One in eight: Nevada has 167,564 empty houses

Nevada has a great many empty homes, and after my experiences flipping occupied properties, I will be happily focused on the empty ones.

Home Address … 7625 VELVET MIST ST, LAS VEGAS, 89131

Resale Home Price …… $95,900

Don’t ask me how, but guess who hit the big time.

Don’t look now, but guess who’s back in town.

It’s so easy, don’t even have to try.

You’re the winner you can take the prize.

Loverboy — Lucky Ones

In the cleanup phase of the Great Housing Bubble, the lucky ones are those profiting from recycling the dead carcasses from yesteryear. I have been sifting through the debris in Las Vegas for about six months now. For a variety of reasons, I have been mum on my activities, but today I am going to share some anecdotes and lessons learned from my new adventure.

The most important of these lessons relates to the topic of today's featured article. According to the US Census Bureau, there are 167,564 houses in Nevada. That's a lot of empty homes — which is good if you want to survive as a flipper. Occupied homes are troubles magnified. Buying them is harmful to your financial health.

The pros and cons of occupied properties

Buying occupied properties at auction is always riskier because you never know what will happen with the previous occupants. I purchased two occupied houses for investors who were able to enjoy positive cashflow from the first month of ownership, so there are potential advantages. Since occupied properties have more risk, they have appealingly large margins — at least they look like they have large margins. When you factor in the lost time and the potential for litigation or damage by the occupants, houses with people in them are something to be avoided.

Squatters on my dime

I have one property I purchased in November, and the former owners are still squatting there. The former owners pulled an interesting legal move. They had the wife file for bankruptcy in her maiden name a few days after the foreclosure auction, and they put the property into the estate. Well, our search didn't pick up the bankruptcy because it wasn't in the owner's name, so we began foreclosure proceedings. Late in the process, the bankruptcy attorney accuses us of harassment, and we had no idea what he was talking about.

Once we discovered the suit, we had to initiate our own suit to have the property removed from the bankruptcy proceedings. They didn't own the property when they filed, so they can't obtain protection from the bankruptcy court to stay there. If they had filed before the foreclosure, they would have had other rights, but if they had filed before the foreclosure, it would have shown up in a title search, and I wouldn't have bid on the property.

The cost of all this legal maneuvering is expensive. The time to properly evict these people has been costly in two ways. First, the declining market means my resale price is declining while i wait. in addition, I have opportunity cost on money tied up in a non-performing asset. I am not a bank. I can't amend, extend, and pretend I am making money. I either sell quickly for a profit or I don't profit.

Ye ol' crack house

By far the most bizarre story I have is a property I purchased in October.

Back in 2005, a recent Salvadoran immigrant obtains his citizenship. With his workman's salary and a penchant for liar loans, he puts together an empire of 8 properties in Las Vegas from 2005 to 2007. The last of these properties was his crown jewel — the property I bought.

The property is in a older Las Vegas neighborhood called Spring Valley. The neighborhood is dominated by ranch style houses ranging from 1,400 SF to 1,800 SF. It has seen better days, but this is not a bad neighborhood. It is mostly median income middle-class families trying to get by.

My property is the large 5 bedroom home at the end of a cul-de-sac. It is the only one in the area with a large pie shaped lot with an outbuilding and RV parking. Back in 2007 when Vicente the Fox, our recent immigrant, bought this property with his liar loan, it was the finest property on the street.

Vicente the Fox began using his large property as a salvage yard. He put individual locks on all the bedroom doors and leased out the rooms to boarders and skimmed their rent. He tried to convince them to keep paying him even after I bought the house.

The boarders were united by their love for crystal meth. There is no evidence this place was used as a meth lab — thankfully — but when the constables came by to evict the last boarders, they confiscated a cigar box full of used pipes and other paraphernalia. In the two weeks after we took possession, the house was broken into three times.

The amount of junk on this lot is staggering. There are eight automobiles on this property, and none of those are in the garage because the garage was full of stuff. All eight cars are in the back and side yards. There were 4 working refrigerators on the property, a dirt bike, an air conditioner, anything and everything you can imagine, and lots of it.

I call our former owner Vicente the Fox because he carefully avoided us whenever we tried to serve him formal eviction papers. He didn't live at this house, and his former address is an apartment where he skipped out on the rent. However, since I was unable to serve him, I could not fully divest him from the property and the junk sitting on it.

He teams with a local attorney bandito to shake me down for wrongful foreclosure, stealing his property, and so on. Since I couldn't get him served, his weak case was strong enough to tie me up in court for a while. I settled.

Surprisingly enough, it turned out in my favor because when I let him back on the property to get his stuff, he cleared out much of the garbage along with the stuff of value. My worst fear was him picking over the good stuff and leaving me with a $5,000 mess to clean. He took a number of paint cans and other items that would have required me to bring in special disposal teams.

There is no good resolution for this property. I will lose money on the deal, and Vicente the Fox will have a roving pile of garbage scattered at friends and acquaintances houses all over town.

Eventually, this property will get sold. Hopefully, it will be to a good family that restores it as the jewel of the neighborhood. That's the outcome I want.

Flippers are maligned for bringing down the quality of life in neighborhoods. The reality is that the delinquent former owners are the ones who brought down the neighborhood. Flippers like me are the ones taking back the crack houses from rent-skimming former owners and putting families back into them.

After those two experiences, it's easy to see why dealing with vacant properties is much preferred. I'll focus on the empty ones. There are plenty to choose from.

Nevada's boom ends in record number of empty homes

(AP) – 6 days ago

LAS VEGAS (AP) — The promise of palm tree groves and low-priced real estate lured Alan and Katherine Ackerly across the Rocky Mountains from Denver to Nevada in 2004, where thousands of new houses beckoned brightly as any neon sign.

They came to buy their retirement home. But the real estate bust took its toll, with a flood of short sales and foreclosures in the market, and last month the Ackerly's dream home was foreclosed on, too.

“I pretty much gave it back to them,” said Alan Ackerly, a 57-year-old electrician who stopped paying his mortgage because he owed more than the house was worth.

The Ackerly's home is now among a swelling number of abandoned houses in Nevada. There were 167,564 empty houses in the state last year, according to newly released U.S. Census data, more than double the number in 2000. The number of vacant homes represents about one out of every seven houses across Nevada.

I haven't looked into the Census Bureau's methodology, but that number sounds a bit too big, doesn't it? There are unquestionably a large number of vacant homes, but that many?

The figures are another striking example of how the housing crisis has pummeled Nevada, casting a new light on the severely weakened market after years of boom.

One result is an increase in code violations. In Clark County, home to Las Vegas, such complaints nearly doubled from 2008 to 2009 and the median price of resale homes dropped to $115,000 in January.

That put's their median somewhere in the late 90s. The Las Vegas market is the apocalypse bubble bloggers predicted would occur in every market. As a reaction to Las Vegas, lenders decided it was wiser to build a huge shadow inventory. The likely have saved themselves a great deal of strategic default.

Neighbors call to complain of abandoned houses, stagnant pools, wild yards and unsecured doors, said Joe Boteilho, the county's code enforcement chief. But the neighborhoods of newly constructed homes are not facing the same blatant signs of disrepair seen in other foreclosure-ravaged states such as Florida, Michigan and California.

It has been a deep plunge for Nevada. Once a leader in job creation and construction, the state had the highest foreclosure rate in the country in January. Delinquent mortgages, meanwhile, are on the rise, with Las Vegas, Reno and Carson City all in the top eight cities per capita in a national real estate study published last month.

Strategic default will dominate the Las Vegas housing market for the foreseeable future. With prices stuck 60% below the peak, late buyers have little or no hope of getting back to breakeven in their lifetimes. How many of you are willing to work 20 years to pay off a mistake like that?

More than 16 percent of Nevadans relocated to new residences within the state in 2008 alone, the highest mobility rate in the nation, the Census data shows.

“We were the hottest market in the nation in terms of the shape of the bubble, how fast it went up,” said Nasser Daneshvary, director of the Lied Institute for Real Estate Studies at the University of Nevada, Las Vegas. “And, of course, when something goes up, it comes down hard, too.”

The growth fueled by tourism and the gaming industry has yielded few winners. Short sales and foreclosures have slashed homes prices, ravaged neighborhoods and fueled unemployment in the construction sector, one of Nevada's primary industries. The jobless rate is 14.2 percent, and the state's estimated budget gap starts at $1.5 billion.

In Fernley, the fastest growing city in Nevada from 2000 to 2010, the only sign of construction in recent months was a new Walgreens and a Catholic church. One in 49 homes is in foreclosure.

“It was just very explosive,” said Mayor LeRoy Goodman. “We hit bottom.”

The economy had become overly dependent upon construction. This cruel purging has wiped out everyone in real estate and construction. When activity returns, it will feel like a huge resurgence compared to the severe contraction of 2008. The industry will regrow into a smaller economic engine utilizing less of the workforce. Perhaps they will only build one mega-resort at a time for a while.

This in what was once the land of plenty. The expansion of glass towers and sprawling casinos on the Las Vegas Strip saw a 3.8 percent unemployment rate statewide in the beginning of 2000. Over the next decade, Nevada would grow by 35 percent, the fastest rate in the nation.

Men and women in hard hats carved homes into mountainsides, raised superstores from the dust and wedged plush golf courses into the desert. The state's residential properties grew by more than 40 percent to 1.17 million homes during those years, affording Nevada the youngest housing stock in the country in 2009, according to the Census data. In Clark County, the school district saw an average of 10 new schools a year at its peak growth.

The people who are down on Las Vegas forget its phenomenal growth prior to this recession. Las Vegas is not Detroit. Detroit watched the auto industry leave with no replacement to fill the void. The economic engine of Las Vegas is gaming and sin.

My wager is that vice will be popular in the future and people will continue to flock to Las Vegas for its vices. Therefore, Las Vegas will recover, and so will its real estate market. I could be wrong. I could lose my bet on Las Vegas's future.

As houses and condominium towers rose from the ground, so did prices. The median home price went from $150,000 to $300,000 between 2000 and 2007, according to a University of Nevada, Las Vegas study.

“It was a new town,” said Dennis Smith, president of Home Builders Research, a Las Vegas real estate firm. “There was money everywhere. Everyone wanted to invest in Vegas.”

The state's growing wealth and relaxed lending practices allowed workers with limited incomes to gain home ownership. In many cases, these were the same people who later faced foreclosure. Most Nevadans who lost their homes earned between $24,000 and $72,000, according to a homeowners survey published by the Nevada Association of Realtors in January. Roughly 60 percent said they lost their jobs first, then their homes.

I would like to see that NAr study. I know several who strategically defaulted there because their mortgage was too big relative to the value. Perhaps they are the other 40%? The strategic defaulter's there aren't hiding their faces in shame.

The crash came in 2008, when unemployment passed 7 percent for the first time during the decade.

Even so, nearly 74,000 new homes were built in 2010, according to Census data. Realty companies said there are still buyers who prefer newly-built houses.

A general recovery seems far away. The state's Foreclosure Mediation Program helped more than 4,200 homeowners since its creation in 2009. Nearly 2,000 of those owners were able to keep their properties.

More short sales and foreclosures are projected to further depreciate homes values across Nevada in 2011. Census data to be released starting in June was expected to highlight the state's robust renters' market.

The rental market is strong because many people were booted out in a foreclosure, but they still had jobs, so they stayed in the area and rented. If there were a major exodus from the area — as is happening in Detroit — then rents would decline along with prices.

“This year will be the worst,” said Rep. Shelley Berkley, D-Las Vegas, who co-chairs the Democratic Caucus Housing Stabilization Task Force in Washington. “The unemployment rate is not going down. The values of the homes keep going down and the ability to pay your mortgage is just not there.”

The Ackerly family moved into a rental house after they defaulted on their mortgage. The value of their $240,000 North Las Vegas home was worth $80,000 by the time they left. Unlike some of their neighbors, they didn't take the new kitchen cabinets, or the palm trees they had planted in the yard, or any of the other improvements they lovingly made to the house after they moved in.

“We were done with it,” said Alan Ackerly.

The things people take and leave behind

One of the properties I bought in March had the kitchen stripped out by the former owners. It's an empty room with a pipe-hole in the wall.

For some reason, people like to leave vacuum cleaners behind. Perhaps they don't want the dust from a foreclosure in their new house? I don't know. But I find one left behind in nearly every property.

I had one property where the former owner removed every doorknob in the house, but then they left them in a pile on the floor and didn't take them. In that same house, they took the garbage disposal. What's the resale value of a used garbage disposal?

A few weeks ago I wrote about the losers who left their family pets to die. We saved them, but not before they endured countless days without food or water trapped in the back yard.

The owners of today's featured property left it broom clean. They even left a note on the water softener telling the next owner it needed service. Who does that? Who leaves a maintenance note on a property they are losing in foreclosure? Good people. That's who.

The virtue of quick processing

In early March, with B of A coming off its Nevada moratorium, I had a few properties in escrow, so I decided to deploy the last $200K I had available. The number of properties pushed through the Las Vegas auction site in March to third parties has been remarkable. I picked up five this month. Any rumors of an end to the foreclosure problems in Las Vegas will be dashed when the March foreclosure numbers are announced. Remember you heard that here first.

On March 2nd, I bought two properties, and with a new sense of urgency rivaling a FedEx operation, we got one of the two properties on the market two days later in time for weekend showing.

214 Mariposa, Henderson, NV 89015

We still had work to do on this property. Basically, I decided to list the property while we were working on it to see what happened. Worst case is that I turn off some potential buyers who see it before it is ready. I wouldn't do that here in Irvine, but Las Vegas is a different market, so I thought I would try it.

Early the next week, even before Jacki gets crews out to start work, an interested buyer makes an as-is offer within $5,000 of my asking price. Since I was just about to embark on a $5,000 renovation, this offer was a no-brainer, and I took the deal. I was in escrow within eight days of the auction.

That was eye opening.

I realized I had been operating as if I were flipping in Irvine or Orange County. In Las Vegas time-to-market is more important than quality of presentation. The properties in my existing inventory — the stuff that is losing value as it ages — all show very well. We focused a great deal of attention on small details, and likely overspent what we should have to make these properties show well. It hasn't made a difference. Price is what sells in Las Vegas. Get to the market quickly and less expensively than your competition, or you lose money.

As good as good can get

This week as I was patting myself on the back for the quick flip, I took the money from some recent closings and bought three more properties. The featured property below was purchased on Friday, March 18, 2011. That's last Friday.

On Saturday, Jacki has the locks changed, took a few photos, and installed the Supra key. Sunday morning some prospective buyers looked at the property. Monday morning (yesterday) we got a full asking price offer which I have accepted.

Four days from auction purchase to full-price offer. We may open escrow today. It doesn't get better than that.

Home Address … 7625 VELVET MIST ST, LAS VEGAS, 89131

Resale Home Price … $95,900

Home Purchase Price … $67,100

Home Purchase Date …. 3/18/2011

Percent Change ………. 34.3%

Annual Appreciation … 515.1%

Cost of Ownership

————————————————-

$95,900 ………. Asking Price

$3,357 ………. 3.5% Down FHA Financing

4.23% …………… Mortgage Interest Rate

$92,544 ………. 30-Year Mortgage

$18,154 ………. Income Requirement

$454 ………. Monthly Mortgage Payment

$83 ………. Property Tax

$8 ………. Homeowners Insurance

$280 ………. Homeowners Association Fees

============================================

$825 ………. Monthly Cash Outlays

-$41 ………. Tax Savings (% of Interest and Property Tax)

-$128 ………. Equity Hidden in Payment

$5 ………. Lost Income to Down Payment (net of taxes)

$12 ………. Maintenance and Replacement Reserves

============================================

$673 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$959 ………. Furnishing and Move In @1%

$959 ………. Closing Costs @1%

$925 ………… Interest Points @1% of Loan

$3,357 ………. Down Payment

============================================

$6,200 ………. Total Cash Costs

$10,300 ………… Emergency Cash Reserves

============================================

$16,500 ………. Total Savings Needed

Property Details for 7625 VELVET MIST ST, LAS VEGAS, 89131

Beds: 3

Baths: 2

Sq. Ft.: 1,241

$/Sq. Ft.: $77

Lot Size: 4,356 Sq. Ft.

Property Type: Single Family Residential, Detached

Year Built: 2003

Community: Lynbrook

County: Clark

MLS#: 1129717

Source: GLVAR

Status: Exclusive Right

On Redfin: 1 day

Cumulative: 2 days

New Listing (24 hours)

————————————————-

MOVE IN READY! Not a Short Sale or REO. Quick Response from Seller. 1-Story Home, 3 Bedroom, 2 Bath in a gated community. Neighborhood near Schools, Shopping, Dining, Parks and Recreation. Charming Open Floor Plan with lots of Natural Light.

Flipping Out

I hope you enjoyed my Las Vegas anecdotes. As you can see, most of my time and energy have been devoted to that end. I don't think I have revealed any trade secrets or given my competitors any valuable information. Perhaps a few may be dissuaded from trying when they know how hard it really is.

It's a hard business, and if you don't know what you're doing, you can quickly lose a lot of money. It requires a lot of time, money, patience, the ability to accurately value property, and a working understanding of real estate law. It can be a lucrative business if you can figure out before the opportunity disappears.

Surviving the turnover of the first group of properties, I feel like I have the team and the systems in place to do well. I am looking forward to the rest of 2011. For those of you interested in my fund, I'm sorry, but it is closed to new investors. Maybe next year….

43 thoughts on “One in eight: Nevada has 167,564 empty houses

  1. Geotpf

    A seven year old house for sixty seven thousand dollars. For the price of a BMW 5 series, you can buy a seven year old house. Now that’s a declining market!

      1. Walter

        Upkeep is probably higher on the BMW also.

        – Started changing the oil on my Bimmer myself.

  2. irvine_home_owner

    Awesome post.

    Very interesting to see the evolution as you learn from missteps and recognize the risk of occupied foreclosures and the adjustment of prepping/staging Las Vegas homes vs Orange County ones.

    I’m still not sure what kind of recovery Vegas is going to see. While it does have an economy of vices, I’m not sure the employment there is high-paying enough to fuel a booming comeback. It’s a place to visit… but not to live. Maybe if it gets cheap enough, FCBs will buy a few vacations homes with their couch change.

    These stories are actually more engaging than Irvine HELOC abuse ones… you should really consider starting an LVHB.

    1. Frak

      Yes. “We don’t need to see Irvine decline identification. These aren’t the articles IHO is looking for. Move along.”

    2. IrvineRenter

      “These stories are actually more engaging than Irvine HELOC abuse ones… you should really consider starting an LVHB.”

      I feel the same way when I am writing these stories. Real anecdotes are compelling.

      I have been trying to keep the blog focused on Irvine, so I have resisted writing about Las Vegas during the week. I will start writing more about these properties and my experiences there during the week. Perhaps one day a week other than Saturday.

      I am glad you enjoyed the post.

      BTW, Asians are the fastest growing group of newcomers to Las Vegas. One of my biggest competitors at the auction site is Chinese.

      1. irvine_home_owner

        Heh… it’s like BOGO for the FCBs.

        Buy One in Irvine so the kids can use the school system, Get One for 95% off in Las Vegas so the parents can hit the tables (via those buses from 99 Ranch).

      2. irvine_home_owner

        Also… are you still doing flips in Irvine?

        I would like to hear some of those anecdotes too.

      3. awgee

        It’s your blog. Write whatever you want. And if those who don’t like it can stop paying for their subscription.

        1. rkp

          as much as i love reading IRs posts, i also come here to read the comments and participate. so while its his blog, getting feedback continues to foster the community.

          your blog is under my favorites but i never go to it. if there are comments, its like 1 or 2 people saying the same thing. no community.

  3. winstongator

    Great post and good to hear that the venture is going well.

    The analogy to Detroit is interesting because Detroit did not die because people stopped buying cars, it was because they stopped buying cars made in Detroit. I see that potential in gaming also. While it might not be as glamorous to gamble down the street, as gaming becomes legal in more places, Vegas has the potential to fade as a destination. You probably won’t be flipping there when that happens though.

    1. so_scared

      vegas isn’t deeply impacted from the people who would go to local indian casino to gamble.

      Their main clientele is the convention business (#1 in hotel rooms in country), whale gamblers and party revelers. I supposed Asian whales are in danger of going to local Macau or Singapore.

      Since ’99, non-gaming revenue has surpassed gaming revenue. It is becoming a foodie capital in its own right.

      LV competitive advantage is that no other city is going to be able to easily challenge their dominance as a convention destination in terms of pure logistics nor their brand as a place go to for bachelor parties, boys/girls trip or other “fun weekenders”.

      When the economy returns, LV will return.

  4. Sue in Irvine

    I read in either Time or Newsweek that having Celine Dion back performing in LV is going to help the economy. I suppose that could be true.

    IR..I assume you are buying these places at the courthouse auctions. Do you know at the time you buy a house if it’s empty or do you find out later?

    1. IrvineRenter

      I don’t know conclusively if the house is empty or not when I buy it, but I can make an educated guess.

      Often times an occupied property will have evidence of occupation, a car is in the driveway, children’s toys are in the back yard, furniture and personal possessions are visible through windows.

      Sometimes the properties are on the MLS as short sales, so there are recent interior pictures. Any short sale with people’s stuff in the pictures is likely still occupied.

      The drivers who photograph the properties try to look in windows to determine occupancy, and they also examine the electric meter. If the property is not occupied, the meter will not move as there are no appliances inside using electricity and the power is usually turned off.

      It’s not a foolproof method. One of the properties I bought on March 2 looked occupied. I got a better discount at auction because my competitors also thought it was occupied. Apparently, the occupants had just moved out and left trash in the front. I got lucky on that one.

      1. Westparker

        IR,

        Wondering if you could share some of your experiences at the auctions? I’ve been to a few in OC and Sacramento, it seems there are many former contractors who are looking for major fixers. Do you see the same thing in Vegas?

        1. IrvineRenter

          I could do an entire post on the evolution of the activity at the Las Vegas auction site. It went from a handful of people in a small lobby to a parking lot full of people under a sun shade.

          The contractors are at the auction site, but it is dominated by investors. Locals mostly, because they know the terrain. Many of these locals are backed by outside money, but it’s the natives that are at the auctions picking up deals.

          The contractors with some financial backing are working on foreclosures, but the others are broke and unemployed. The amount of money spent on renovations is tiny compared to what used to be spent on new construction. I don’t see many of the contractors because they tend to get a project, then disappear until its done. The investors are at the auction site every day, so their presence is more noticeable.

  5. octal77

    IR

    Very interesting post.

    To disclose, I follow the Irvine market and
    have no interest in Nevada or LV.

    But, I am really curious about one thing.

    What is the source of income for the buyers
    you have had contact with? Is it gaming/sin
    or does anybody have any “real” jobs?

    Thanks for a great blog.. I read it daily.

    1. IrvineRenter

      Unemployment in Las Vegas is very high, but more than 80% of the workers are still working their same jobs making the same money they were when prices were 60% higher. I have sold one to a local investor, but the rest have been sold to local owner occupants.

  6. rkp

    IR – excellent post. Why not rent out those properties that you will lose money on? Or is the business model set up to not hold on to any of these properties?

    What is the rent like for these and how easy is it find a renter?

    1. Walter

      If he rents out the properties, all the capitol will be tied up and the fund will no longer be able to operate as advertised.

      Also, how will he pay out the investors at the end of the term?

      1. irvine_home_owner

        I may be mistaken but I thought part of IR’s IHBLV investment portfolio was also cash-flow properties where they buy at auction and rent the property out because the the buy cost is lower than rents.

        I remember a blog post where it got heated because IR said he was helping people and the LV economy by renting these homes out.

        Maybe that has changed.

    2. so_scared

      i suspect that he has to flip quickly to earn the kind of rates of return he needs.

      He isn’t setup as a buy and hold REIT in the traditional sense. I’m sure he is setup more like a hedge fund where he makes his money something like a 2/20 type structure. (I have no idea what his compensation structure actually looks like but I’m sure he isn’t doing all this work to earn a 5% management fee on rental income.)

      He could rent it out very quickly for short periods of time but if his objective is to turn these in a week, no point in renting it out and certainly can’t rent out occupied crack houses.

    3. IrvineRenter

      “Why not rent out those properties that you will lose money on? Or is the business model set up to not hold on to any of these properties?

      What is the rent like for these and how easy is it find a renter?”

      Walter’s observation is correct: if I tie up capital in a rental, I will only make 8% to 10% a year. If I flip and make 8% to 10% per property, and turn it over 3 or 4 times a year, my rate of return is much higher. My investors signed up for the higher returns of flipping rather than the more stable returns of rental income.

      It is better to take a loss and free the money up to profit on the next deal. Even if I have a 10% loser, I can make it up in three or four months if I pick a 10% winner.

      Finding renters is not difficult. Any property can be rented if you discount the rent. So far, that hasn’t been necessary as rents are holding firm. As the economy picks up, rents should go up with it.

        1. so_scared

          Why would his bench mark be the S&P?

          It is a different risk/return and most importantly, largely uncorrelated to S&P. Adding this type of investment will reduce the overall risk to the investors portfolio.

          The typical investor in the fund is looking for both return and diversification from uncorrelated returns.

          Maybe he should be measured against other types of REITs which might do something similar or a index of private equity funds.

        2. IrvineRenter

          “Give us an update on where you stand overall.
          Are you beating the S&P net fees?”

          That’s where I have to stop. I don’t think my investors want me to reveal that information. For this first six months, I was thrilled to make anything. I knew there was going to be a learning curve, and I would be forced to adapt to the local market environment. It’s the performance over the next 6 months that will tell whether or not I know what I am doing.

  7. FreedomCM

    Is it known how much of the increase in vegas business in the 00s was dependent on HELOC or credit card debt (which was subsequently paid off using a HELOC)?

    I have a hard time believing that that portion of the vegas action is going to be coming back anytime soon.

    1. IrvineRenter

      My guess is HELOC money became a substantial portion of the local economy starting in 2004. Price in Las Vegas went up nearly 50% in an 18 month period. You have to imagine there was a great deal of mortgage equity withdrawal and some serious partying during 2004-2006.

  8. Dave Kinkade

    This was an enjoyable read. Good content, fast-paced and something unique. Thanks and I’m glad I stopped in to read your blog today.

  9. Renter in SD

    Hi all,

    Been lurking here for about 2 months, and wanted to chime in and say to IR: good job as usual, and I especially enjoyed today’s post.

    And I’m really curious how long you spend putting together each day’s post, on average?

    Thanks again for all the good information.

    1. IrvineRenter

      It certainly takes longer than it used to.

      I usually devote anywhere between 1.5 and 2.5 hours per post. Sometimes, if I am inspired I will go longer. The post today took about 3.5 hours to complete.

      Basically, I don’t watch TV, and I write instead. I would do very poorly on a Trivial Pursuit TV edition.

  10. JG9100

    Hi great blog. I agree RE is a tough way to make a living. For me though I might buy one to live in I am retired. But there is a disturbing line item in the monthly payment section. The Home owners fees… Is that a mistake?? $280 or is that yearly?
    monthly would be a deal liker for me. Vegas is only attractive at rock bottom living expense.
    Thanks,

  11. Michigan Dude

    “Detroit watched the auto industry leave with no replacement to fill the void.”

    This is one of the best postings yet, but your reference to Detroit repeats a common but untrue belief. The auto industry’s troubles had very little to do with Detroit’s problems. The decline of the City of Detroit started with the 1967 riots, and Detroit will continue to decline no matter how well the car companies do. Even so, I can see the logic in Detroiters burning down empty houses that are used by hookers and addicts. But there is something truly creepy about these stories of brand new, upscale housing projects turning into suburban ghettoes. At least Detroiters have an excuse.

    1. Planet Reality

      I’m always amazed at IRs lack of understanding of Detroit.

      Detroit has all the problems you point out, but it still has significant auto industry jobs. These jobs include extremely high paying jobs at GM headquarters and many higher education engineering jobs at GM and ford. These are high end jobs that will continue to be in Detroit and really do not exist in Vegas. The premium areas of Detroit have held up very well, where the GM executives and engineers live. Other areas are worthless.

      Las Vegas is mostly lower education type jobs and hourly workers who make far less than the hourly auto workers whom still exist in Detroit.

  12. John Farrell

    I can’t figure out why a lot of people use the statement about the foreclosures:
    “it has been a deep plunge for Nevada. Once a leader in job creation and construction, the state had the highest foreclosure rate in the country in January.”
    Not only January, but about 50 months before also.

  13. Vultures & Dolphins

    < "Hopefully, it will be to a good family that restores it as the jewel of the neighborhood. That's the outcome I want">

    Bullshit. You couldn’t CARE LESS about who/what occupies the house. You make it sound like you’re doing “God’s Work”, when in actuality you’re just a stinking middleman who produces NOTHING. You don’t even occupy the house, you just make it more expensive so you can leech off the price difference. Like the unproductive vulture that you are, you simply swoop in, sprinkle some magical pixie dust on any given POS property and, lo & behold, it is now suddenly “worth” $20-100K MORE.

    And to make matters WORSE you promote Las Vegas as the next best invention after sliced bread when in reality it’s a dying desert shithole that’s running out of water and jobs faster than you can say FLIPPER. Plus, what kind of an asshole puts his hopes on gambling and prostitution to pull a city thru hard times?

    1. Hi mom its me

      If we did not have private middle men, we would have government middle men (cuba, etc where all the rich people are government employees). Thats way WORSE IMO.

      You are free to bid at auctions just like everyone is in this country. Its equal opportunity! Its called capitalism, the public schools vilify it, but thats what we are supposed to be. Dont have cash? Get some investors like IR is! get off the couch!

      IR is not even using government funds to flip!!! The retail buyers he is flipping to are no doubt using FHA/Fannie/Fraudie loans. So THOSE BUYERS are the problem (or rather the taxpayers are clueless retards willing to perpetually fund mortgages for dopes with no cash, thus enriching hard working middlemen).

      Go Irvine Renter! I wish you the best! Some of those buyers of your homes might not end up in foreclosure!(glass is half full, right? half of them WILL foreclose when they get a job transfer,divorce, et then you can flip same house AGAIN to next 3.5% down payment buyer! yay capitalism! go go go!)

      1. Vultures & Dolphins

        < "You are free to bid at auctions just like everyone is in this country">

        So I can get RIPPED OFF like everyone else in this country too, huh? In case you haven’t noticed, most RE auctions are a SHAM, with secret reserve prices and fake bidders planted amongst the attendees. The fraud is RAMPANT and no one gives a shit, least of all our corrupt government.

        As for middlemen, they’re USEFUL only when they connect producers to consumers who would otherwise not be able to access their products. A dipshit that buys a house, slaps a cheap paint-over job on it and puts it right back o the market for an extra $75K HAS DONE NOTHING! And the poor bastard that buys it from the flipper is an idiot who could’ve saved $75K by buying it DIRECTLY.

        1. Planet Reality

          Don’t forget that the difference between the bubble price/loan and the auction price is paid for by the tax payer. Yes in Las Vegas most of the FHA purchasers IR is selling the flips to will also foreclose eventually That tab will be picked up by the tax payer as well.

          In short if IR is lucky enough to be profitable, his profit will be
          paid for by the tax payer. The contradictions and hypocrisies keep on coming. You may take solace in how boring and dirty this flipping must become in a short amount of time.

          1. Vultures & Dolphins

            Exactly.

            IR’s entire business model is COMPLETELY predicated on his ability to consistantly find a GREATER FOOL willing to catch the falling knife.

            And that means the TAXPAYER in most cases by default.

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