All Forum Posts by: Bill R.

I think people are overestimating the impact of developments like this BUT I also think that people don't understand LV economics.  Already, less than 50% of tourism revenues come from gambling.  People come for the food, nightclubs, entertainment, etc.  Gaming is becoming a smaller and smaller portion of tourist spend.  

More and more friends tell me that they are coming to town to see a concert (especially true since T-Mobile Arena started operating).  Instead of flying/driving in from LA on a Friday night and spending all of their time in the casinos they are coming in on Friday night, going out partying, laying by the pool all day Saturday, getting dinner and heading to a show/concert on Saturday, and heading home Sunday morning.  

Why do you think all of the Strip casinos have been trying to maximize non-gaming revenues?  Day clubs (nightclubs with DJs but during the day around the pool).  Parking fees.  Resort fees.  $9 beers.  Now when you play video poker you don't automatically get free drinks, they have an electronic system that will only allow you to have a free drink after you've wagered enough.  Gone are $1.99 steak and lobster specials, replaced with $75 steaks by gourmet chefs.  Most every casino has given up massive amounts of valuable gaming floor footage for nightclubs.  Shopping districts within casinos.  Etc, etc, etc.  

A lot of people think, "Vegas, it's all about gambling" but it's becoming less and less about gambling every year.  

Excellent post though little of this is specific to Hawaii.  Was sort of hoping for some insight into active HMLs, how to build a team in Hawaii (I'm sure it's similar but are there any specifics given the unique culture of Hawaii?), specific techniques for locating properties (i.e. do yellow letters and similar marketing techniques work equally as well in Hawaii?), gotchas like putting a kitchen in a Ohana unit, etc.  

The North LV and East LV areas certainly are rougher than Summerlin and Henderson but they're not exactly war zones.  There are nice areas and sketchy areas within those parts of town just like a lot of other areas.    

And you have to sort of balance that out with what you're comparing it to.  Summerlin is a huge master-planned community with tons of gated communities and high home prices.  Personally, it feels a little too Stepford Wives to me which is why I chose to live in Henderson.  But even Henderson is a highly planned out community with pockets of insanely high priced neighborhoods.  It's just a little less master-panned than Summerlin (IMHO).  

Obviously if you're looking for your own primary residence and you want to live in an upscale neighborhood, sure, pick Summerlin, Henderson, or Southern Highlands.  

But if you're looking for investment properties, North and East Vegas are going to have a lot more opportunities.  

For instance, I just threw N. Summerlin into Zillow and set $250K as the top price and it returns 15 homes.  Same search for North Las Vegas shows 802 homes for sale.  

What kind of assets are you bidding on?  From what I've seen, first position note investors tend to be thinking 50% - 60% of BPO in terms of bidding for assets $100K and above.  Perhaps on a property where the BPO is only $50K you might be able to bid lower than that, but not that much lower.  

The other thing to keep in mind is not what percentage you feel is fair but whether or not you can still make a profit.  If you're trying to buy real estate rentals at the 2% rule that was once so common on BP, you're going to have a hard time finding deals.  Same here.  If you're working off of what you should expect to pay from some book or workshop that's from 2010, you're going to be sorely disappointed at what the prices are today.  

The question you have to ask yourself is whether or not you can still make an acceptable ROI paying whatever the going rate is. You can't just draw a line in the sand and say that you're not going to accept anything less than 40% ROI if the market is willing to settle for 35%.

Now, if the ROI is being driven down into the 10% range, well, sure, you might want to walk away but if you're trying to pick up assets at 35 cents on the dollar, I'm assuming that this is not the case.

Like Cliff said, I think you have to choose between UPB and BPO valuation based on the situation. Perhaps you're looking at these using the wrong metric and thus submitting bids that don't make sense for the seller at those valuations.

 You better allocate some money to pants.  900 lap dances generates a lot of wear and tear.  

It all comes down to what you value.  If you quit today (or after your pension kicks in) and have nothing more productive or valuable to do with your time, you're simply giving up free money your employer was willing to pay you.  

Unless your intent is to become a full-time active real estate investor, it's more of a question of when do you want to stop accumulating wealth and start living off the wealth you've accumulated to date.  

I think a lot of people who have commented look at this and think they might be making $50K a year and once they can make $50K a year from rentals, they want to quit their job and go real estate full time.  But once they quit working, $50K a year in W2 income goes out the door as well as benefits (health, matching 401K, etc).  Now they're living off the $50K a year that their rentals are producing instead of being able to reinvest that into their portfolio to keep building it.    

Ten years from now instead of making $100K in rental income, maybe they're only making $65,000 because they lost $50K a year that could have gone into reinvesting.  

Now, if you have a good reason to punt away $50K a year then it might be the best move for you.  Or if by quitting the day job you can quickly replace that $50K W2 income with more income from new investments (becoming an active real estate investor), great.  

Not that I'm trying to talk you out of it.  Hey, if the amount of income from rentals and your pension together afford you the lifestyle you want, with plenty of cushion to spare, and you can't wait to get out of the rat race, go for it.  

Just don't try to think of it as a magic number that once you hit X% of your salary in rentals that it's smarter to do one thing over the other.  It's all based on a completely subjective value of how you want to spend your time.  

 On the wait list :-)

@Art Ritter Yes, student debt is certainly in risky territory.  I've also seen a few folks raise red flags about other assets like toxic car loans too.  Can't say that I've looked as deeply into that and other areas as student debt but certainly makes sense.  

In fact, look at the massive amounts of money central banks made available after the housing crises and global recession.  Very little of that money flowed down to the little guy.  The banks have been inflating markets with that money but you have to look at where they've been pumping up prices.  

One thing I've noticed recently is that the big hedge funds that bought up all the SFR rentals are now looking to deleverage and-or cash out. IPOs, selling off bits of their portfolio, etc.

Not that any of this is all doom and gloom.  I think it's just a good idea to have an idea of what the macro-economic environment looks like when you invest.  There will never be a time when it's all green lights.  Even at the most opportune time there will be plenty of yellow and red lights that will give one pause.  

The real question is whether or not you have to chase deals.  If you're sacrificing your numbers to make a deal work, it's probably time to step back.  If you're considering taking on additional risk in order to obtain the same amount of return, you might want to step back and make sure you're okay with that risk and view that risk realistically rather than trying to make it okay in your head that it's really not that much riskier.  

For instance, in the bond world, you have AAA rated bonds and if you've been investing in AAA bonds and that's what your comfortable with, if yields are depressed when you have money to invest, dropping down to a AA or A rated bond to get the same yield that you used to get on AAA bonds is taking on additional risk.  

In the bond world it's easier to quantify because you have a rating agency that gives you a generally accepted comparison but in RE people take on additional risk and find it easier to justify because there is no indicator of risk for them to compare two opportunities against.  

It's funny because whatever point of view you have, you'll find news and data to support that point of view.  

For instance, @Thomas Bouchereau, you are correct.  Things are very different than they were in 2008.  Yet, I can argue that many of the flaws in the Las Vegas economy (you're in Henderson) which caused the recession to hit it harder than it hit almost anywhere else in the country still exist.  

It's interesting that you keep hearing "well, things are different" as if a crisis has to be caused by the same factors as the last one.  

The reality is that both recessions and crashes typically look nothing like the immediately prior recessions and crashes.  I highly doubt that the next recession or crash would happen due to sub-prime housing lending.  That would be far too obvious.  Just like the 2008 crash was not caused by over-inflated tech stocks like the 2000 recession was.  

There's a quote from Gary Vaynerchuk that I think some might benefit from.  "Never be romantic about how you make your money."  His point is that if you fall in love with anything in business, for instance, a specific investment strategy, your eyes are closed to change.  

Ultimately, nobody can tell you what will happen next.  The market will go up.  The market will go down.    

@Eli Kallison - You're probably sipping a cold Singha by the time you read this but I wanted to throw out a piece of advice that has little to do with RE and more about your perpetual travel schedule.  

I've lived outside of the US, off and on, for about 9 or 10 years over my lifetime.  I am also a former resident of California.  

The state of CA is going to want a little taste for as long as you maintain "residency" in the state.  They are one of the most aggressive states when it comes to taxing overseas residents.  

When you decide to leave the US, you still have to claim a state of residence.  Usually it defaults to the last state you lived in and had physical residency in.  

Now, as anybody who has lived overseas will tell you, Uncle Sam wants to wet his beak on any money you earn anywhere in the world.  If you decide to teach English up in Chiang Mai the IRS will require you to declare and pay tax on that income.  

And guess who else has their hand out, the state of California.  

The IRS does allow you an exemption on the first $99'000-something in foreign earned income though so unless you are a high-earner (and not many of those exist in Thailand - and none of them are English teachers) you'll fly under their radar (you still need to file tax returns though and declare the income).  

But guess who doesn't care about the $99,000-something foreign earned income exclusion, California.  They want paid on anything you make.  And they are aggressive about claiming that you are still a resident of the state.  

I've read they've even gone so far as to claim that if you keep a storage locker in the state that they consider that evidence that your move was not permanent and you intended to return to the state.  Holding real estate would certainly make it difficult to convince CA's tax authorities that you were severing all ties to the state.  

And, as with anything having to do with tax authorities, the burden of proof if on you.  If CA says they consider you a resident and want paid, you have to prove to them that you're not a resident.  

So, talk with your tax person but you may want to delay chucking it all and first establish residency in a state with no state income tax before you indefinitely leave the US.  Establish a residence, register to vote, obtain a driver's license (and make sure to surrender your CA driver's license), etc.  

Also, don't do what a lot of expats do and give up all of your banking relationships while you're overseas.  At best you'll have some form of temporary residency so getting credit cards or other lines of credit in a foreign country are very difficult.  You also don't want to have to tell people in the US how to use SWIFT codes to get money to your Thai bank account.   

You'll be amazed at how many times you need to use PayPal or some other online service and they won't accept your Thai debit/ATM card.  Having a US credit card can come in handy.  

Have a permanent address back in the US where things can be sent to.  At a minimum, your US banks and credit cards will want an US mailing address to maintain your accounts.  Maybe friends or family can act as your mail drop. I used to use a service that would scan anything sent to that address and then post the PDF online.  

Lastly, just as a final reality check, Thailand is cheaper to live in than LA, for sure.  But it's not as cheap as some people think.  Just expect that.  I see people online asking stuff like, can they live in Thailand on $500 a month or $1,000 a month and I'm like, "Yeah, if you like living in an apartment with no aircon, eating street food 3 meals a day 7 days a week, and think sitting in a bar complaining for an hour that the price of beer has gone up 14 cents is fun."   

Sounds like you'll have sufficient funds coming in though.  I just can never wrap my head around folks who relocate half way around the world to end up being too broke to actually travel around the country and enjoy it.  :-)