Considering Real Estate: Las Vegas. Seeking advice

I am rapidly approaching my debt free goal, and am transitioning to investing. Emergency fund is already flushed out for about 8 months of expenses.

In addition to bolstering my retirement accounts (Roth, etc) I would like to look into rental houses.


I can purchase a single family home in a nice area for approx $90,000. I should be able to rent it for $1,000 per month. My current income and obligations would allow me to meet the mortgage indefinitely were I to have no tenants.
In my mind, the current state of real estate in vegas (rock bottom) makes it a better long term alternative to full stock investments. It also matches my goal of creating an income stream.


My financial adviser suggested that I should find someone who has played this game, and ask them if they would do it again. Enter Arfcom.

In addition to any comments, can someone suggest a quality book I can read to better educate myself?

Thanks!
Darcy

I was interested in this myself but I came to the conclusion that it wasn't a good idea unless I could get to the point that I could either buy the home outright or have the mortgage paid off within 5 years.

A standard mortgage is a 30 year obligation. A lot can go wrong over 30 years. I am already attached to and responsible for one mortgage and I really don't want to be stuck with another. With ~20% unemployed here in Nevada the chance that my current income might decrease or even disappear some time over the next 30 years is just too great to lock myself into that sort of obligation.

Every time I try to talk myself into buying property I always end up talking myself out of it. The one and only redeeming quality of real estate is that you can get leveraged up to buy it. You can borrow $90k to buy a house but nobody is going to lend you $90k to buy equities if you don't have money to match it.

If you had $90k CASH MONEY to spend would you honestly put it into real estate or would you accomplish the same thing with less risk by buying into a REIT?

That said, we are at an incredible intersection of low rates and low home values. It is tempting but I just can't put that large of a portion of my net worth into a single asset. If I was sitting on a million dollar portfolio then maybe I'd pop $90k for a rental property but not where I stand right now. If you are getting very close to debt free which probably means you aren't sitting on a giant portfolio. My conservative opinion would be to not get into deals represent that big a chunk of your worth. The only exception to this is your primary residence because everyone needs a place to live.

As far as the pitfalls of actually doing it, I haven't really heard good things. Everyone I know who is in that game has nothing but headaches even if they do manage to turn a profit. There are a lot of easier ways to make money in this market.

Don't do it. I see rentals all the time in my job here in Vegas and about 5% maybe don't get turned into a pile of crap by section 8er's in a matter of months.....

Right off the bat, if you aren't getting say 10% on your money (Cash on cash ) after the mortgage, and an additional 10% for vacancy and another 10% for maintenance, walk away.

I have over 100,000 sq/ft of mostly commercial along with some residential. I don't play the stock market game.

ETA:

I've bought one, and am closing on another small 1-2 BR house, less than 900 sq/ft for $25K to $30K. Rentals are strong here in Colorado, and I'll rent them for $600-$800.

So to be clear, I should be clearing an additional 30% over my mortgage? So for a $1,000 mortgage, I would need to rent for $1,300? Seems feasible if I pick the right property.

Also, I kind of have it in my head that it works like a big savings account. In 15 years (or whatever the time frame is to mortgage payoff), I will own a $100,000 property that essentially somebody else paid for, minus whatever costs I have above and beyond my 30%. After the payoff period, I then have a steady stream of income that would far outstrip the equivalent interest bearing accounts available.

So, I end up having $100,000 tied up in a real estate investment, but then again, I really only ever invested the down payment, because the renter has essentially been paying my mortgage the whole time.

Am I thinking in the right direction?
Also, if you had it to do over, would you make the same choice?

This. The economy is still sliding downhill and real estate prices will drop even further. Real property is not the place to be unless it is for your own home.

Hello,

I currently own 3.5 properties with 2.5 of them being "investment" properties. All things considered I wouldn't change a thing!

I bought my first house to live in right before the peak. I'm about 65k upside down on it. Keep in mind this was a home I was going to live in and it was purchased during the craze in Phoenix. I rent this property to two guys who originally started as roommates for a combined $800/mo and the fixed rate mortgage is $1100.

I bought my first investment property with my father almost 2 years ago for $43k. We each went in half and we don't have a mortgage. We put $2500 to roof repairs. It's been rented to the same tenant for almost 2 years now @ $765/mo

I bought my second investment property in November of 2010 for $54k. I bought this property because I started a full time job that put me 40 miles away from my first house. Keep in mind that I did move into this house but bought it with investment on mind. All homes I buy will be investment first, home second if need be. I now rent this house for $875 with a mortgage of $422 on a fixed rate mortgage. I put about $3500 down. I didn't have to put the standard 20-25% down as it was owner occupied.

I bought my third investment property in November of 2011 for $68k. This home was about a half mile away in the same neighborhood as the house in the paragraph above. I did have to put 20% down on this one. My mortgage is $445 on a fixed rate loan. I rent this home for $800 although it could yield $900 (I'm helping some family out) I lived in this house until 2 months ago when I took a promotion in Nevada. I currently live in a 5th wheel trailer, saving for my next investment property in Phoenix.

I am single and quickly learned that I'd rather have a comfortable life in my later years than have a bunch of toys in the my younger ones. I bought on the houses above only making $40k/year at my full-time job. The trick is to keep your debt to income low. Most of my things are paid off and I only owe $5k on a truck loan. Too much debt can kill it for home buying. I still have a lot to learn and planning on building a little more diversity in regards to my investments. I do have a 401k but it's not big. I pulled cash out to fund down payment $ on some of these homes and so far it has paid off.

I look at most millionaires and regardless of where they made their money, somewhere they have their hands in real estate. I'm not looking to be a millionaire but @ 29 years old I'd like to selectively work by the time I'm 40.

ETA: I use gut instinct when selecting a tenant and I believe understanding goes a long way. Karma is huge in this business.

Thanks for sharing ROOFTOP!

Don't rent.

Flip them.

Buy forclosed home for 52k and use a 203k loan to put 10-15k in repairs into it. Then sell it for 90k.

Since your in NV, you should know about the LV market and how it leads the country in foreclosures. Make a guess if you believe the market has hit bottom, or run the numbers include depreciation.

The key if your going to rent out, find quality tenants, if you have a gut feel about them, find another tenant. Ask for enough up deposit up front and to make sure that the tenant doesn't walk. Make the decision up front if you want to have pets, how to handle "roommates", etc, Get a lawyer to draw up the lease or use one that includes local laws, tenant laws vary by state and its stacked against the landlord

The biggest headache is managing the property, if you have someone local who you trust or can manage repairs yourself, that's the key. If you turn it over to a management company, expect to give them a cut and be careful if they want to replace a bunch of items or things break with regularity. I make the tenant responsible for minor repairs and calling the plumber at 2:00 in the morning. I cover major repairs and get service contracts when I can. There is a trade-off, if you do the repairs, you cannot deduct labor, but you know that its done right and presumably save on overall labor costs.

PS: If your a tool guy, remember that if you use tools to repair the property, they are a tax write-off against property income.

Maybe since your getting your start you should look at cheaper foreclosed houses. Yeah the rents less but so is the risk. If you could get into this for 30k, well that's not to much risk. Tons of foreclosures where your at. Just my free opinion.

I don't believe Las Vegas housing prices will decline much more, if at all. I saw a show a few weeks ago where a couple bought a home that would be 1 million plus, even in rural TN, for 250 k. If I were in Vegas, I would buy up foreclosed properties and rent them. The market will eventually rebound. That may take 20 or 30 years, but I'm relatively young.

Vegas is getting to the point where you could scrap the house for wood and copper and come out ahead

Tell me about it.

I own a home in Vegas that I bought just befor the bubble got to it's peak.

I owe $180,000 on it..........it is valued at about $94,000.

Thank God I have relatives in Vegas to look after the house and I have responsible renters.

If I lose those renters I am totally and completely fucked since there is no way I can cover the mortgage right now.




I could have made a fortune on that house if I had played it right, but I was young, inexperienced, and I bought into the hype. Important lessons were learned but God damn it's painful.

You might be right but there are plenty of near million dollar houses in Detroit going for five bucks. I've driven down streets near downtown lined with (formerly) gorgeous turn of the century 3k-4k sq ft homes that are now certifiably ghetto.

I'm not saying your instinct is incorrect and you could be dead on but there IS precedent for homes like that going south and staying there for more than 20 or 30 years.

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