Las Vegas Real Estate News
Major Change in Eviction Laws
The good news is that the California exodus has pushed our real estate prices up. The bad news is they are bringing their leftist views with them. Our new recently elected liberal legislature produced a cornucopia of laws providing tenants with more rights and benefits. Our real estate lobby killed a lot of these ridiculous proposals like allowing tenants to use their security deposit for their last month’s rent. At the end of the day, some of those changes managed to leak through. We are still digesting these changes and brainstorming new procedures to benefit our clients. Here are just some that will have a significant impact on our investors:
- Serving Notices: Licensed process servers are now required to post notices. These notices include “Pay or Quit” , “30 Day No Cause” and “Unlawful Detainer”. We are now forced to use vendors to post these notices. Notices we used to post frequently and without reservation will take more consideration. Notices will now cost owners $75.
- Fees / Fines: There is now a cap of fees and fines we can impose on tenants. We used to just pile these on tenant ledgers so we could take it out of their security deposit. Those happy days are over. The maximum amount of fees that can be tacked onto a tenant ledger is now 5% of the monthly rent. This is a fraction of the costs it takes to toss a naughty tenant. Evictions will now cost owners upwards of $500 or more.
- Delayed Filings & Lockouts: “5 Day Pay or Quit” are now “7 Day Pay or Quit”. Lockouts have changed from 24 hours to 48 hours. We suspect the constable’s office is going to increase their fees as well. The ramifications are a little more difficult to predict. Evictions will now take at least a week longer if not more.
There were some other changes that were reasonable like allowing tenants access to important belongings after the lockout. We did that anyway because it’s just bad karma to keep people from getting their stuff. As time goes on, I’m sure some subtle nuances will surface that we had not thought of.
Our immediate reaction to these laws is to raise the bar on application standards. For example, in the past we would just increase the security deposit for people who had marginal credit. Since we cannot attach fees to security deposits, we are eliminating that option entirely. Extra security deposits are meaningless now. Increasing our standards means that we will need to screen even more tenants to protect our investors. Increasing standards will now translate into longer periods for tenant placement which ultimately costs investors. In exact terms, it will probably take 3 weeks to place a tenant (for properties priced at market) instead of our typical one week.
Labor Day Is Looming
Why do you care? If your property is vacant at the end of August, you are in trouble. The amount of folks looking for a rental after August 15th drops in half. With a significant drop in people looking for a rental and our increase in screening standards, vacancies will stretch out for longer periods. Overpriced properties will be vacant for much longer periods. Vacant properties are prone to vandalism and plumbing disasters. It’s wise to have your property priced at or below market now.
We are noticing that the larger homes (>3,000 sq ft) in the nicer neighborhoods are dropping while entry level homes are flat lining. The chart above is Summerlin area homes greater than 3,000 sq ft compared to the starter homes on the East Side. The bling bling homes are dropping in price and they are on the market longer. The starter homes are nearly flat in price but days on market a increasing dramatically. We suspect there is a demographic effect related to millennials having smaller families. After Labor Day, larger homes will slide into the ditch faster than the starter homes.
Will those trends continue after the traditional Vegas winter slump? Probably. There is a correction looming. The mortgage industry is lowering their lending standards and people with recent economic prosperity are paying over list for their first home. Even some of our investors are taking out second mortgages to pay for shiny things despite all our warnings. These investors will be the first to throw their hands up when the economy hits the fan.
In summary, if you want to capture most of your appreciation, unload your property now at a small discount before winter hits. If you want to keep your property for the long term (greater than 15 years), hunker down and keep some cash in the bank. You will need that money to weather the storm and have it available to pick up some foreclosed properties when the storm is over.
2nd Book Released
A Few Properties More – This was written specifically for you crazy owners who want to manage your own properties. There are a lot of really good tips in there for you. I give away MOST of my trade secrets. Don’t tell my competitors!
Jim Eagan / Broker / Limestone Investments
- Why you should never rent to friends & family.
- Why vacation homes make poor investments.
- Just say “NO” to partnerships.
- Don’t throw your family under the bus with poor planning.
- Radio interview on investments.
- Overview of Limestone Investments.
- How we handle a crack head squatter.
- Squatter removed from a home.
- Video of building full of squatters.
- Video of abandoned fourplex.