Rents are dropping to ridiculous levels and hard to make sense of overall investments from a rental standpoint. Don't count on rents INCREASING in these areas to substantiate a high purcahse price. They may continue dropping. I was surprised by # 1 but not Vegas and Phoenix. Rich
Jim,
I understand rebates and I consider them as an extra or bonus, not considered in analysis. I bought 154 units in Dallas 6 months ago. It had to stand on its' own as an investment. THEN, i applied for the WAP (weatherization assistance program ) of $6500 per unit based on tenants income. It looks like I'll get that for about 120 units. This will be a tremendous BONUS, but the property is 98% occupied and throwing off nice cash each month.
I still worry about average rents in the 700 range. If that goes lower, it won't work, imo. Rich
Rich
That is an interesting list. For years, Vegas and Phoenix were hotbeds for investing. I am curious, what areas do you think are hot areas to make investments in? I have heard North Carolina, Missouri, Pittsburgh and maybe Florida. People also mention Ohio, Mississippi and Alabama.
Mike,
I'm not bullish on any area to buy in currently. It is interesting that not one SINGLE BP member has joined this thread and disagreed in the bad rental areas in Vegas, AZ etc. That confirms the Realty Trac info, imo.
BTW, I haven't had to drop any rents in TX, if that means anything. And, I'm 98% full in apts and 100% full in SFRS. Rich
I bought a $42k 3/2 SFR in Vegas ... found a tenant last month after a two month search. Vegas seems to remain a hotbed for investors as the sub $50k 3/2 SFR appears non-existent .... I can see rents softening as investors continue to buy up all the REO's. I'm probably like most Vegas investors who like both the cashflow and potential appreciation because of the city's desirability with no state income taxes, weather, world-class amenities, etc. But I agree with you Rich, finding good tenants paying nice rents is a valid concern.
Rich, I'm surprised that Los Angeles is not on that list. I had to drop one of my unit from $1,300 to $1,160 and the other unit is on the market for three month now with no serious takers.
In Round Rock TX, my two SFRs are holding up and in a matter of fact my PM raised the rent recently by $25 on one of them.
In Alabama, I had to drop one SFR from $650 to $595 but the others are holding.
Being a subscriber of the up coming hyper inflation theory, I think this is only temporary. In two years time, it will all go up again. In the mean time, I'm buying cash so drop in rent doesn't hurt that much...
Ted- 2 month search to find a tenant! Yuk! What did it finally rent for? The Realty Trac info showed a very low average for Vegas. Was this North Vegas?
Eddie- You confirmed my research. TEXAS is GOOD!! I'm increasing my rents on all SFRS in TX. You also confirm the point in the article with your LA info. Rich
I attribute part of the delay trying to find someone to lease/option the home for $950 for first 5 weeks ... once I opened it up to a traditional renter I found someone within three weeks at $750, one year lease. It's not in N Vegas ... decent area but on a busy street.
I probably have you all beat. I have a house in Visalia, California, been vacant since Summer, 2008. I am currently on my third property management company. This third one is working very hard, but it is in a gang infested area. Was a nice family neighborhood when I bought 15 years ago, it just went down hill with the economy.
On the upside, my Texas properties are rented and rent in less than 30 days when vacant. On the downside, it takes 3 months rent just to pay the property taxes.
I have a duplex unit in Southwest Colorado, one unit has been vacant since December, but when the snow is piled higher than the windows, it is just a bad time to rent. Also, being on a golf course with no fence, we cannot allow pets or it would have rented in a week.
I have two properties for sale in Southern California, and when they sell, I will be looking for new investments. This time, I want to get the "Two Percent" rule fulfilled, so I am starting my research. I will be buying with 50% down and getting a 50% mortgage. So I will be looking for homes and financing. With a credit score of 815, financing shouldn't be a problem.
Hi Ted,
Here are a few benefits. Prop insurance is very low. I build brand new 4br 2 ba 2 car all brick home for $50 sq ft. I have a subdivision (now gated) that I paid 13K per lot.
Each COMPLETED new home is appraised at 140K. and my insurance is approx $700 per year. For TX residents, no state income tax.
Rich
Rich
What would that $140K home rent for? I bought one in Arlington last year for $142K and it rents for $1,275 a month. Property tax for 2009 was $3,876.00. You are right about the insurance, it was only $713.00 for 2009. Repairs are also quite low, I had a French Drain installed last year from the back yard to the front, and total cost was $800.00. Locally, I had an estimate of $3,000.00 for the same thing on my home here in Colorado.
I just wish there was a place in Texas that I could get 2% rental income. I would even be happy with 1.5%.
Mike M- $1025-$1100 per month. I've started raising rents to higher amount due to 100% full and waiting list. You can get 1.5%, but they won't be new. I'm pretty close on some of mine, but I don't buy that type. I want nice, newer, non ghetto , and look for long term. Repairs are rea;;y cheap. My tile floors are done for $.69 per sq ft. I pay for materials. Completely re-paint interior of house including garage and ceilings runs approx $700 for labor. Rich
Rich
I love your term 'non ghetto' because that is the way I like to lean as well. While there is money to be made with the 'low income' housing, it really is not my preference. Some of my rentals have turned that way, which does not make me happy, but what can you do?
I am wondering if anyone thinks that the Vegas or Phoenix market will turn around anytime soon (1-3 years)? I think those markets will be worth keeping an eye on from 2013 to 2015.
Vegas bottom was reached and is gone ... in 2009, 3 bedroom sfr's in decent shape were going for under $40k .... probably only way to get a sub $50k 3 bedroom sfr is via shortsale ... last year at this time there were 100+ 3 bedroom REO sfr's for sale under $40k ...hardly any now ... inventory can't keep up with demand ... appreciation already visible for low-end homes ... with so little building going on and assuming Vegas population maintains or grows (BIG if - considering current economy), i see a lot of appreciation as people continue to acquire homes for half or less of what it would cost to build. (and yes, obviously i'm a huge believer in the vegas market so take this as you may....)
Ted- you are bullish on Vegas-and I'm not. Check realtor.com. Currently 145 3br under 40K. If you check up to 45K, there are 252, and if you go up to 50K, there are still over 400!!
That is not what worries me. This is:
I've always compared Phonix and Vegas are comparable. The last part of this article may be worth reading.... This article makes me still concerned and leaves me worried that the second blast from this 2 barrelled shotgun COULD be as bad as the first, due to lack of loans available and these are NOT subprime loans that are in trouble. Rich
Your search included condos/townhomes which there are still o' plenty ... it's the 3 bedroom, sub $50k SFR that's becoming endangered. I agree there's still a lot of inventory to go through but it's been a year now and supply can't keep up with demand and it appears more and more investors are flocking to Vegas so bottom continues to move up .... I look at the 2nd wave as more opportunities for people like me before things start to settle in 2+ yrs and Vegas economy bounces back :cool:
Your search included condos/townhomes which there are still o' plenty ... it's the 3 bedroom, sub $50k SFR that's becoming endangered. I agree there's still a lot of inventory to go through but it's been a year now and supply can't keep up with demand and it appears more and more investors are flocking to Vegas so bottom continues to move up .... I look at the 2nd wave as more opportunities for people like me before things start to settle in 2+ yrs and Vegas economy bounces back :cool:
In the old days, when the economy tanked, people used to drown their sorrow in alcohol and gambling. That is no longer the case and that's why I don't see Vegas bouncing back any time soon. Las Vegas, like any other metropolitan area, have a wide variety of neighbourhoods and prices (Yes, there are still bunch of $20K SFRs there but whether or not it worth buying is a matter of taste and investment niche.
The biggest problem with places like Vegas and Phoenix is what to do with those properties once you bought them. Lots of inventory means fierce rental competition and cash flow is questionable. Now, if the recovery was around the corner, some may prefer to bite the bullet in order to cash out then, but I don't see a quick recovery.
Having said that, the folks at the "Personal Real Estate Investors" magazine think differently. In the latest issue which I received yesterday they seems to be quite bullish on Vegas. I have yet to read it all so I don't know they reasoning but at the moment, I'm with Rich on this one.
Ok, So I read the article in the Personal Real Estate Investor Magazine that titled "Welcome to Las Vegas? You Bet!!" And the sub was "Why America's worst Market is its Best Investment?"
I must say that the article didn't make much sense. It seems that the author interviewed bunch of people who make their living selling, financing or promoting RE in Vegas. The funniest quote I read was by Brian Davidson of the Cash Flow Store in Las Vegas:
"Pinning down Vegas' market health is like trying to shoot a bumblebee in a hurricane. The Market is doing weird things.It's a mix of fragileness (I think he ment fragility.. E.Z.) and a mix of strength. The job market is Horrible - close to 13.1% (unemployment) - Without any sign of abating. However, home permits are up"
Now to me, there is nothing weird and it is very easy to pin down that market - BAD!!! I don't care how many building permits were issued. If there is no employment, you cannot sell the current inventory, nor you can rent it with positive cash flow... Sugar-coating that market won't make it sweeter.
It also says in the article that average prices dropped from $314,000 (I guess from the height of the market in 2006 E.Z.) To 2000's prices of $130,000. Now again, I don't see any reason that the average price in Las Vegas should be any higher then, let say San Antonio, Dallas or Austin's satellite cities, TX. Vegas is a gambling industry serving population. They don't make they big bucks. And that include the air force bases. So the fact that those prices drop, doesn't mean that "It's a great opportunity". It means that it was brought down to reality.
The average monthly rent in Vegas should drop further as more competition develops. It will be hard to create cash flow, with little hope of increasing it to make sense of investment. For owner/investors that need loans, they'll be smaller due to the % of rent credit lender will allow. Maginal buyers will be affected by this also.
Don't mean to be dumping on Vegas, as there are other cities showing the same symptoms. Time to be aware, cautious and careful with your decisions. Rich.
I was asked in a couple threads for this projected decrease in rents. Here it is.
http://realestate.msn.com/slideshow.aspx?cp-documentid=23517536>1=35000#1
Need to consider this in your projections on acquisitions. Rich