How I Bought a Seller Financed 4plex in Las Vegas [Part 3]

113 Replies

@Michael Ealy reading your post now.

@Jay Hinrichs my expense numbers are definitely low. But I'm not using this property for cash flow, it's a long term play. I anticipate it breaking even so you could double the vacancy and repair numbers on my spreadsheet and I still hit my goal. But I'm MUCH in the positive in the long run and on $35k out of pocket, this will be a huge ROI in the long run. (btw - that is the actual property tax number, thank you Vegas for super low prop taxes)

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@Account Closed utilities are ~$100-$120/month.  This was confirmed this week when I called water, trash, electric, and sewage.  You're really bad at trolling and you're filling this thread with more garbage than Republic Trash Services will be picking up from my 4plex every Tuesday and Sunday.  "I actually just looked at his whole post."  Makes sense since you haven't made a comment offering an inkling of value yet.

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@Frankie Lester that may be true that no one buys D class for appreciation but let’s also remember that Vegas is getting a NFL team in a couple years and a soccer or hockey team which is sure to bring in more visitors and eventually residents. So I would think the value of his proper would increase substantially.
Just to give another 2 cents to this post...i understand some have invested in vegas or have known others who have, and you want to ‘caution’ @Spencer Cornelia on this deal But instead of the negative comments why not just congratulate him on the deal? He didn’t make the post asking for advice on how he accomplished this deal. He made the post to share his excItement and to share with everyone how he made the deal in hopes to encourage others. Whether it’s a bad deal or not only time will tell, but to bash him isn’t right at all. No one situation is the same and he could have success with this property and make those nay sayers look like fools. This man made a deal happen that he could have walked away from and have nothing. And I’m sure everyone who posted did not hit a homerun on their first property. BiggerPockets isn’t suppose to be a trolling or negative forum or at least I didn’t think it was.
Originally posted by @Spencer Cornelia :

@Michael Ealy reading your post now.

@Jay Hinrichs my expense numbers are definitely low. But I'm not using this property for cash flow, it's a long term play. I anticipate it breaking even so you could double the vacancy and repair numbers on my spreadsheet and I still hit my goal. But I'm MUCH in the positive in the long run and on $35k out of pocket, this will be a huge ROI in the long run. (btw - that is the actual property tax number, thank you Vegas for super low prop taxes)

nothing wrong with no cash flow in a market you expect appreciation on..  I need to look at my tax bill on the place I just bought in Summerlin a few years ago.. I just don't recall it being that low.. most states 1% of purchase price is about where they start.. and not sure if Nevada reassess when you buy.. since I never keep anything more than 6 to 9 months I really don't focus on prop taxs although this place in Summerlin I live in it.  

Re: sports teams. Every fiscal study I’ve read about says sports teams do NOT make a notable positive difference in a city’s economy. They’re part time low pay jobs - people don’t move to a city for that. That doesn’t support housing price increases. The players are only a few people - not enough to make a notable difference on the local economy. 

In Chicago, the city with more teams than any other, it makes about as much difference to their economy as a small shopping mall (aka, not much). 

In CA, when the Lakers left Inglewood, that area actually saw economic improvement when the team LEFT the neighborhood. This is because the traffic etc was actually making people not want to live there and brought the neighborhood down. 

I’m not sure why people think sports teams will be such a boon to the economy here, when that hasn’t been the case anywhere else. 

The only people pumping up the idea that these teams will be so great for the city, are the ones selling the idea that taxpayers need to pay for their privately owned stadiums, and of course the folks who just want to believe because they like sports etc. Lol

https://www.marketplace.org/2015/03/19/business/are-pro-sports-teams-economic-winners-cities

https://news.stanford.edu/2015/07/30/stadium-economics-noll-073015/

https://faculty1.coloradocollege.edu/~afenn/web/EC%20389/Sportsecon%2006/Impact/SportsEconGroup1WebSite/motivation.htm

https://digitalcommons.bryant.edu/cgi/viewcontent.cgi?article=1014&context=honors_mathematics

(Short term effect yes - people get excited and start spending in the short term. Long term effect NO - reality sets in and people realize all those crappy part time stadium jobs don’t actually make a difference.)

Bottom line:  economists are in widespread agreement that sports teams do not have a noticeable positive effect on local economies. I’m not buying that it will be different here. Crappy part time jobs have never made a big positive difference because they’re crappy part time jobs. 

This thread is conversational GOLD 

@Spencer Cornelia you bought your education. If you lose money on this deal, you will still have greatly underpaid for your knowledge.

the reason that @Account Closed   being a PM in this town and being negative about this deal is a bit worrisome LOL 

congrats again. 

@Spencer Cornelia , best of luck with your deal, this has been a fascinating thread for me to read as a fellow LV investor curious about small multi-family in Vegas, but not really seeing much locally.

Would be really interested in how you can manage turnover and rent payments with that property. Probably does seem crucial to really push for for the best quality tenants you can, if that means sacrificing a tiny bit of monthly rent or paying a PM a bit more, it's gotta be worth it if you can keep vacancy / missed rent payments low and avoid evictions.

Personally... I've always wanted to try to grab some of those smaller units near the Arts District, "value add" them and whatnot.... They seem like an interesting product but I have no idea about their pricing and how those numbers would work. Maybe one day!

Originally posted by @Casey Powers :

Re: sports teams. Every fiscal study I’ve read about says sports teams do NOT make a notable positive difference in a city’s economy. They’re part time low pay jobs - people don’t move to a city for that. That doesn’t support housing price increases. The players are only a few people - not enough to make a notable difference on the local economy. 

In Chicago, the city with more teams than any other, it makes about as much difference to their economy as a small shopping mall (aka, not much). 

In CA, when the Lakers left Inglewood, that area actually saw economic improvement when the team LEFT the neighborhood. This is because the traffic etc was actually making people not want to live there and brought the neighborhood down. 

I’m not sure why people think sports teams will be such a boon to the economy here, when that hasn’t been the case anywhere else. 

The only people pumping up the idea that these teams will be so great for the city, are the ones selling the idea that taxpayers need to pay for their privately owned stadiums, and of course the folks who just want to believe because they like sports etc. Lol

https://www.marketplace.org/2015/03/19/business/are-pro-sports-teams-economic-winners-cities

https://news.stanford.edu/2015/07/30/stadium-economics-noll-073015/

https://faculty1.coloradocollege.edu/~afenn/web/EC%20389/Sportsecon%2006/Impact/SportsEconGroup1WebSite/motivation.htm

https://digitalcommons.bryant.edu/cgi/viewcontent.cgi?article=1014&context=honors_mathematics

(Short term effect yes - people get excited and start spending in the short term. Long term effect NO - reality sets in and people realize all those crappy part time stadium jobs don’t actually make a difference.)

Bottom line:  economists are in widespread agreement that sports teams do not have a noticeable positive effect on local economies. I’m not buying that it will be different here. Crappy part time jobs have never made a big positive difference because they’re crappy part time jobs. 

I like your candor.. what sports teams do help with those is local restaurants and you would have to say Pac Bell park in SF was a positive development for that area of the city that before pac bell came in was old warehouse ghetto type area.. now its full of pubs restaurants and condo's.. although no one working in the pubs or restaurants can afford rent in the SF that's for sure. 

As it relates to Vegas I think its a very unique situation. I went to the Vegas Knights game last night and sat next to a couple from Nebraska.  So they spend money on their trip here and spent money on tickets although I think it just became something else to do.

but I have to think that the Raiders will during each game attract the visiting teams fan base in a way that is far greater than any other city save New York Or maybe SF..  

But as stadium jobs go your right..  but for Vegas were you have a lot of cheap rents.. I can see that working and propping up these 4 plex owners. 

@Spencer Cornelia

@Account Closed

Let's look at sales price of 260k and the comps. There is a actual comp at $410K on 12-22-17. Zillow estimates low 300-310k. Looks like a good case to be made at 300k. From the sellers perspective, he must know this information because all he has to do is look. If there is 5% commission to sell at 300k, then that is automatic 15K expenses, plus another 5k in escrow, title, miscellaneous. Maybe around 20K total. Net to seller could be 270-280k overall. So to have a buyer at 260k without the MLS involved and get 6.5% rate note, is not bad for the seller.

The fact that Spencer did this with 20K down, in otherwise normal 25% of 300k, which is 75k, is the real story of this post. Plus, even if you have the 75k, there is always the underwriting that gets you. 

Terry

@Casey Powers Sports teams may/may not provide actual jobs, increase traffic, etc etc.  I'm not going to argue those points.

What they do provide is the belief that Vegas is now a real city and not a destination for a weekend.  The NFL is a massive business, and by choosing to allow Vegas as the host city for one of its 32 teams, it's an indication that they believe this city can provide the necessary requirements for a sports team to flourish.  The NFL will not fail.  Add in the MLB considering Vegas as a potential expansion city + NHL team + WNBA team + NBA considering Vegas on its shortlist if it were to ever expand.  It's a no brainer.  Sports team absolutely have a huge positive impact on the economy as a whole.  Just look at the Golden Knights and how their success has brought the city together, provided events, increase foot traffic into restaurants, bars like Jay said, increased tourists visiting, etc.

In summary, if the Raiders succeed, which I will say is very likely, this will open the doors for Vegas to become a premier city in the United States.  And that absolutely has a positive effect on property ownership for those of us who own property in Vegas. 

Originally posted by @Terry Lao :

@Spencer Cornelia

@Frankie Lester

Let's look at sales price of 260k and the comps. There is a actual comp at $410K on 12-22-17. Zillow estimates low 300-310k. Looks like a good case to be made at 300k. From the sellers perspective, he must know this information because all he has to do is look. If there is 5% commission to sell at 300k, then that is automatic 15K expenses, plus another 5k in escrow, title, miscellaneous. Maybe around 20K total. Net to seller could be 270-280k overall. So to have a buyer at 260k without the MLS involved and get 6.5% rate note, is not bad for the seller.

The fact that Spencer did this with 20K down, in otherwise normal 25% of 300k, which is 75k, is the real story of this post. Plus, even if you have the 75k, there is always the underwriting that gets you. 

Terry

in the long run for the seller.. to get 6.5% return and you have to figure they have less than the 240k note they are carrying.. their return is actually higher so it probably a greater cash return to the seller than if they slug it out as owners.. much more passive and unless rents really do raise by a lot the value is probably topped at about this point..  

I think land scarcity is far more likely to drive appreciation in Las Vegas, than sports teams which have always been proven to have little positive impact on any city. Low wage stadium / restaurant jobs just don’t help the economy.

We are surrounded by govt owned land, have developed almost all the available land, and new lands are being released slowly. Another city where that has happened is Hong Kong, and their housing prices are now the highest in the world. Some employers expanding here can also help - think Allegiant Airlines etc. 

Land scarcity has already changed the way homes are built here - this is why you see so many newer homes with no yard. If the government continues releasing new lands at the same pace, and the city continues growing in population (plenty of indicators point to this happening), then land scarcity will drive up property values by default. 

In that case, those old POS small multis would be put to better use by being demolished and replaced with condos or at least bigger apt buildings. IMO. Lol

@Casey Powers

One would think that since Las Vegas is a dessert, there is an abundance of land. However, Casey is correct, as most land is owned by the Federal government. In the future, IMO, Las Vegas will be similar to Los Angeles. Currently, Las Vegas is the top destination for people leaving southern California. 

On a separate note, I just got elected to HOA board on one of my 4plexs. This HOA has management company and includes maintenance. Have you ever heard of maintenance people stealing appliances?

Terry

Originally posted by @Casey Powers :

In that case, those old POS small multis would be put to better use by being demolished and replaced with condos or at least bigger apt buildings. IMO. Lol

savage!

@Spencer Cornelia . Nice man . Keep the spirits up.. I’m going through something like this now for a condo in Tulsa.
Originally posted by @Alexander Felice :
Originally posted by @Casey Powers:

In that case, those old POS small multis would be put to better use by being demolished and replaced with condos or at least bigger apt buildings. IMO. Lol

savage!

Hey, economic progress dictates that land always be put to its highest and best use - that's what maximizes profits and property values. Hence, when land prices climb to a certain level, the old crap low ROI buildings in town will have to be replaced with buildings that provide better ROI. Also, Las Vegas is not the type of town to hold onto old non-performing buildings. Las Vegas loves a good demo and rebuild. haha

@Casey Powers ok but you can’t prove that his property won’t gain any appreciation because of the sports team. Aside from statistics you post it doesn’t guarantee anything. No one here can guarantee anything in real estate otherwise you wouldn’t be on here posting because you would be making soooooooo much money your time would be better elsewhere. Aside from statistics and how Vegas is a dump and blah blah blah where is the congrats on him working the deal? Being patient to work seller financing? Come on no one hits it big on every property let alone their first one.

Thanks for posting this Spencer and keeping it "real" with your journey. I am beginning to see more and more where perseverance is a much needed attribute to be a successful Real Estate Investor. 

@Casey Powers @Account Closed

Spencer, you are the one that got confrontational on your first post replying to Frankie. You were being smart with him when he was simply giving you his input. Take it or leave it, that's what constructive criticism is all about. And that is all everyone is doing that is not congratulating you, just giving you the 411. I wouldnt be bashing anyone, just say thanks for the advise or input and move on to the next. Alot of us dont like the responses on here, but no one forces you to post. I always get bashed on my different deals but i like all the different opinions.  From the start of post i thought the same thing about the price. Seems really high but whatever, if it works for you. You said in your post you overpaid 15k. dont be desperate to get into a deal . I feel you, patience sucks. And for the most part alot of these people have TONS of experience so i'd think they know what they are talking about. 
I only buy distressed, that way i can actually make good profit. double the equity. Not borderline make it. Good luck.

@Maugno M.

Frankie is a troll who has never done a deal.  'Advice' isn't inherently helpful.  Poor people give out financial advice every day.  Criticism and advice are two different things.  I love criticism....if it's valid.  I also love advice, as long as its coming from someone with experience and with my best interests in consideration.

"dont be desperate to get into a deal" -- this implies that I was desperate to get into this deal and that I shouldn't buy a deal with an ROI of ~200%. Given my (lack of) experience, short term and long term goals, and financial position, this deal was a no brainer.

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