The Mechanics of Buying Real Estate

I talk a lot about the good deals in Las Vegas, but I think it’s fair to say that some of you who read this may not even be familiar with how to purchase a property, for an investment or personal use. If you have only done it once or twice, or if you have never done it, there may be some things you don’t know.

Unless you are paying cash, finding the right home starts with finding a good lender. You need to know how much home you can afford, how much money you will need for down payment, and closing costs, and what your monthly payments will be, before your real estate taxes and insurance. A lender can pre-approve you for a loan and issue an approval letter. This is imperative when you are negotiating on real estate! If more than one comparable offer has been received and none of them are cash offers, the seller will always choose the buyer who has the financing in place. Many sellers will not even look at your offer without a pre-approval letter. (If you need lender recommendations, I have them for you!) Of course, cash is still king!

The next step is determining which neighborhoods you prefer within your budget. Since the first rule of real estate is location, location, location, if the property will be your home, I suggest choosing the best community you can afford even if it means choosing a somewhat smaller or less luxurious home, as long as it will accommodate your lifestyle comfortably. Then when you are ready to sell the home and move on you will be assured of a better pool of buyers. Of course location is important for investment properties as well. You want to be in a neighborhood poised for appreciation, but where the tenants are not going to have the Home Owner’s Association (HOA) after you all of the time. Make sure you look into the real estate taxes and insurance costs when determining affordability, and know that landlords have different types of insurance coverage than homeowners. (If you need a great insurance agent, let me know.)

Once you have identified several neighborhoods to look in, I can customize your search to fit your special needs. I can search by size, number of bedrooms & garages, school zones, lot size, pools, fireplaces, floor plan style, etc. I will preview the homes for you, and only show you the ones I know are the best on the market for price and condition. And don’t worry, you will know the home when you walk into it! It will feel like your space. For investors, the best buys typically have more bedrooms and less square footage.

Next we need to negotiate an offer with the seller, often a bank. The two most crucial points in the contract will be the selling price and the closing date. To find the proper offer price, we will do a market analysis on the neighborhood for you and determine how much other similar homes have been selling for. The seller will not want to spend a lot of time waiting for you, however you must have a reasonable time to inspect the property and evaluate the HOA. Then your lender’s job (if you have one) is to close quickly.

Don’t be afraid to offer the seller an amount that the property is really worth – having said that, if a property is priced right to begin with and you waste time making low offers to save even more, someone else is likely to swoop in and buy it out from under you. Sometimes trying to save a couple of thousand dollars is not worth losing the home of your dreams or a great investment property.

After the offer is accepted it is time to choose a home inspector. I always recommend having one. In fact, if the property is bank owned, I suggest spending a few dollars more and getting an engineer to inspect. Your inspector will go through the home and up in the attics checking all the major systems. They will find defects a normal buyer could not reasonably expect to discover and often the seller doesn’t know about them either. A few hundred dollars invested here can save you thousands. Of course also understand that the inspector’s job is to point out every single defect in the property, so don’t let your inspector scare you away.

The lender will eventually be sending out an appraiser. The appraiser’s job is to make sure you are not paying more than fair market value for the property.

Just before you have ‘closed’ on the purchase, contact the utilities to get those into your name including water, sewer and trash. If you will be hiring contractors to do work, you will want to schedule them now, as the good ones are usually busy.

The day of the closing you will want to do a final walk through of the home. (I can do that for you if you are not in Las Vegas) You will check to make sure everything in the home is still in good working condition and anything that the seller was supposed to fix has been. Then we will go to the escrow office to sign the final loan documents and turn in a cashier’s check for the balance of the down payment and closing costs. Of course if you aren’t in Las Vegas, this will be done by overnight courier and wire transfers.

The day your home is recorded at the county recorder’s office is the day you get your keys. You can now either begin to work on it, move in or get it rented!

Are you ready to buy real estate in Las Vegas? Visit www.MyFastEasySale.com, click the “Wholesale Buyers” link, and fill out the form. Let’s get you going.

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Two great words that can really get you in trouble.

What a game yesterday!

One of the best big games that we have ever seen. Someone help me understand this please.

We are not allowed to call the event by its name. (You know, the two words – the first word starts with an ‘S’ and the second word starts with a ‘B’). 

As I understand it, radio stations, TV stations, bars, restaurants, etc., can’t say it because it is copyrighted. We can say that the Pittsburg Steelers played the Arizona Cardinals at Raymond James Stadium a short 2 hour drive from Disney World in the big game this weekend.  After the big game people went back to the Marriott Hotel and drank Budweiser or Jack Daniels with Coke to celebrate. That seems to be OK.

We can say that the Tampa Bay Buccaneers were not present for the big game at Raymond James Stadium.

Why is it we can say Pittsburgh Steelers but not S**** B***?  How come everyone who says Arizona Cardinals is fine as long as they don’t say that they lost the S**** B***?

I can understand not allowing people to sell items that use the logo’s, but when I’m chatting with my friends in a public place, if I call it its name, instead of the big game I hope I don’t get in trouble – because I said those words today a few times (of course I don’t dare write them).

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Happiness is plenty of cash flow!

I just flew back into Las Vegas, and boy are my arms tired! (OK, that was cheesy).  I was in Rhode Island closing on a small apartment building that I had bought at a foreclosure auction.  Are you thinking why Rhode Island?  The answer is simple.  Abundant cash flow.  As excited as I am about the future appreciation of real estate in Las Vegas, I am just as excited about the incredible cash flow of 3 family apartments in Providence and Cranston Rhode Island.  Now, I certainly don’t expect them to appreciate at near the rate  as Las Vegas, but check this out. The building I bought was $131,000 and needs a little over $5,000 worth of work. 

On the first floor, I have a tenant that has lived there for 10 years paying $850 per month. I have a tenant living on the second floor that has lived there for 14 years paying $850 per month.  And the third floor is vacant and needs most of that repair money, but has 1 more bedroom, so even though it is on the least desirable third floor, with the extra bedroom, we will get at least $750 for it. If we get a section 8 tenant (don’t cringe – section 8 can be wonderful if you screen carefully) we can get $975. So let’s add that up without the section 8 tenant.

$850 1st floor
$850 2nd floor
$750 3rd floor
—————–
$2450 per month gross rent.

The annual real estate taxes are going to be $2,376 ($198/mo) and the annual insurance is $2,977 ($248/mo)

If I had a mortgage for the entire investment of $137,000 (just for illustration), and I were paying a high interest rate (by today’s standards) of 7%, my Principal and Interest payment will be $911/mo

So my monthly budget for expenses is;

$245 Vacancy (figured at 10%)
$245 repairs/misc (typical)
$196 Prop Mgmt
$198 Taxes
$248 Insurance
$96 Water & Sewer
—————-
$1420

after I pay the mortgage, I still have $509 every month

Here is the beauty – this is worst case scenario. I have 2 tenants that have lived there for years, so they are not likely to be leave or not pay rent. The new tenant is likely to be section 8 which pays an additional $225 per month (most of there rent will be paid by the state) and I will likely have very little vacancy. 

Do you like that?

BTW – I closed with hard money because of the nature of the repairs, and am open to flipping this property. Are you interested?

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Howdy pardner

I sat down earlier this week with a potential new real estate investing partner to discuss the terms of our future relationship. This person did not have much experience investing in real estate, and was primarily interested in working with me because I do.  He understands that he does not have to reinvent the wheel.  We all learn (anything) better when someone who knows how shows us – as opposed to fumbling our way through.  We typically can learn it either way, but in the case of investing, the mistakes we make along the way are measured in dollars. 

He, at one point during the conversation, mentioned that he had been advised by people he trusted, not to partner on real estate.  At least one person suggested that he should be in complete control of any real estate transactions.  Others shared nightmare stories of partnerships gone bad.  Without question, a bad partnership can be horrible. 

I happen to have had very successful partnerships.  In fact I’m certain that partnering on real estate, has made me more money than if I had done it by myself.  Even when things in my partnerships have not gone the way I would want them to, I can’t say I have had any partnership experiences that were so bad that I would stay away from partnering.

Is that because I have been lucky? Perhaps in a way – but I was not so much lucky in the partnership as I was lucky enough to have seen good partnerships and bad ones before I went into any. I learned from the mistakes of others.

If you have spent any time at all looking into real estate investing, you’ve certainly heard just awful stories about tenants, right?  But are tenants profitable?  Most certainly  tenants are profitable, when approached correctly.  When approached from the mindset of a person who just thinks it will be easy to rent property without learning the business, very often having tenants becomes a disaster. (If you are planning on having tenants without learning how to be an effective landlord, please keep in touch with me.  I’ll be happy to buy your properties at a discount when you are fed up with them.)

I found found the same to be true with partnerships.  If you partner with someone just because it seems like a good idea, very often, it won’t be.  But if you take the time to learn how to set up good partnerships, you’ll be very happy with most of them, and only disappointed with the others.

I wrote an ebook awhile ago that spells this out better – the advantages and the pitfalls of partnerships.  If you are considering partnering with anyone, I recommend you read it.  If you are against partnerships, I insist you read it.  You can download the book here. You’ll need Adobe Reader to open the ebook.  If you don’t have it, you can download it for free by clicking on the image below.

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Be careful what you wish for . . . you just might get it

You create what you think about most! What do you think about most?

Most of my friends and loved ones know that I did/do not enjoy the weather in the northeast.  When I came back to Las Vegas to get more involved in the real estate market, as a sort of Joke, I took all of my cold weather clothes and put them in a box which was put up into the attic at my best friend Jack’s house.  I was basically saying “I don’t need those anymore, ever”, because truthfully that is what I want.

Of course, my son lives in Massachusetts, I have strong business and community ties there and I haven’t really left, per se; I just needed to be knee deep in the market here for awhile to really accomplish what I came here to accomplish.  I will be in the northeast several times this year – starting with today.  I am flying to Providence, Rhode Island, to close on the purchase of a 3-family building and get the tenants on board.  I went over to Jack’s house yesterday to get that box of clothes out of the attic so I could pack for the trip.  While there I noticed a couple of other boxes that I need in my office so I picked them up too. I loaded the 3 boxes in the back of the truck and drove away – – – with the tailgate open.  I went to the bank and I often back into my parking space.  When I exited the bank I walked to the front of the truck – still not noticing the tailgate.  When I got back to my place, I went inside and was preparing for my trip. I still had insurance and rental agreements and rent-a-cars and such to handle. I finally finished my busy work and went to go take the boxes out of the truck.  The good news is I did not lose the 2 office boxes, but of course all of my jackets, gloves, scarves, sweatshirts, etc were in that box.

Here is the weather report for the time I am supposed to be in Rhode Island,

Today Tomorrow Sat
Mostly Sunny Partly Cloudy Mostly Sunny
High: 34°

Low: 18°
High: 34°

Low: 19°
High: 30°

Low: 17°

So, remember, your thoughts have a frequency. They create your existence every day.  They don’t create things you want, they create things that you think about.  Choose your thoughts carefully and consciously, always.

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Who is getting mortgages in Las Vegas these days?

The candid truth about who can get a mortgage for Las Vegas real estate, and some things you may not know.

I have a friend who works as a loan officer for a pretty big mortgage lender in Las Vegas. He called me today to ask me what I wanted for my birthday (yes, today is my 41st).  I answered “dinner with Jennifer Anniston”.  Then I said, “As long as we’re being honest, tell me what is happening in the mortgage industry. Who is getting loans right now?”

Here is what he said – 

“The optimal person who is getting a loan right now is a person who does not own a house, (then he added) of course you know, everything is full doc1. There is not one stated income2 program around. If someone is calling a program ‘stated’, they’re lying. FHA loans have gone from 5% of our total pipeline3 to 50% of our total pipeline over the last year. A lot of buyers are going to FHA [loans] even though they have great credit scores or whatever, just because they are easier to close than conventional loans and you only need to have 3 1/2% down. If you have 20% down on a conventional loan, they’re lending on that; 25% down on investor properties, is going to be your best rate. We’re still lending a lot. I just did my pipeline report. I’ve got 5.5 million dollars in my pipe that is set to close before February. The sales manager that I work with, his pipeline is at 3.8 million dollars; so there are loans out there. There are definitely loans out there.”

Then he said

“If you own property right now, and you are upside down in it, and you want to buy another house, you have to be able to qualify [with proof of income] for both payments without using rental income from the one you are leaving.” [this is because people who are not behind yet, were buying a new homes, then ‘bailing’ on the one that they were upside down on. It did not take lenders long to get wise to this buy-n-bail scam]

Finally he said

“The other thing to be aware of the at the beginning of this year, the FHA loan limits in our market [Las Vegas] got changed to a maximum of $287,500 which is a purchase price of $295,000.  Conventional loans in Las Vegas are very difficult to get. The mortgage insurance companies don’t want to issue policies. So now you have a gap between the conventional loan limit, which is $417,000, which dramatically decreases the number of borrowers who can qualify. In [his] personal opinion over the next year, [he] think you’re going to see values of homes in that zone [between $295,000 and $417,000] degrade into an FHA loan. If you are going to list your house for $310,000, why wouldn’t you drop the price to $295,000, so you have a bigger pool of potential buyers. If you don’t, you’ll have fewer offers, and if you do get an offer and the buyer ‘falls out’ because they can’t get conventional financing, you may go ahead and drop the price to $295,000 so that you can sell it.”

That’s what he said, and he’s on the front lines of the Las Vegas mortage industry every day and has been for a few years.

1 – Full doc: Short for full documentation – in other words, prove you have money, prove you make money, and prove that it is all legitimate.

2 – Stated or Stated income: When people with excellent credit history are allowed to just state how much they earn

3 – Pipeline: Loans that are in process that are likely to be approved for funding

Are you ready to buy real estate in Las Vegas?  Visit www.MyFastEasySale.com, click the “Wholesale Buyers” link, and fill out the form.  Let’s get you going.

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The numbers don’t lie (or do they?)

What does the national real estate data tell us? Maybe nothing.

As many of you may know, yesterday the national real estate data came out for the month of December 2008.  What did the data say?  Existing home sales up 64%, median home price down 15.3% to $175,400 compared to December 2007 numbers.

Now I don’t have the December numbers for Las Vegas, yet, but in November, existing home sales were up 79.0%, median price $173,900, down 31.5% compared to November 2007.

Have Las Vegas homes really lost that much value?  Well, they certainly have lost that much perceived value.  What do I mean by that?  When the prices were rising astronomically, homes could not have truly gone up in value that quickly, but people perceived that that they did, so they paid the prices.  I remember seeing a map that showed that real estate in Summerlin, went up 73% in one year (I thought I still had that map somewhere, but can’t find it). Then prices came back to a reasonable value.  So what is the real value of the real estate in Las Vegas?  When will it stop declining here in Las Vegas?  Nationwide?  You might want to ask Barack Obama – I certainly don’t know.  What I do know, is that it will go back up, eventually, and when it does, if you bought some, you’ll be smiling! And if you bought right, you’ll be drinking umbrella drinks someplace warm and sunny, anytime you want.

So how do you buy real estate right in Las Vegas?  For starters, visit www.MyFastEasySale.com, click the “Wholesale Buyers” link, and fill out the form.  After that, I’ll show you some real values, and tell you why they are values.

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Short Sales vs. Bank Owned houses in Las Vegas

Currently, Short Sales: make up 31% of all Las Vegas real estate listings on the MLS, and Bank Owned listings make up 38%.  This means that Short sale and REO listings are just under 70% of total listings, but is one of those a better route than the other?  It depends.

Right now banks actually own more inventory than has hit MLS.  The houses that they have released into inventory they seem to be prepared to deal with now. The last 3 offers I have written on bank owned properties have all received a response within just a few days.  Offers on short sale properties seem to take much longer – often because of the owners of the property.  In order to submit your short sale offer to your bank, they need to see financials from you. Recent bank statements, pay stubs, a hardship letter and more.  Many homeowners are just not emotionally up to the task.  It’s quite draining to look down the barrel of financial hardship.  If you’ve never done it, I hope you never do, and if you have, then you understand.  These people aren’t just losing something, they are losing their home, the safest, most wonderful spot on planet earth.

There is certainly an upside to the short sales however; the condition of the property. Someone trying to short sale their home is trying to ‘do the right thing’, instead of just walking away.  Because of that mind set, the properties are often in pretty good overall condition.  This is often not the case with the REO homes. Many of the people who have been foreclosed on and evicted (even if they were at one time trying to ‘do the right thing’) felt abandoned, harassed or otherwise victimized and lashed out as they left; leaving their former house in very poor condition.

So what is my recommendation? To contact me so I can help you make the right decision for you on Las Vegas Real Estate. Visit www.MyFastEasySale.com, click the “Wholesale Buyers” link, and fill out the form so I can start helping you today!

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Make your log-ins MORE secure, while spending LESS time on them.

Anytime you can be more efficient, you’re better off, right?

As I was logging into WordPress to blog from a different computer today, I was struck by how much I love my little password tool.  Now, Internet Explorer will remember your usernames and passwords, but there have been so many security issues with IE over the years, I would never trust it with my private information.  I have several online accounts that have a log-in, as do most people.  Of course there are passwords I would never care if anyone learned (like sidestep.com or driver.com – great resources), but there are also passwords that are critical to me, (like my bank account and my dubli.com account).

And I know people who consistently use the SAME username and password everywhere they go on the internet. Are you one of those people?  Think about it, if you are, and someone knows ONE of your log-ins, then, they know ALL of your log-ins. 

In any case, almost a year ago, a friend told me about a VERY secure little tool called Roboform that resides on your computer, and remembers all of your passwords for you.  For your really important accounts, it can generate super secure passwords for you. If you’re like me, you’ve always stayed away from those because they were too hard to remember.

So how does Roboform help you when you are on a different computer?  There is a portable version that resides on your portable USB or U3 flash drive (often called a jump drive). Like the PC version, it can only be accessed with a master password, so it is secure, even if it is lost or stolen.  With all of my online accounts, and all of my DIFFERENT log-ins, I’ll bet this software saves me 2-3 hours per week, and increases the security of my online accounts.  To check it out for yourself, visit
www.MyFastEasyPasswords.com.  Roboform is even trusted by the Better Business Bureau.  I bet you’re going to tell all of your friends about it.  It’s just that great!

Now, back to the people who use the same log-ins (or even very similar ones) for all of your online accounts, I want you to make changes NOW (please). Identity theft is a very real problem, and I don’t want you to be the next victim. 

So, here is what I want you to do. 

 

  1. Go to MyFastEasyPasswords.com then download and install the software.  Use it free for 30 days.
  2. Go to an important web site that you use
  3. Log-in (Roboform will ask you if you want it to remember – go ahead and say yes)
  4. Change your password
  5. Write the new password down
  6. Log out
  7. Log back in with the new password
  8. Overwrite the old password with the new password in Roboform
  9. Go back to step #2 until you’re can’t remember any others

Have more than one log-in on a particular site?  For example, I have a business log-in and a personal log-in for my banking. When you save the log-in, you get the opportunity to name it.  Roboform offers you a name, based on the Title of the web page you are logging in on.  If it offers you ‘ABC Bank’, simply name it ‘ABC Bank – Personal’ 

Enough on that. ‘See’ you tomorrow!

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But what if we aren’t at the bottom in Las Vegas yet?

Don’t wait until the market hits bottom in Las Vegas to start buying real estate. Let someone else pay the bill while it continuies to decline, and cash in later.

I think the question I get most often is, “Jeff, what if Las Vegas Real Estate has not hit bottom? If I buy now, and it continues to decline in value, what do I do then?”

Great question, so let’s start by taking a look at a graph I got off of Zillow.com awhile back.  If you look at this, it certainly does not indicate that we have hit bottom.

Las Vegas Real Estate Prices

So let’s look at how we can be sure that won’t work against us.  I grew up in California, where I have seen the Real Estate markets swing radically every few years.  I remember I had a friend many years ago, who got divorced, and refinanced his home to give his former wife her her share of the divorce settlement. Shortly afterwards, the local market began to decline steeply and within a couple of years my friend was alarmed to discover that he owed more on his house than it was worth.  He asked me if I thought he should ‘walk away’ from it like many others were doing.  I first asked him if he could still afford it (of course this was long before exotic mortgages, and he had a 30 year fixed rate loan), and he stated that he could. I then asked him what he was going to do if he sold it, and he said he would rent a place for himself. The obvious solution was to continue paying the mortgage and live there, so he did.  Several years later, he was getting remarried and moved into his new wife’s home. When he went to sell that house, it sold for much more than he owed on it.

So what if you bought real estate, and someone else was paying the mortgage for you? Would it really bother you if it declined in value? For the first time since 1991, there are a lot of single family homes in Las Vegas that can rent for more than the mortgage payment (as well as the RE taxes, property insurance, maintenance and property management fees). When the property is producing positive cash flow, you can afford to wait for it to go back up in value! Think about it, your tenants will cover the expenses on the house, while it continues to decline in value, until it finally goes up!

So WHAT ARE YOU WAITING FOR?

Las Vegas real estate is ON SALE.
Get yours now!

To contact me so I can help you make great decisions on Las Vegas Real Estate, visit www.MyFastEasySale.com, click the “Wholesale Buyers” link, and fill out the form so I can start helping you today!