding. If you look at 3-car inventory in Irvine… for newer homes… the price is pretty high compared to other OC cities.
You should join us over at http://www.talkirvine.com (apologies to mods but I miss geo’s IE/bullish opinions).
Maybe I will. 🙂
Is this another property that Heloc’d themselves to death?
http://www.redfin.com/CA/Newport-Beach/418-Saint-Andrews-Rd-92663/home/3246561
Bought in 1991 for $537k, approved short sale at $980k? How would I go about finding that out?
IR – It appears your new venture is successful and will continue to be so for some time and I am excited for you.
Form my observation of filppers, it does not seem to matter to them if the market has bottomed or is moving one way or the other. Much of their success seems to be contingent upon their ability to rehab and flip quickly for a quick and large ROI.
Again, congratulations.
Shoot, I thought the fund was already closed!
I think Las Vegas should market itself as a great place for boomers to retire. Cheap housing (necessary for boomers who never saved and spent their houses), no cold weather, not a kid-friendly city, plenty of adult entertainment and I think pretty favorable on the taxes, too. Perfect!
This makes sense. I already think it has lots of retirees, but it doesn’t scream “retiree city” like Phoenix or most of Florida. Older folks frequently think the heat is good for their health, so that would actually be a plus.
I know. I’m only half joking. If places like Arizona and Florida attract retirees, then Vegas should, too. If it’s that cheap, and there’s no income taxes (I don’t know, I’d have to go look it up and I’m too lazy) retirees might be able to live on a combination of Social Security, retirement savings and maybe a minimum wage part time job. They would want access to health care, though, so there would have to be some docs and a good hospital. I think it makes perfect sense.
IR you know I’m a fan but there is something more than passing strange about today’s post. Maybe you can help clear some things up for me.
If you truly have clear title to the first property (which seems so good to be true I’m still scratching my head about how the whole thing came to pass), this is still a one off deal right? You probably won’t find another deal like this in your lifetime wouldn’t you agree. So what bothers me about profiling it is the presumption that this kind of thing is an everyday occurrence. Maybe it is, in which case I’m all wet. But you did make reference to adding new investors so my BS meter did jump a little the more I learned about the circumstances of your purchase.
Secondly, how does a guy (tenant in the second property) who lives in Vegas and surely is aware of housing prices, suddenly spring for a $295,000 home? If he had the kind of money available to buy something why was he renting?
And why did he think your price was so super duper fantastic he just had to jump on it within a few weeks of you buying it? Aren’t there homes all around that area going for significantly less? You certainly make it sound like that’s the case. To me this ‘example’ is extremely puzzling. I realize I’m on shaky ground here. Not questioning your veracity by any stretch, but I need help understanding these anomalies in the story. Thanks.
I stated in my post that these two properties were unusually good deals. I wouldn’t say they are once-in-a-lifetime as there are other similarly good deals in that market. I did not make these deals sound like an everyday occurrence when I stated “The typical margins I am obtaining are about half as large.”
The tenant in the second property has been renting there for about six months, and his family really likes the property, so when the opportunity to buy it arose, he took it. He is not concerned about future price changes, or he is not so concerned as to keep renting. If you look at the numbers, his cost of ownership is still lower than his rent. Why shouldn’t he buy? As for why he is renting now, I don’t know.
He didn’t think my price was so fantastic he had to jump on it. He picked on of his available options.
He had three options:
1. Take my cash offer to leave the property. He didn’t want to do that.
2. Wait until I evict him after 90 days while I honored his lease per the Obama legislation.
3. Offer to buy the house from me at the price I wanted.
Given those three options, which do you think was the wise choice? He chose to buy.
There are not homes around this area going for significantly less. I don’t know why you think that. He is paying my price because that is what the current comps are in the area. I personally think prices will fall, but that is where they are today.
It’s great to see a couple of your top investments. It’s still difficult to see how you will earn enough to afford living in Irvine when you are mostly investing other peoples money.
My main question is when you will move to Las Vegas. That seems inevitable from multiple angles.
Hi IrvineRenter,
I follow your posts on a regular basis and really appreciate you insight.
I would like to purchase an investment property and agree that Las Vegas is a good opportunity. However I do not have the time to drive out there, go through the biding process, find a renter and maintain the property.
Therefore I was wondering if you think there are any decent investment opportunities here in Southern California. I know that they might not be as good, but I was wondering what your thoughts are on properties in Moreno Valley or Riverside.
Thanks.