Chris Whittaker

I speak to a lot of investors who want to enter the condo investment arena. They see the prices and rent equation and think "this is a no brainer." On the surface it makes perfect sense. Buy a condo in Las Vegas with 2 bedrooms, pay $50,000. Put down 20% ($10,000) and have a note for $40,000. The payment on $40,000 is approximately $280/month including taxes and insurance. The HOA is no more than $200/month and your management fee of 10% of rents of $800 is $80/month. Total monthly cashflow using a scenerio like this and not setting aside any reserves for repairs or vacancy is $240/month.

The difficulty unfortunately isn't with the scenerio, it's with the reality of this market and how difficult it is to obtain financing on any condos in our city. Not to mention the competition is so fierce you'll most likely get beaten out by a cash offer anyways. Here's what you need to know about condos in this market.

Conventional loan: No more than 15% of the owners can be delinquent in their HOA Dues and the owner occupancy percentage must be over 60%. No pending litigation and the lender must still approve the complex.


FHA and VA loans: Must be on the FHA approved Condo list (see FHA link below) AND the requirements listed on the approval page must be met. No pending litigation.

Canadians purchasing a condo in Las Vegas: No more than 5% of the owners can be delinquent in their HOA Dues and the owner occupancy percentage must be over 70%. No pending litigation.

IMPORTANT LINKS


FHA http://portal.hud.gov/portal/page?_pageid=73,1&_dad=portal&_schema=PORTAL

FHA Mortgage Limits https://entp.hud.gov/idapp/html/hicostlook.cfm

FHA Approved Condo Look-Up https://entp.hud.gov/idapp/html/condlook.cfm?CFID=1318400&CFTOKEN=9c57314bac1b7ef7-DD1133B5-B1F5-2C90-75FF9D8F2543C965

First-Time Homebuyer Tax Credit http://www.federalhousingtaxcredit.com/2009/index.html

100 Questions and Answers about buying a new home http://www.hud.gov/offices/hsg/sfh/buying/buyhm.cfm

½ Off Homes for teachers, firefighters, EMT's and Cops http://www.hud.gov/offices/hsg/sfh/reo/goodn/gnndabot.cfm

Do I have a Fannie Mae loan? http://loanlookup.fanniemae.com/loanlookup/

Do I have a Freddie Mac loan? https://ww3.freddiemac.com/corporate/

I hope this helps clarify your investment questions.

Did I get your attention with that bold statement? Thought so. I figure, this is the first post of many so we might as well define what this blog is all about. Let's leave the confusion at the door. I think part of the problem we're facing right now is that most Americans have no idea what they're doing with their money. We are bombarded daily with images, articles, news reports, blogs, videos, and breaking news feeds with all sorts of mixed messages. My theory is that all these media impressions are purposely designed to be confusing so that you just throw your hands up and say something to the effect of, "Why don't I just give my hard earned money to this financial institution to manage for me because I have no idea what I'm doing?" or even worse, "I can't deal with this mess right now, we'll just start investing later, 5 years from now, or 'someday'." As Tony Robbins says, "The road to someday leads to a town called Nowhere!" Unfortunately, due to the economic crisis we're living in, that town will be filled to capacity and will have a lot of occupants who chased the hottest investment ideas, the next big thing, easy money, quick flip properties, penny stocks and the like. My goal for you would be to take the exit before "nowhere" and live a life of abundance (which doesn't always have to mean financial abundance). Success is the stuff left over when the money runs out.

Here's where we begin. Let's get a few of the basics on the table. If you take a deep breath and open up to the fact that with time and some educated investments, you will retire in style and live a life that's a little less confusing. Start with the title of this post. Your primary residence is NOT an asset. The definition of an asset is something that puts money IN your pocket. By definition, the house you live in does not put money in your pocket, in fact it takes money out of your pocket every month for 15 to 30 years typically. Even if it's paid for, you still have to pay taxes and insurance and possibly a homeowner's association fee. The confusion that we've encountered this past decade is that homeowners have been able to pull money out of their primary residence and use it to buy lavish gifts, vacations, home improvements and other rental property. The problem with this is that over the course of 10 years, the first time homebuyers got used to hearing the stories of these kinds of financial winnings and have come to expect the same. Buyers would constantly rationalize their purchase as an "investment" because it's just supposed to appreciate. Never before was appreciation really the incentive to buying a primary residence. Some markets in this country and other parts of the world would appreciate at alarming rates and owners got very excited about what they could buy with the "equity" in their home. In reality, a home is no different than a car except for the cost and the financing terms. A home is supposed to last 30 years thus a mortgage is typically 30 years, while cars unfortunately tend to last 5-7 years thus financing is the same. A car was always looked at as a bad investment because it went down in value as soon as it was driven off the lot, but a home was looked at differently for some reason. A home was just supposed to go up in value and as soon as that proved not to be true starting around the end of 2006 panic starting setting in. . . (to be continued)

HAPPY SUMMER EVERYONE!!

I hope you all had a wonderful 4th of July celebrating another year of freedom. Dana, Carter and I went to San Diego for the weekend to visit family and saw almost an hour of fireworks on the bay. Carter (2 1/2) declared that he "loves firecrackers."

I have the July report for your viewing pleasure. If you'd like me to send it, please e-mail me back. What we're seeing is inventory that's almost as low as our boom years. We now have below 9000 single family homes for sale. Buyers are scrambling to get into a property since prices have become so affordable and rates are still very low. Investors are also competing with these buyers because rents are far exceeding the cost of the property. Bank owned homes still comprise the majority of our sold properties (over 80%), with short sales selling about 10% and non-distressed homes making up the difference.

We're unsure how many homes in Las Vegas are being held by the banks and not yet released to the market. We know they have them because we can monitor how many are in the NOD (notice of default) stage. We're unsure why they wouldn't release them in a steady manor except to generalize and say the more they release the lower the prices. With all the government programs and funding being thrown around, I'm sure there's something going on that's more beneficial to the banks, but there's no consensus on what that is. If you have your theories, I'd love to hear them. It's a dialogue I have almost daily with people.

We do believe that the banks are working more diligently with homeowners who are upside down. This problem seems to be getting worse as layoffs increase and homeowners are frustrated with being underwater 30%-50% in our market. If you or anyone you know is having thoughts but is unsure of what to do, I have a couple of suggestions. We know two lawfirms that have an excellent track record and they will consult with the homeowner. One charges $200 for the initial consultation. The idea is you want advice that benefits you, not the lawyer, loan mod company or real estate agent. Advice that is clear with an action plan that you can feel good about. If you're having trouble sleeping at night because you're worried about your future, give me a call to at least discuss some of your options. You do have options. If you're a buyer or investor and you're sitting on the sideline waiting for the masses to declare NOW is the time, why are you waiting, what sign are you looking for? Investors, if it cash flows, isn't that what you're looking for? Yes, it may drop another 5% or maybe even 10% but at these prices, we think you can make that up by the interest rate you'll be getting if you buy today compared with next year.

Anyways, enjoy your summer with family and friends, and consider me as your real estate advisor in these difficult times.

I wanted to give you an update on inventory. When things were slow in Las Vegas/Henderson/ N. Las Vegas (Fall of 2007) we had 24,000 condos, townhouses and homes on the market. Our market picked up in the spring of 2008 and we had approximately 22,000 units on the market. We slowed down a little in the fall of 2008 primarily due to the state of the economy and uncertainty with mortgage rates and criteria. During that time our inventory was around 21,500. Right now we have a little over 16,000!! That's a tremendous decline in inventory.

Also, an average month for us up until Feb. of this year has been 2700-4000 contingent or pending units in escrow. Right now we have slightly over 10,000. That just shows you how fantastic our buyer volume is right now. Even if the banks add to the inventory we should be okay, as long as we stay under that 18,000 unit number we'll be healthy and strong as a market.

Did the bank moratorium on foreclosures work? Still too early to tell. Yes, we've seen more properties come on the market since the March 31 lift but the prices of these properties for the most part has been so low, investors are smacking their lips. Lots of cash buyers and investors are in our market right now.

2009 is going to be a great year. Reflecting on 2008, there was a lot of transition. This market has changed as many of you know, so I have to be pliable and find what works best for me and for my clients. I've been a licensed real estate agent in Las Vegas since 2000. Over the past 9 years I've worked as a solo agent; Started a top producing team with my wife Dana; Merged with another team at Prudential; Co-founded a real estate brokerage; and was the Broker and Vice President of a real estate investment company with 712 members and a top ranking website.

It's time to get back to basics again and that's why I've recently joined Keller Williams Realty Las Vegas. The leadership and owners create a work environment filled with excitement. Our market has dropped 50% since our boom days. We are now seeing beautiful homes with pools, 4 bedrooms, 3 car garages and granite for $350,000, nice 1600 sq.ft. starter homes for $150,000 and 2 bedroom condos and cashflow properties UNDER $50,000. Now is the time to buy. Call me if you're interested in more information, or if you know anyone who's fallen behind on their payments, I can help as well. I also represent a bank in the sale of their REO's and have an inside track on those properties as well.

Also, This coming Saturday March 14th, we'll be having a presentation at our office on S. Durango (between Desert Inn and Sahara) starting at 9am on how to get offers accepted in this market. This month REO agent Craig Sutton (who was an appraiser for years and really knows his stuff) will be teaching any and all buyers what they need to know to get their bank owned offer accepted. Trust me, if you come to this, it will make your life easier!

At 10 Craig will give us a list of the 5 VERY BEST REO BUYS in our office. Some of these may not even be on the market yet but are great opportunities and you will have first crack at them! We can go from house to house together! I think everyone should be done by noon.

You can bring a friend who has been talking about buying too!