bought and sold in 1 year, gain 100K on 4plex in LV

44 Replies

The appreciation prices have gone insane in Las Vegas. Fourplex bought 1 year ago, and now seller is asking $100k over his purchase price. The crazier thing is he will get pretty darn close to 100k gain, which is a annual return of 44%. 

Terry

https://www.redfin.com/NV/Las-Vegas/5227-Garden-Ln...

Perhaps they made improvements in which case they won't gain 100k. Is it in the same condition as when they bought it a year ago?  And that's the asking price, they may not get it.  But if they bought it a year ago, sat on it and stand to gain 100k a year later that's good coin for them.

@Rodney Sums

It was purchased as is, which was really nice to begin with. The buyer paid all cash, and property actually fell out of escrow, and this person swooped on it. This just come on the market, and does not have pics yet. How do I know? Because I tried to buy it when it fell out of escrow and he beat me to the punch.

Terry

@Terry Lao if it helps to not burn as bad....MAYBE they did fix something that isn't visible from pics or the exterior...like plumbing, sewer, electrical, mold etc.  But if they bought, held n sold without any updates then I feel you.

@Rodney Sums

Thanks for the kinds words. I might have lost out on the purchase, but I inquired with the listing agent after it fell out of escrow. The lady got cold feet when it was about to close, and she backed out. She lost her deposit of $5k. I might feel bad, but she probably feels even worse. 

No updates done because the pics when they come out will be the same ones that i saw.

Terry

Well @Terry Lao in a last ditch effort to make you feel better, it'll be interesting to see what they get for that property. I'm no expert on the area and the rent you could get but That 600/mo HOA with the risk of an increase and/or special assessment has to be a (female dog). Just glancing over what they report as incoming rent I gotta ask....Would you buy it for 320k with the advertised facts n figures?

@Rodney Sums

There is a comp (sold) in complex for $290k. There is pending at 299k, 305k, 269k, 265k. Seller will get close to 320k, maybe 310-315k. If purchased property with 25% down, at 30 year fix, will cashflow to about 400-500 before future monthly repairs. Also, can boost rents up $50-75 per unit, thus will net 600-700. 

The biggest thing going for this is location. Only 1.5 miles from the Las Vegas strip, near MGM casino. 

Your question, would I buy at $320k? Well, if i did not own a fourplex right next door (literally and figuratively)...........yes I would buy. Remember I said I lost out to another bidder for this 4plex? I knew it was a good deal because I owned one already.

Terry

@terry Lao 

Weird the last guy held on for 12 years to lose 20 grand. Shoulda hung on one more year. 

I remember you talked about these HOA's. Did you say you had to use their management company for tennants? Or was it mostly utilities and common grounds costs? If you're doing all the PM including finding and screening from out of state well done.

Thanks

@Bill Brandt

This another 4plex that does not have problems. There is HOA of $640, but includes water, sewer, trash, gated, and 24 security who drives around on golf carts.

This one I manage and do not have property manager. I had the same tenants when I bought two years ago. 

Terry

@Mary L.

Chime in. What do you think of 100K gain in a year? Based on purchase price of $225k. Listed for $320k. i think seller will get close to $320k. Maybe $310k.

Terry

The market is crazy. I bought a duplex in Nov 2015 for 270 and could sell it today for low 500k-and I have done nothing other than paint. But then what? If I can't morph into a bigger multi plex, I am just keeping it, and I know I am not the only one with these kinds of 'gains'.

The 100k mark is significant because it is a whole number that is not small and yet not large, but a milestone. Look at it as a $100 bill, the largest and most valued currency for US. 

Compare a 100k gain for SF/San Jose and it might not be that large. However, your home will be worth a $1M for a 10% gain. Seattle could reach a 100K, and their median homes are $775k. The fact that Las Vegas (4plex) did it is that the median home is 275K. The risk is less in Las Vegas compared to bay area, and you get close to the dollar gained. The percentage wise 10% typical gain for $1M versus 177% gain for 275k.  Seattle 100/775 = 13%.

Can Dallas Fort Worth, Austin, or Houston gain 100K in a year?

Terry

Don’t forget. The realtors ar going to get $20k. And the tax man’s gonna get $12k. If he gets $310k his $85k turns in $53k. Certainly not bad. But only half as good as $100k. and if he’s selling he has to assume he’s not going to make that $53k plus rent next year? The 2nd year 100k is only a 33% improvement, Easier than the 45% increase he got last year, and the realtor only takes an extra $6k instead of $20k. Win win. 

@Bill Brandt

Nice to hear from you. Yes, those darn pesky selling expense and taxes. Almost like winning the $500M lotto, and then take the lump sum and pay the taxes, and you are left with $200M. 

The above 100K scenario could be if buyer used 100% cash or leverage with 25% down. If used 25% down financing, then 56K down would get you 53k (after selling exp and taxes), almost 100% ROI.

Lots of ways to look at the numbers. Bottom line. I don't think there is too many markets that can give you these returns (Seattle, SF/San Jose, Southern California, DFW, LV), without risking a lot of capital.

BTW, no replies on cost to build 4plex.

Terry

Originally posted by @Terry Lao :

@Bill Brandt

Nice to hear from you. Yes, those darn pesky selling expense and taxes. Almost like winning the $500M lotto, and then take the lump sum and pay the taxes, and you are left with $200M. 

The above 100K scenario could be if buyer used 100% cash or leverage with 25% down. If used 25% down financing, then 56K down would get you 53k (after selling exp and taxes), almost 100% ROI.

Lots of ways to look at the numbers. Bottom line. I don't think there is too many markets that can give you these returns (Seattle, SF/San Jose, Southern California, DFW, LV), without risking a lot of capital.

BTW, no replies on cost to build 4plex.

Terry

 Am I misreading this, financing doesn't effect your cost basis which is used to determine the gain (100k).

@Terry Lao

No. I think it’s a top 10 market return easy. Especially if you only count markets where houses are under $300k and fourplexes under $400k. I was just suggesting seller would make holding longer unless they need the cash. 

On the fourplexes ive found the same. Everyone’s interested but no ones coming forward with opportunities. Phil hasn’t suggested any possible land deals yet. I don’t think we even have a ballpark for land requirements and costs. 

May 1st I will know if I’m going to sell my first property may 31st. (Only $100k gain in 8 years, but I did collect $120k in rent.) if current tenant doesn’t renew I think I’ll sell. So I’ll have $200k to exchange in to something if we find it otherwise I’ve got other plans for it. 

@Matt K.

He’s not saying you made more or less money. He’s saying if you put down 25% ($50k) and made $50k in one year (100%)  that’s a better deal than if you put down $225k and made $50k (40%) because you could have bought four of these last year each with 25% down instead of just one and made $200k. Or sell 3 and pay off the fourth with profits. 

He’s talking about percent return not actual gains. 

@Matt K.

@Bill Brandt

Bill is correct. The gain of 100K does not changed cost basis. However, you do need to take into account if bought all cash or 25% down, because that will determine your ROI percentage.

Terry

@Terry Lao

100k gain with purchase price of $225k in a year.  That's a 44% gain!  Certainly, it is a very good return. 

I notice similar good return happens on townhouses and condo too in Las Vegas area. 

Two months ago, Feb 2018, I just purchased four townhouses in Las Vegas area.  (Financed with 25% down payment on each townhouse).  

One year before I purchased those 4 townhouses, the same size, the same floorplan, the same community townhouses were sold around $150k in Feb 2017.   I just purchase those townhouses for around $210k each.  60k / 150k is about 40%.  I'm paying about 40% extra than the price one year ago.  

In December 2017, I purchased a one bed condo for $111k.  It was sold for around $75k in Oct 2016.  

36k / 75k is about 48% gain.  I'm paying 48% extra than the price one year ago.  

I have not look at the comps on the single family houses for a while.  So not sure about the % gain on single family house.  

Las Vegas definitely have a very good year in 2017!  And I expect Las Vegas continue to have a very strong year in 2018.  

@Mary L.

Thanks for the comments and details. Being from the bay area, you are looking at Las Vegas as a kid in a candy store, or buying 4-5 LV or Gucchi purses at a time. Does paying 40% extra from the previous year make you hesitate to buy? or since you know the bay area, these increases just come with the territory and you will it is still a bargain?

https://www.redfin.com/NV/Las-Vegas/5227-Garden-Ln...

The listing for $320k and potential 100K gain, just got put into pending status after only 4 days. The listing prices went from 260, 269, 290, 299, 310, and now 320, in a matter of a few months. It is one thing when you list and can ask whatever you want. Now, these are in pending status. When and if they close, I expect to see closed at listing price or relatively close to. The speed at which listing and closed prices are going up will only drive prices even higher.

Terry

@Terry Lao

https://www.zillow.com/homedetails/3700-N-Decatur-Blvd-Las-Vegas-NV-89130/2092433580_zpid/

There are cheaper lots, but this is right on Decatur and has plans for 7 lots if we can build 2000sf foundation 4000sf 2 story fourplexes on it. When I started to look there are lots of 2 acre lots for for $200-$300k in the “boonies” (2-4 miles from shops, busses, restaurants) that might work just as well. Decatur is just such a main thouroughfare. Whatcha think? At least we have a baallpark price although I would prefer one that someone else has already installed the road and utilities. 

@Terry Lao

I didn’t hesitate when I bought those 40% extra townhouse/condo because the rental numbers work out for me and I have confidence that the coming peak price will be at least 50% more than today current price.

Remember we said that today Las Vegas price is only about 70% of the previous peak price in year 2005?

From the historical data, new peak price is always higher than the previous peak price. If today house price is only 70% of year 2005 price, conservatively, to hit back year 2005 price, we have at least 30% / today 70% more room to grow. 30% / 70% is about 42% more room to grow.

In my opinion, Las Vegas house price hit back year 2005 is considered conservative.
Conservative opinion has at least 42% more room to grow.

My more realistic opinion is, new house peak price will usually be at least 25% more than the previous peak. (125% - 70%) / 70% is about 78%.
My more realistic opinion is, Las Vegas has at least 78% more room to grow.

Some of you may be laughing at me when you read this. We will find out when the next peak arrive.
I highly have confidence that Las Vegas house price will have at least 42% to 78% more room to grow.

The 4-plex you mention in this post, sold $225k one year ago, is asking for $320k today. I bet the same 4-plex new peak price will be more than $480k (at least 50% more than today price.)

@Mary L.

Hard to fault your optimism when you got the actions behind your words. Meaning you took action and bought properties, as opposed to those who just give opinion without skin in the game. 

Your opinion of subject 4plex would fetch $480k will happen down the road, but not sure when. The best comp for a 1 minute search turned up $426k in Oct'16.  Historical data is not indicative of future returns, but there is precedence that it did happen. 

I thought hitting 300k would be a good point to sell my 4plex. Now, it got there and looks like going higher. I will wait until end of the year to re-valuate. New price point maybe 350k?

Terry

@Terry Lao

The 4-plex (Garden Ln) you mention in this post will pass $350k very easily without any doubt. 

Just re-evaluate the market when it hit 350k, but don't sell it yet, still too early.

A while ago, I read an advertisement from a Las Vegas Real Estate Agent.  

He posted on the ad, "If you don't buy the house today, you will regret tomorrow."

I laughed out loud when I read it.  

I laughed out loud because the Realtor and I have the same thought.  

This is the same words from the bottom of my heart.  haha..

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