Current Henderson Market?

15 Replies | Henderson, Nevada

I'm wondering what strategies are working best, right now, for the investors in this market. Buy and hold, fix and flip, wholesale, among others. Single family, multi family, or commercial. I've seen various statistics, inventorys, economics, and directions. Macro economy seems to be best since recession, wondering if investors stats,( cash buys, financing stats, or type of property demands) could help formulate a 5 year plan for anyone new to REI?

@Antony S.

Welcome to BP! Your strategy is basically going to be tied to your personal finances and the amount of time you have to invest in real estate. In my opinion, the market in Las Vegas right now is very difficult, as sellers are expecting higher and higher prices, banks seem to be content to sit on inventory rather than sell at discounts, and most good fixer deals are going for all cash and fast. Also, the returns most people are expecting are pretty low, especially on flips - a buddy of mine is a very active flipper here and is currently targeting a 10% net profit (using his own capital). Too slim for me, but he's trying to make up for it in volume. 

Anyhow, I've personally settled into the BRRRR strategy and am doing the work myself to keep me busy and keep costs down. We've done 8 properties since February, so we're doing about a property a month.

Since you're just starting out, unless you have a lot of seed money, I think the most efficient way to make money would be to focus on marketing activities. If you can find the motivated sellers and secure a property at a reasonable price, you should have no issues finding a partner or private capital to turn the deal. The tricky part is finding these properties, since you'll need to find things not listed on the MLS, as the MLS is checked by dozens of investors here on a daily basis and competition for properties is fierce.

-Christopher

Thanks alot for the reply Christopher,

What would you consider a good deal? What would be an acceptable CAP rate in this market?

One other questiuon I have is about the 60 day "subject to financing" clause of a contract.

Is this being used, and is it reliable in this enviroment?

Greatly appreciated,

Antony

Cap rates are running very low in most of the Henderson neighborhoods for single family rentals.  Inventory is still around 3 months supply depending upon the neighborhood, so prices continue to rise.  

Hello @Antony S. ,

Profitable flipping is extremely difficult in the current market. Several factors must line up in order to make flipping a profitable business. It was great in 2005 but not at this time. Please see A Process for Increasing Your Odds of Profitably Flipping Properties (BP Editor's Choice Award) for more on flipping.

On formulating a multi-year plan, we do this with our clients. You need to determine your destination before you can choose a path. Some of the questions I ask my clients include:

• Goals - Appreciation, cash flow, balanced cash flow and appreciation?

• Available funds

• Time frame - When do you need what?

• Risk tolerance

• Credit - Leverage is highly desirable in real estate investing

In terms of the Las Vegas investment market, as @Phillip Dwyer stated, good investments are hard to find (the same is true for everywhere). However, we spent years developing and tuning software for selecting good properties. Today prices are higher but so is the rent. We are constantly finding properties with a real return (including all recurring costs) in the 5% to 7% range (single family). However, these properties represent only 0.01% to 0.1% of the available properties on the MLS so we can only do this because of our proprietary software.

Antony, I have never seen a "60 day subject to financing" clause. You need to line up your financing before you make any offers. You need to know all your costs (including financing) before you consider any purchase.

Best of luck.

Antony,

Just a clarification on your post related to the 60 day "subject to financing" clause question.  Are you asking if offers made with a 60 day escrow request and contingent on buyer financing being obtained are effective?  Or, are you referring to making an offer to purchase a property "subject to existing financing" and asking for a 60 day escrow?

The later strategy (acquiring a property subject to existing financing) is a great way to get control of a distressed property that you intend to buy and hold for rental, and refinance into a new loan later (or sell) when market conditions are more favorable.  I do not think 60 day escrows are an advantage to either party and mostly a disadvantage to sellers, however.  I also agree with the concepts echoed here by others in terms of knowing your numbers and money source and availability PRIOR to entering into a contract.

Originally posted by @Antony S. :

Thanks alot for the reply Christopher,

What would you consider a good deal? What would be an acceptable CAP rate in this market?

One other questiuon I have is about the 60 day "subject to financing" clause of a contract.

Is this being used, and is it reliable in this enviroment?

Greatly appreciated,

Antony

I'm currently buying properties with a cap rate around 5% to 7%. Once rents are standardized and back to market, I think I should end up near 8% for my current portfolio. I would consider a 8% to 10% range for a Class A/B property to be good, but will be difficult to find.

I'm not really sure what the 60 day subject to financing is - If you're referring to having a contract with a financing contingency, these aren't abnormal, but a large portion of sales in Las Vegas right now are all cash deals. An all cash offer will almost always beat out a financed offer, if they are in the same general ballpark.

-Christopher

Keep in mind the question by the original poster was regarding the Henderson market.  While in many ways Henderson mirrors Las Vegas, there are differences as well.  I've found that many parts of Henderson trade at lower cap rates than comparable Vegas neighborhoods.  

@Antony S. I agree with others above. Flipping is difficult right now as inventory is still slightly low putting us in a slight sellers market. Buy and hold strategies seem to be the most popular and the easiest found deals right now. Flipping will require a budget for marketing to off market sellers. Think outside the box here.

The CAP rates in Vegas are segmented by area as @Phillip Dwyer mentioned. In some of the older areas demand is a little weaker allowing you to get better deals in terms of purchase price to value. This will give you better CAP rates, but the area might be less desirable. On the other hand there are high demand areas of Vegas and Henderson alike (Green Valley Ranch for instance) that do not offer as good of deals and you end up paying closer to actual value. This ends up lowering your CAP rate but you are in a newer area, with low crime rates, great schools, etc. 

I also agree with @Christopher Brainard 's point about rental rates due for an increase (which we are beginning to see) for several reasons. This will help improve CAP rates as well as increase investor demand. I do have to say I think 10% CAP rates for Class A/B is pretty few and far between on the MLS unless you not being conservative on the actual expenses, vacancies, and estimated repairs. If you find 10% for Class A/B with conservative numbers jump all over it because that is a steal.

I hope this is helpful. Please let me know if I can be of any further assistance.

THIS HAS ALL BEEN VERY HELPFUL!!! I HAVE BEEN LOOKING IN THE 89122 AREA(EAST OF BOULDER HWY) FOR SEVERAL MONTHS NOW. PROPERTIES HAVE BEEN GOING FAST (3-6 MONTHS), MOSTLY RENTALS. (THE AREA IS RICH WITH THEM, AND HAS A LOWER END PRICE POINT $100,00-150,000 ARV RANGE WITH $900-$1,000 RENTS,CLASS B/C AREA, CASE ANYONE IS INTERESTED) I WILL CERTAINLY CONTINUE MY RESEARCH. MY CURRENT ASSET AND CASH POSITIONS ARE WEAK NOW. I'M PRETTY MUCH STARTING FROM SCRATCH, BUT I NOW HAVE A GOOD STARTING POINT.

THANKS TO ALL

Thanks Robert,  

That is a property I would be interested in.  I sent you a collegue request with message.  Also talked to your wife, she can relay my info.

Thanks,

Antony