You made the claim with your "math" earlier of getting $1500 / month on a $60k purchase and an ROI of less than 4 years.
You didn't present your T&I, R&M or any other ancillary costs. You said you paid all cash. I just took $18K and divided by your purchase price of $60K.
Yes, I know. Much more than you claim. Yes, because past performance is indicative of future performance, right? Then you should have bought more. You should have sold your primary residence to get more cash to buy more of these. It's funny that you think large investors didn't have the cash to do this and needed the banks to lend in order for them to get in on these magical 30% yearly returns.
You are correct. I meant annual rate of return. I didn't have enough information to calculate a true IRR.
I gave you the tax figure of $40/mo. The insurance is a similar amount. And $18K/$60K isn't the formula for IRR. (I calculated IRR at 20%-25% range, depending on the property)
And you do understand that is not a sustainable rate of return for any kind of real estate, right? It's great as a one off, but you can't model with those expectations.
Here in Silicon Valley, outside investors are buying up $XXX millions in real estate with negative monthly cashflow, with all cash purchases. But somehow they weren't able to scrape together the money to buy some of these risk-free 25%, guaranteed, yearly returns.
I'd point out the market has changed quite a bit. Real estate prices are up about 17% in the Vegas area since the 2009/10 bottom. And picking out worthwhile properties is beyond doing ROI on a spreadsheet. Having lived 5 years in Henderson, I had a bit of local knowledge. Something that looked good on paper might not be as great in reality. It might be in a bad neighborhood, far commute to the casinos, lack nice amenities, be far from shopping, etc. Every land development deal there required the developer to put in a park or hiking trail and that sort of thing. Distance to those is a factor. Distance and view of the Strip are others. School district is another. Carry on.
It's sustainable as long as you own the property. At the time we went on the buying spree, we had a couple hundred properties, at least, that we considered. And that was in a fairly small area, a subset of the Vegas area as a whole.
Like Maxiep said, it isn't unlikely that you made the investment you're talking about. What is ridiculous are your claims that: - Rents will never go down, even during a terrible economy - These types of risk-free investments were available in large quantities and the only reason they weren't purchased was because banks wouldn't lend on them.
Neat. The exchange rate is favorable to foreigners to buy things here. They aren't making any more land on the peninsula. Well, maybe a little with landfills. Yet they have scraped together money to buy up property in Vegas. http://www.reviewjournal.com/real-estate/low-housing-inventory-frustrates-homebuyers Low housing inventory frustrates homebuyers "The old saying “cash is king” has never been more true than in today’s housing market. Statistics from the Greater Las Vegas Association of Realtors show that cash buyers have accounted for more than half of all local existing home sales since the beginning of 2011. This percentage has actually been climbing in recent months, peaking at nearly 60 percent in February."
But they just couldn't manage to do so in 2009. You were the only person looking at real estate with $60k in cash in 2009. That's why the 25%, risk-free annual returns didn't get priced out of the market quickly.
2009? It was late 2010. But whatever. I wasn't the only one looking at real estate with the ability to pay cash. Hardly. The market there was saturated with speculators before the crash. For a couple years leading up to the bailouts, there were gradually more and more for sale signs in front of homes in our neighborhood. We saw our home price nearly double from 2005 to 2008, and we never had an LTV over 50%. Yet we were over $100K underwater for a couple of years and only recently have we made it back to even. With all the losses and foreclosures and people walking from their properties and speculators simply bailing, there was simply a massive inventory of properties. It took years for that inventory to be bought up again. I never claimed the investments are risk free. The risk/reward value is good enough to consider, if not too good to pass up. There are still good deals on paper there. Lake Las Vegas is a development about 30 minutes east of the Strip. It was a very upscale development with its own casino, lakefront mansions and condos, lakefront shopping, etc. The lake was man made, too. A property I just looked at on Zillow for yucks costs about $67,000 with about $900 (average) to $1400 (max) rent potential. Everything all told, it returns about 9% at the $900 rent figure, 80% occupancy rate, and before depreciation. Like I said, "on paper." Lake Las Vegas development went into bankruptcy in 2010. The lake has a leak in it, and who knows who is going to fix it. There are significant foreclosures throughout the development. It's far enough from the Strip that it's a decent commute. It's a bit of a drive to get to any shopping outside the lakefront stores. So my assessment is that it'd be hard to rent now. It's not going to appreciate until the rest of the inventory tightens up. The properties closer to the Strip in Henderson and Vegas proper are going to get the main focus of buyers for a while to come. Someone like Trump is going to come along and pick up Lake Las Vegas and there will be a feeding frenzy for the properties. When, I can't say. Maybe not for a few years. The people who currently own there are fairly rich. Celine Dion had a show on the Strip and lived in Lake Las Vegas ($1.2M home). Back in 2010, everything in Vegas looked like Lake Las Vegas. http://www.lasvegassun.com/news/2010/mar/01/shining-lakeside-oasis-loses-its-luster/#axzz2UtzMKaio Lake Las Vegas: A shining lakeside oasis loses its luster The area quickly won notice. Golf Magazine named it one of the top communities to semi-retire to, and the development was named one of the 10 most important projects in the world during an international architecture and design exhibition. Its cachet rose when Celine Dion purchased a $1.2 million home there in 2002. But then Lake Las Vegas sprung a leak. The property went into foreclosure after Transcontinental defaulted on $540 million in loans in fall 2007. The development was acquired by the Atalon Group in January 2008, only for it to file for Chapter 11 bankruptcy protection six months later. The problem: Because Lake Las Vegas was heavily dependent on secondary home buyers, it was crippled when discretionary spending dried up and the booming Las Vegas real estate market crashed. The community’s three golf courses also went into foreclosure, only one of which has since reopened. Wells Fargo took over Loews Lake Las Vegas — one of three hotels alongside the lake — in June, and in the latest in a string of bad news for Lake Las Vegas, the Ritz-Carlton announced Feb. 8 it would be closing its doors in May, and Casino MonteLago, the community’s only casino, said it would be shutting down in March. Indeed, Lake Las Vegas, a well-heeled community striving for seclusion, has found itself completely exposed to the Great Recession. (more at the link)
