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  • The New Investor in Distressed Properties

    By

    Tony Sena

    The possibilities of making big profits in distressed properties has lured many new investors into the field. Many, surprisingly enough, are willing to risk financing these kinds of properties without the knowledge and expertise, much less the experience of the successful, long-time investor.

    Frequently, these newcomers rely on “instinct” rather then on the advice of knowledgeable professionals, such as real estate agents and attorneys. Their hunger for quick, profitable deals and lack of true market knowledge most often leads to investments that either do not materialize, or turn out to be money-losing propositions.

    These entrepreneurs often do not know of all the options an owner of a distressed property may have before actually being foreclosed, such as:

    • If the owner is in a higher than debt equity position, but has fallen behind on payments to the lender, he may opt for a quick sale to get out from under the mortgage
    • Deed in lieu of foreclosure – giving the deed to the lender – may avoid foreclosure, but is not the best of all possible options
    • Short Sale: The borrower must convince the lender to allow the property to be sold, even if the sale price is less than what is still owed on the loan.

    The borrower must additionally ask the lender to agree that no further action against the borrower to collect any balance still due on the loan- after the sale of the property – will be taken. The possible tax ramifications of such a sale may not leave the seller free and clear of all debt.

    “Jumping” into a distressed property purchase, without a complete understanding of the process, and without a skilled advisory team is often a recipe for financial disaster.

    Without these advisers, how will the new investor know the true market value of a distressed property, particularly in a difficult market such as the present?

    Certainly, the new investor should be aware of the outlay of funds required-other than the purchase price- such as appraisals, home inspections, title searches, financing conditions, rehab and upgrade costs, etc.

    Further investigation may be needed to uncover possible second or third mortgages, contractor’s liens, judgments, and so on.

    Additionally, the new investor who finds a truly profitable investment, will rarely be the only one who knows about the property, and will quickly find himself up against the old pros, savvy, long-time investors with deep pockets, who will be difficult to compete with.

    At this point, all we can say to the new investor is, do not take the plunge into distressed property investment until you have thoroughly familiarized yourself with the market in which you are playing. Put together the best advisory team possible, and make sure your funding sources will enable you to make the purchases that will make you the kind of money that drew you into this investment field in the first place.

    If you have any questions about investing in Las Vegas Real Estate, feel free to give us a call at 702-376-0088.

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    Added Value Properties

    By

    Tony Sena

    Added value properties are properties that for one reason or another are undervalued, but with renovation, sometimes minor, sometimes extensive, investing in these properties could be profitable.

    This is dangerous area for new investors, particularly those with a get rich quick mentality. Careful analysis by an experienced investor and his/her investment advisers is a requirement of good judgment and the only way to make a qualified decision as to whether the deal is worth pursuing or walking away from.

    How to recognize a possibly under-valued property that with some tender love and care would add value, might make a worthwhile investment takes experience in evaluating real estate investment targets.

    Some examples of a possible added-value investment property:

    • A rental property in which the owner is not experiencing the expected cash flow from the investment. Possibly the current owner is unaware of how to track rental market trends or inexperienced in finding the right kinds of tenants and is experiencing high tenant turnover.
    • The neglected, vacant property of an out of town owner, who doesn’t need the money, and may have not as yet gotten around to having the home fixed up and marketed.
    • A for sale by owner (FSBO) home that has fallen into disrepair due the owner’s lack of funds. The owner has little knowledge of the property’s true market value, and is selling the property in “as is” condition.
    • The owner was recently deceased, and the beneficiaries are out of town and anxious to sell. The property may be in some disrepair, maybe minor, possibly major.

    The beneficiaries are reluctant to put any money into the property for renovation, and may be putting pressure on the listing agent for a quick sale and might be amenable to selling at an attractive under-market value price to a qualified buyer.

    • The once residential home is now in an area that has been re-zoned for commercial use, and the owner is not inclined to be a landlord to a business owner tenant and would rather just sell the property.

    There are many other reasons as to why a property could be targeted by the investor as an added value prospect, and as mentioned previously, it takes real know-how to identify and analyze a real estate investment of this nature.

    As any experienced investor knows, it takes the knowledge, resources and experience of a real estate agent who knows how to recognize these kinds of properties to find the investments that may be worth pursuing.

    If you have any questions about investing in Las Vegas Real Estate, feel free to give us a call at 702-376-7379.

  • The Handyman’s Special

    By

    Tony Sena

    Why Fixer-Uppers Are So Popular

    Although not all investors are attracted to these kinds of Las Vegas Properties, some real estate investors look for nothing else but properties in need of repair. This can be understandable, when on the surface it may appear that a motivated seller may be willing to part with his run-down parcel of land for as much as 20% to 40% under potential market value.

    Of course, the inexperienced Las Vegas Investor may look only on the bright side of the picture, such as creating equity with minimum up-front cash, using government money and low interest loans to rehab eligible properties into saleable or rentable condition, or flipping a “ fixer-upper” for big profits, with a minimum outlay of funds.

    All of the above speculations are not only possible, but are frequently accomplished. However, the experienced investor doesn’t only see the bright side, but will carefully evaluate possible pitfalls and cash outlay estimates after purchase before making a commitment.

    As with any property purchase, and particularly with a handy-man special, a thorough building inspection by a licensed contractor is a must. Any problematical finds, such as structural damage and the extent of that damage, must be carefully evaluated before deciding to buy or walk away.

    Another important consideration when dealing with this kind of investment is the outlay of funds required to repair and refurbish the property. If you are a do-it-yourself craftsman, you will probably be able to handle cosmetic repairs such as painting, cleaning, minor plumbing and electrical repairs such as leaking faucets, or replacing a light switch, etc., but, more extensive repairs would probably involve the cost of hiring a licensed contractor, especially if the building needs to be brought up to code.

    All of these factors, other than just the purchase price must be carefully evaluated before making any commitments. Future use of the property, and a realistic exit strategy are other important considerations.

    At this point in time, when selling prices are down and inventories are high, many investors in rehab homes would prefer to fix up and rent, rather than compete in a “buyers market.” Favorable cash flow from monthly rentals will allow the investor to bide his/her time waiting for an up cycle in the marketplace, as inventories gradually diminish and selling prices begin to rise.

    Lastly, although CPA’s and real estate attorneys are valuable members of any investors team, a good Las Vegas Real Estate Agent is the key person on your team that can help you build wealth.

    A good real estate agent, one that has experience in finding the kinds of properties you are looking for, and is in tune with your goals and business practices, are your eyes and ears in the marketplace.

    Above all, the smart investor knows that connecting with a reliable agent will not cost you money, but actually help you to make money.

    If you have any questions about investing in Las Vegas Real Estate, feel free to give us a call at 702-376-0088.

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    Las Vegas Real Estate Sets Sales Record for June 2009

    By

    Tony Sena

    Las Vegas Real Estate sales of single-family homes, condos and town homes hit a record of 4,702 in June, beating the previous record of 4,414 set in June 2004 according to the information released by the Greater Las Vegas Association of Realtors.  The main reason for the increase in home sales is the average sales price of $140,000 which is considerably less than the average sales price of $242,000 in June 2004.  The drastic drop in home prices has made it affordable for first time home buyers once again and lucrative for real estate investors.

    Majority of the Las Vegas Properties that sold in June were single family bank owned homes and short sales.  Condo and town homes also saw an increase in sales compared to June 2008.  This can also be attributed to the drop in the average sales price which is bringing real estate investors to the Las Vegas Real Estate Market. Many real estate investors are buying condos with cash and then placing them on the market for rent with a Las Vegas Property Management Company.

    Now that Banks and Lenders have lifted the moratorium, we should see a rise in bank owned homes hitting the market over the next 5 to 7 months.  This should fuel homes sales even more as many real estate agents are receiving multiple offers on their bank owned home and even short sale listings.  The bad news is the increase in bank owned homes for sale could drive down the average sales price even further as Banks and Lenders price the properties below market value for a quick sale.  Either way, don’t expect Las Vegas Home prices to increase any time soon.

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    Home Prices Decline 29.5% in Las Vegas

    By

    Tony Sena

    Home prices in Las Vegas dropped 29.5 percent in May compared to a year ago.  This decline can be attributed to the abundant amount of foreclosures that are flooding the Las Vegas Real Estate Market.  Banks and Lenders are lowering prices to move these homes which is affecting home values all across the Las Vegas Valley.

    First time home buyers, investors and those looking to buy 2nd homes are finding incredible opportunities.   A friend of mine is looking to rent a home and they forwarded me a property that was for rent and asked me to find out when it was purchased.  After doing a little research, this 3000 square foot house sold in December 2006 for $610K and just recently sold in May 2008 for $300K.  Talk about a great deal!  This one story, 3 car garage, 3000 square foot house sold for almost 50 percent less in less than 2 years.

    What this means for buyers:

    1. Excellent opportunity to find an affordable home.
    2. More home for their money.
    3. Banks/Lenders are paying your closing costs.
    4. Interest Rates are still at all time lows.

    Sellers are not in a very good situation right now and should avoid selling if they can and attempt to wait until home prices in the Las Vegas Valley begin to rise.  The rental market is doing very well right now and sellers should look at renting their home as a viable option before selling.  If you cannot wait and have some type of hardship, (divorce, loss of job, pay cut, etc…) you could always look into selling your Las Vegas home as a short sale.

    What this means for sellers:

    1. Banks/Lenders are driving down the values in neighborhoods.
    2. Probably will owe more than the home is worth.
    3. Hold off on selling if you can afford to wait for home prices to rebound.

    If you are looking to buy or sell in Las Vegas, don’t hesitate to contact Sena & Associates for all your Las Vegas Real Estate needs at 702.376.0088.

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