All Forum Posts by: Brad Bellstedt

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Ok, so I'm helping someone run the numbers on a 4 plex in Vegas and it is in REALLY bad condition so the calculations get a little bit complex and I'd like a second pair of eyeballs to look it over and see what I might be missing. 

The Property - 4 plex, really bad condition, listed for $200,000. 

The Plan - buy the property with hard money, rehab, rent, refinance. 

Hard Money - I was told to expect to pay about 4 points, 12% interest, and 30% down. We can adjust if that information is inaccurate. 

The Rub - Purchase at $200,000, paying $60,000 down ($140,000 loan) $5,600 in points, and about $5,000 in closing costs. Put about $30,000 into the rehab (complete guess) and have it back in rent ready condition 4 months after closing, paying interest only on the hard money loan. 1 month after the completion of the rehab, all 4 units are are occupied. 1 month after all units being occupied, we refinance. The building is now worth about $275,000 and we refinance down 20% left in it (cash out 80%) and that puts $220,000 in our pocket. Enough to pay off the $140,000 hard money loan, the points and interest that came with that loan, the rehab, the original closing costs and the closing costs of the refinance.

Now we've got a $220,000 loan amortized over 30 years at 5% interest that's costing us $1,181/month but a property that's generating roughly $3,250/month in total rents or $859 in net cashflow. 

Does that look right to you? If so, that's a 44% COC return and almost a 9% CAP rate. Seems too good to be true. 

A friend of mine who is a lender but not a hard money lender said I/the buyer should expect to pay 4 points with 30% down payment and about 12% interest. Lets see how accurate some practicing hard money lenders believe that is. 

Hey BP!

I'm running the numbers on a property and its been a while since I've asked around about hard money rates in Las Vegas so I'd like to pose the question to the community and see what kind of responses we can get. Also, I'm not 100% sure of the process so I've got a couple of follow up questions as well. 

For round number's sake, lets say I want to purchase a property for exactly $200,000. How many points should the borrower expect to pay? What interest rate can the borrow expect to incur?

Also, when buying a property with a conventional loan, the closing costs are about 2-3% of the purchase price. Is that generally the rule for private money loans as well? If not, what % of the purchase price would you say the typical closing costs would be for hard money loan? Last question in the series...When are the points paid? Is that something that is paid up front or rolled into the closing costs? 

Yes. To piggy back on what Sean is saying, most agents keep their full time job for about 2 years until they can get familiar with the process and how to prospect for clients. Unless you can find a team that to join that will pay you while you learn, keeping your full time job while learning the practice on your own is probably the most widely used technique for making the transition. As are not knowing anyone goes, be social, attend a lot of event, and build your social media following with those contacts. What is nothing today can be quite an impressive following by next year. 

Could be! If this shutdown drags on for longer than anticipated, those who weren't concerned about their employment, may become concerned. Some of the general public buying properties right now may catch themselves in a tough position if they aren't careful. 

Thanks for the tip @Account Closed.

Hello!

I was recently contacted by a local investor who is interested in buying distressed properties including STR properties from investors who are in need of the cash. If you or someone you know is considering liquidating a distressed property or STR here in Las Vegas, please private message me.

So, how's the Las Vegas housing market?

In the last 4 weeks (since 3/18/20)

2,460 properties have been listed for sale.

Inventory of homes listed for sale increased from 5,927 to 7,347. (24% increase)

1,620 properties for sale went under contract with a buyer to be purchased.

2,582 properties successfully completed the selling process and changed ownership.

The average number of days to sell a property DECREASED from from 47 days to 39 days. (17% decrease)

The average price of single family homes sold decreased by 4.7% from $377,790 to $360,000.

The median price of single family homes sold decreased by 2.3% from $320,000 to $312,500.

1,134 single family homes listed for rent signed a lease with a tenant.

The original list price to final sale price ratio was 96.5%, increased to 103.2% and decreased back to 96.5%

The number of weeks of inventory available increased from 8.7 weeks to 12.8 weeks. (47% increase)

So what does this all mean?

It means the housing market, although slower than we would anticipate for this time of year, is still holding up very well considering the circumstances. The market is showing no signs of a “crash and burn” 2008 scenario here but rather a pent up demand for housing as we wait for the economy to return to normalcy.

The current pace of the market is comparable to the pace we routinely see from December-February of a typical yearly cycle. Far from the market crash we saw back in 2008.

Consumers are less concerned about their employment are still shopping for and purchasing homes as illustrated both by the number of homes to go under contract with a buyer and the number of homes to complete the process and actually sell. In addition, the average days on market to sell DECREASED. A hugely reassuring statistic.

Now we did see a decrease in the average and median home sale prices but I believe the reason for why that is relies simply on the law of supply and demand.

With the closings of so many businesses here in Las Vegas and around the world went the financial stability for so many potential home buyers of homes here in Las Vegas. As the pool of potential buyers for homes decreases, so will the number of offers written and submitted to sellers. With fewer potential buyers to compete against in the market, the odds of creating an auction style type of bidding war amongst buyers also decreases. The result is that buyers are able to reach an agreement with the sellers for potentially less than they would have had to offer had a competing buyer been there to help drive up the price. The more regularly this happens, the more it is reflected on a macro level throughout the market.

The agent must present your offer to the seller unless instructed by the seller (in writing) not to present offers that meet/don't meet XXX requirements. (Usually a minimum price) This is true and to prove to you that your offer was presented each page should be initialed by the seller and signed on the last page. That's how it works here in Nevada anyways and I assume it would apply there as well but you may want to ask someone specifically practicing in Texas. 

Sounds good to me @Nick Cikity! I'm always available so please feel welcome to hit my up anytime about anything. If I can help, I'm happy to do so.