Real Estate Prices Increasing
There is still an unemployment rate of about 8%. There are tens of thousands of properties with tenants not paying rent because have not been able to evict tenants with all the ridiculous new laws. The foreclosure moratorium has ended but defaults take about 4 months to hit the market.
From an investor’s perspective, the market is horrible. Cash flows are nearly zero after you pay over list to actually get a property. One of our investors put a property on the market at $335k and we have multiple cash offers above $350k. This video pretty much summarizes the frenzie:>>> You have to see this. lol FUNNY VIDEO
A frequently asked question I get is what kind of returns can I get? Well it really depends on the product. Here are some example types of real estate returns in this environment:
- Commercial Mom & Pop Strip Malls -> 5% Unfortunately, you have to have at least $300k cash to play in this game.
- 3/2/2s in the barrio -> 3%
- 3/2/2s newly built -> 2%
- 3/2/2s in upscale neighborhoods -> 2%
- Condos in upscale neighborhoods -> 1%
- Condos Under $100k -> -4% What? Really? You lose money on these? Rents don’t cover HOA, repairs and management expenses.
- 5/4/3s in guard gated exclusive neighborhoods -> -5%
- Fourplexes -> -8% We no longer manager these.
- High rise condos -> -10% (Why do people buy these? To impress their friends I guess.)
I can’t think of any reason to invest in real estate at this moment in time.
AB468 Will Crush Owners Who Manage Their Own Properties
Our new liberal legislature issued a bill and our governor recently blessed:
A landlord must wait 60 days to file the summary eviction to allow CHAP to process the application. If the tenant doesn’t respond to the agency or apply for rental assistance during that time frame, the landlord can receive the payment on the condition they not evict the tenant for 90 days.
This bill can potentially take anywhere from 60 to 90 days to toss a naughty tenant. Most owners don’t see this bus about to hit them. Fortunately, we have no more naughty tenants in our portfolio.
I have noticed over the years many owners who are managing their own properties are actually losing money but not having their properties professionally managed. The average owner is losing about $200 a month!! They are stepping over $20s to pick up nickels. If you are still managing your own property and want a free analysis of how much money you are losing now, please shoot me an email.
This young investor came to me back in 2008 to purchase a home. He was super shy and was worried that his modest savings would not get my attention. I said “No problem.” We found an old beat up home during the glory days of the last recession. We got it at $26k and he put in about $14k worth of work. His total investment was $40k. For those investors who follow my systems it was a 3/1/0 in an F neighborhood in D condition.
From 2008 until 2015 we had tenants paying about $700 per month. Minus taxes, repairs etc he cleared about $40k during his ownership. Then he turned to us and we sold it in 2015 for $70,000. Minus commissions and transaction fees, he cleared about $64k on the sale. With his modest $40k, he earned $104k in cash flow and appreciation.
Roughly speaking, he earned $15k annually for 38% annually. If you take out appreciation, he still made 14% annually.
Clark County Short Term Licensing
There are many bills out there aimed at investors. Fortunately, many of the evil ones died but the most recent one that will have a significant impact on the short term rental market. If you are currently licensed in Las Vegas, Henderson or North Las Vegas, the new AB 363 will not affect you. Investors who have property in Clark County MAY be able to become licensed. When licensing officially opens, it will be a bloodbath because there is a minimum of 660 foot rule in that ordinance. Of the 8,000 unlicensed short term rentals in Clark County, it is likely that 4,000 short term operators will be thrown under the bus. If your properties is not in the city, not in an HOA and you want to become licensed, reach out to us soon.
There are a ton of features we love about Appfolio which is the web based platform we use to track a zillion details on properties. However, there is one flaw that drives us to drinking and is a constant source of irritation among our clients. We settle accounts on or about the 15th of the month. Appfolio automatically generates a report starting on the 1st. If a maintenance event occurs after the 15th, our clients have no idea what happened and the event doesn’t appear on either the previous report or the current report. We call these “Mystery Maintenance Events”. The only elegant solution is to settle at the end of the month but about half our clients would go off the rails if we delayed payouts. Therefore the only solution is to generate a report from the year start date manually for clients who reach out to us. If you get a mystery maintenance event, don’t hesitate to ask us for a manual report with a year start date.