Thursday, March 29, 2012

Underwater in the Desert

Underwater in the Desert. 

There are so many people in the Las Vegas that have the same problem.  A larger portion of homeowners have a mortgage or two, or three that are worth far more than the value of their home.  It has been a disaster for the economy and for employment and it is has many people in the city and the housing market will not recover until there is some kind of reset of the market.  The problem is that we have known this for several years but the banks, for a number of reasons, some being justified and some being completely bogus have been unwilling to follow through on their promises to the American people and to the government.  This is true even though they were saved from insolvency by the Tarp bailout funds. 

The entire scam that was Tarp cost billions of dollars and saved the bankers from meltdown. The ironic thing is that they never did a thing to help the market.  They refused to aggressively write down mortgages which would have slowed the chain reaction of foreclosures.   This would have saved cities like Las Vegas from the horrendous drop in real estate values that has now gone all the way down to pre 1997 levels. 

The result has been tragic for many people.  No one in their right mind will continue paying on property that has dropped over 60% in value recently while their mortgage is worth nearly twice the amount of their home.  Morality is no longer an issue. You have to question a person’s intelligence and sense of duty if they keep paying on an albatross that will ruin their family’s future.  Anyone who would call a person a deadbeat for deciding to walk away from an absurdly underwater home is a pompous ass and should have their head examined.  The shaming that the media and the arrogant bankers tried to lay on the public was just a smoke screen to try and cover up the reality that it was years of criminal behavior in the banking and lending industry that led to the housing meltdown.

This crisis was not created by homeowners.  Trying to blame them is like trying to blame earthquake victims for an earthquake.  The issue now is that the market is at a point that will never be corrected in years unless the banks start to write down mortgages to current values and aggressively agree to accept short sales at market value regardless of the underlying mortgage amount. 

It is ridiculous how much money the government has thrown at the banks to fix these problems.  There has been virtually nothing done to this point except to save the banks and to save the bankers from any liability.  The billions of dollars that have been given to banks went to pay back Tarp in most cases.

The banks did a PR stunt saying they paid back the Tarp funds with profits.  In the majority of cases the banks paid back Tarp funds with other government program monies that were supposed to go to homeowners for mortgage write downs and loan modifications. 

The result has been that properties values in Las Vegas have continued to fall and are still falling.  Another result is that there is a shortage of inventory and that most people who have a mortgage won’t even try to sell because they are just as happy to walk away.

Why?  Partly because of their lack of faith in the modification program and lack of faith that banks will actually do the right thing.  Many people could have been helped by the banks and in turn it this would have helped the housing stock from getting beaten down to unparalleled levels. 

Anyone who wants to short sell and wants to get on with their financial life without having to go through a foreclosure should be seriously looking into a short sale.  It is the best option for most people and it is the only option to ever get a fresh start with out completely wiping out your credit.  The short sale is a bit easier to recovery from than a foreclosure and by the time you can buy again after a short sale there will likely still be great values in Las Vegas. 

The right thing to do might just be the thing that was unheard in the United States prior to this recession.   It may be time to see your home as an investment and treat it like you would treat a business.  You need to make a business decision about your future and do just as the banks would do or the billionaires like Donald Trump and or the former CEO of Blockbuster would do. 

They would get out as fast as they could and as painlessly as they could if they had underwater investments. Your home is now an underwater investment that may never ever recover.  It is time to cut your losses. The easiest, least harmful way is to opt for a short sale.  It really may be the only option in some cases and it is the least harmful to your credit.  It is a shame to have to consider such options but the world has changed drastically the past 5 years and Las Vegas has been hit the worst.  Your future lies in the balance and it is time to start treating your home as your investment.  If it has gone sour then you need to get out as fast as possible with the least damage.  There is no shame in doing what is best for you and your family.  The banks have been paid ten fold by the government and will be fine.  Look into a short sale and get back on tract for a bright future. 

Sunday, March 25, 2012

Avoiding the pitfalls that come with older rental properties

It may give people a few things to consider when they are in the market for an investment property.  The trend in Las Vegas is to only want to purchase the newest property available but older home can be tremendous profit centers if managed properly.  It is a different philosophy but preparation is the key to generating massive profits.  Remember anything that makes a lot of money will take hard work and persistence.  Older real estate can take a little more work but it can be well worth your investment.

Avoiding the pitfalls that come with older rental property and finding profit the aging housing stock.   

One of the realities of real estate is that it needs maintenance and upkeep.  The older a property the more issues tend to arise that will cost investors, landlords and homeowners more and more money.  The trend in Las Vegas is to invest in newer property that will have less maintenance issues and in turn less tenant phone calls.  The idea is to keep the management costs to a minimum.  Many companies will manage older property because of the additional time and expenses that tend to come with older property.  However, you may be missing out on some great deals and fantastic opportunities to make money or find a home if you set your sites on only newer property. 

There are ways to limit the future issues that will come up with an older property and they often do not cost as much when done in advance.  The major expenses come in when you find out a water line running through the attic springs a leak which can lead to the replacement of the ceiling, insulation and light fixtures.  Another major headache can if the water heater is located inside the property and not in the garage.  If the water heater leaks or rusts enough to leak out the bottom you could have a repair bill out of this world. 

The question is whether you can do things to limit major issues and expenses to make it worth while to consider an older property as a home or investment.  You may be able to find what you want in investment property in Las Vegas today that is only a few years old but this will not always be the case.  The housing stock will get older and older. If you are not willing to consider properties more than 10 years old you will be limiting your opportunity to find great deal. 

How can you avoid some of the headaches and costs of owning older property in Las Vegas?  The number one answer is better preparation and planning.  You will have to account for somewhat higher maintenance costs that are completely normal in older homes.  In order to cover the higher costs you will have to look for property that will get slightly higher cash on cash return than newer units.  This is simple enough to by just looking for slightly undervalued property in rental areas that have monthly rental pricing that has remained strong.  There are many of these areas in town and there often is far less difference in rental pricing then there is in home price variation.  Rental rates seem to fluctuate less over large areas of town where home prices can be much more inconsistent. 

Once you find the property you like you can evaluate any issues that may lead to more management complications.  Nearly everything can be fixed in older homes but there is always a price to pay.  Some things are just not worth fixing if it will mean you will spend 10 years trying to recoup the cost.  However, most property can be put in perfectly good rental condition by spending a reasonable amount of time and money before you find a tenant. 

I will go into more detail about the minor and major things you can do to make owning an older rental property another profit center for you portfolio. 

Has your nest egg become your anchor? Just about everyone is in the same position.  We can help get your head above water again and allow you to take control of your future.  Call me today and find out your best options to get out from under your monster mortgage.  Don’t let the housing crash control your future.  You have options. 

Thursday, March 22, 2012

Short Sale in Las Vegas, NV

If you are in a home that is underwater as most people are in Las Vegas, NV there may be hope for you.  The banks may be realizing that more underwater you are in your home the more of problem they have in dealing with the underlying collateral.  If you have considered selling or moving but have held back because of your lack of equity, now is the time to check out the possibilities of doing a short sale.

A short sale is when you sell your property for the current market value while working out a deal with the bank to accept this as payoff in full for your mortgage.  In many cases the banks are willing to do this in order to clear their books and to avoid the costly foreclosure process.  The banks have gotten funding from government hat have given them plenty of cash to discount loans. However, they have been dragging their feet for a variety of reasons.  It has taken some time for the banks to realize it was  better to short sale than to foreclose.

Securitized loans can be harder to modify or short sell because there may be several different parties involved in the ownership of the note but it is still possible.  Banks can get short sales done and in Nevada they are starting to realize the market will never clear and their inventory of foreclosed properties will never go down if they don't start a process of dealing with home owners and realtors that facilitate short sales.

The ideal situation in most cases would be for the bank to just negotiate directly with the home owner and modify their loan so they could stay in the house with a lower payment and lower mortgage amount but for whatever reasons the banks have refused to use this as a tool clear up their books.  It makes less sense to do a short sale for the bank but they seem to be more in favor of doing a short sale but selling your home this way and getting the balance of your mortgage waived so you can buy a new home very soon at a much lower price is the best scenario.  It sounds unrealistic but it is true.  The banks are willing to work out deals for short sales so you can get out of your home without any further liability.

If you are in the Las Vegas area and want to sell your home give me a call or email me and I can discuss your options.  Being underwater is not the end of the line, we are processing short sales every day in our offices and people are moving on to buy a new home in a very short period of time.  You do not have to be behind on your mortgage to do a short sale either.  You can be current or you can be behind it doesn't matter.  Make the call today to get your home listed and sold quickly.

The inventory is low in Las Vegas and homes are selling very fast.  This seems impossible but it is true.  Call me, Chris LaHaie at 702-338-8526 or email me at and find out how to list your home for sale and get out from under that cloud of debt. 

Saturday, March 17, 2012

Bank of America: Too Crooked to Fail | Digg Politics

By Matt Taibbi
March 14, 2012 10:55 AM ET
bank of america
Illustration by Victor Juhasz
At least Bank of America got its name right. The ultimate Too Big to Fail bank really is America, a hypergluttonous ward of the state whose limitless fraud and criminal conspiracies we'll all be paying for until the end of time. Did you hear about the plot to rig global interest rates? The $137 million fine for bilking needy schools and cities? The ingenious plan to suck multiple fees out of the unemployment checks of jobless workers? Take your eyes off them for 10 seconds and guaranteed, they'll be into some shit again: This bank is like the world's worst-behaved teenager, taking your car and running over kittens and fire hydrants on the way to Vegas for the weekend, maxing out your credit cards in the three days you spend at your aunt's funeral. They're out of control, yet they'll never do time or go out of business, because the government remains creepily committed to their survival, like overindulgent parents who refuse to believe their 40-year-old live-at-home son could possibly be responsible for those dead hookers in the backyard.
It's been four years since the government, in the name of preventing a depression, saved this megabank from ruin by pumping $45 billion of taxpayer money into its arm. Since then, the Obama administration has looked the other way as the bank committed an astonishing variety of crimes – some elaborate and brilliant in their conception, some so crude that they'd be beneath your average street thug. Bank of America has systematically ripped off almost everyone with whom it has a significant business relationship, cheating investors, insurers, depositors, homeowners, shareholders, pensioners and taxpayers. It brought tens of thousands of Americans to foreclosure court using bogus, "robo-signed" evidence – a type of mass perjury that it helped pioneer. It hawked worthless mortgages to dozens of unions and state pension funds, draining them of hundreds of millions in value. And when it wasn't ripping off workers and pensioners, it was helping to push insurance giants like AMBAC into bankruptcy by fraudulently inducing them to spend hundreds of millions insuring those same worthless mortgages.
But despite being the very definition of an unaccountable corporate villain, Bank of America is now bigger and more dangerous than ever. It controls more than 12 percent of America's bank deposits (skirting a federal law designed to prohibit any firm from controlling more than 10 percent), as well as 17 percent of all American home mortgages. By looking the other way and rewarding the bank's bad behavior with a massive government bailout, we actually allowed a huge financial company to not just grow so big that its collapse would imperil the whole economy, but to get away with any and all crimes it might commit. Too Big to Fail is one thing; it's also far too corrupt to survive.
All the government bailouts succeeded in doing was to make the bank even more prone to catastrophic failure – and now that catastrophe might finally be at hand. Bank of America's share price has plunged into the single digits, and the bank faces battles in courtrooms all over America to avoid paying back the hundreds of billions it stole from everyone in sight. Its credit rating, already downgraded to a few rungs above junk status, could plummet with the next bad analyst report, causing a frenzied rush to the exits by creditors, investors and stockholders – an institutional run on the bank.
They're in deep trouble, but they won't die, because our current president, like the last one, apparently believes it's better to project a false image of financial soundness than to allow one of our oligarchic banks to collapse under the weight of its own corruption. Last year, the Federal Reserve allowed Bank of America to move a huge portfolio of dangerous bets into a side of the company that happens to be FDIC-insured, putting all of us on the hook for as much as $55 trillion in irresponsible gambles. Then, in February, the Justice Department's so-called foreclosure settlement, which will supposedly provide $26 billion in relief for ripped-off homeowners, actually rewarded the bank with a legal waiver that will allow it to escape untold billions in lawsuits. And this month the Fed will release the results of its annual stress test, in which the bank will once again be permitted to perpetuate its fiction of solvency by grossly overrating the mountains of toxic loans on its books. At this point, the rescue effort is so sweeping and elaborate that it goes far beyond simply gouging the tax dollars of millions of struggling families, many of whom have already been ripped off by the bank – it's making the government, and by extension all of us, full-blown accomplices to the fraud.
Anyone who wants to know what the Occupy Wall Street protests are all about need only look at the way Bank of America does business. It comes down to this: These guys are some of the very biggest assholes on Earth. They lie, cheat and steal as reflexively as addicts, they laugh at people who are suffering and don't have money, they pay themselves huge salaries with money stolen from old people and taxpayers – and on top of it all, they completely suck at banking. And yet the state won't let them go out of business, no matter how much they deserve it, and it won't slap them in jail, no matter what crimes they commit. That makes them not bankers or capitalists, but a class of person that was never supposed to exist in America: royalty.
Self-appointed royalty, it's true – but just as dumb and inbred as the real thing, and every bit as expensive to support. Like all royals, they reached their position in society by being relentlessly dedicated to the cause of Bigness, Unaccountability and the Worthlessness of Others. And just like royals, they spend most of their lives getting deeper in debt, and laughing every year when our taxes go to covering their whist markers. Two and a half centuries after we kicked out the British, it's really come to this?
Bank of America started out in San Francisco in 1904 as an emblem of American capitalism. Founded by a first-generation Italian-American named Amadeo Giannini – it was even originally called the Bank of Italy – the bank set out to serve immigrants denied credit by other banks, and it was instrumental in helping to rebuild the city after the devastating earthquake of 1906.

Bank of America: Too Crooked to Fail | Digg Politics

Tuesday, March 13, 2012

Capital Economics Expects Housing Crisis to End in 2012

Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit.
The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago.
Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters. 
However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.
Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.
Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”
In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.
While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.
Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generate actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.

Capital Economics Expects Housing Crisis to End in 2012

Thursday, March 8, 2012

GAO: Almost Half of Bailed Banks Repaid the Government With Money “From Other Federal Programs” « naked capitalism

The Government Accountability Office continues its subtle war on the talking point used by Treasury that “TARP made money”. Here’s the GAO, with a report out today.
As of January 31, 2012, 341 institutions had exited CPP, almost half by repaying CPP with funds from other federal programs. Institutions continue to exit CPP, but the number of institutions missing scheduled dividend or interest payments has increased.
Much of the government-supplied TARP funding (to small banks) was replaced by the Small Business Lending Fund passed in 2010, which Republicans called “TARP 2.0″.  The larger banks, however, where much of the bank-based credit creation in the economy takes place, didn’t use this program.  Instead, they got an implicit subsidy of between $6B and $300B a year from the widespread belief that the government will not let their bondholders lose money.
The talking point that the Troubled Asset Relief Program made money for the taxpayer is an important structural argument for the Treasury Department and the political elements in the Obama White House.  Yves Smith quoted an earlier GAO report on this phenomenon a few months ago.
Although Treasury regularly reports on the cost of TARP programs and has enhanced such reporting over time, GAO’s analysis of Treasury press releases about specific programs indicate that information about estimated lifetime costs and income are included only when programs are expected to result in lifetime income.
Our banking system is still reliant on the government for support.  Officials can claim that TARP made money, but it’s becoming increasingly clear that this is a way of avoiding a description of the actual policy framework.

GAO: Almost Half of Bailed Banks Repaid the Government With Money “From Other Federal Programs” « naked capitalism

Leverage and how to use it to your advantage when buying income property

Leverage and how to use it to your advantage in Real Estate

Why is real estate such a great way to invest your capital? Leverage is the number one reason you can get such great returns on real estate. Most people don't understand leverage or understand the principals that make leverage such a fantastic tool in your real estate investing arsenal.

First let me define leverage in the way it applies to real estate. You use leverage when you buy a 200,000 property with a 20% down payment and borrow the rest of the money from the seller or the bank. If you paid cash for the property you would need to come up with 200,000 and change at closing to take over a piece of real estate. You would be using no leverage and you would be looking for a return on your capital that would be similar to what you would get in other investments. If you made 2400 in rent per moth and after expenses put 1500 in your pocket cash each month you would make 18000. This 18000 would be your yearly return on capital invested. It is a good return and it is possible to make a good living buying property for cash. You can calculate your cash on cash return by taking your 18000 profit divided by your 200,000 investment.
The number would end up as a percentage. You would end up with a return of some where around 9% for the year. This is a good return on capital but not nearly what you can get if you use leverage to make your purchase.

Let me give you the same example but with only 20% down payment. You would have to bring 40000 to the closing for your down payment and you would be financing 160,000 from the seller or the bank. Rates are relatively low now but they tend to be higher on investment property so I will use 6% rate of interest on the 160,000 financed. We can calculate what it will cost you in interest the first year by taking 6 % of 160,000. The amount of interest on your loan will be 9600. You are paying 9600 the first year of your loan in interest to use leverage. This also leaves you the 160,000 in cash that you would have been investing in one property still in your account for other purchases so you are keeping your options open.

Lets take a look further at my example and see if you can actually make more money by using leverage.

You will still receive the same 2400 payment for rents per month except now we need to add in the interest cost into the calculation. You will still be taking in the 18000 a year but you have to pay your mortgage or at least the cost of interest out of cash flow. You will paying interest and you net gain at the end of the year will be only 8400 in our example. It looks like a lot less but less figure out what return we are getting on our money invested.

We take the 8400 net gain for the year and divide it by the amount of capital invested which is 40,000 this time. So what looks like smaller gain income becomes a much greater return on you capital because the new calculation comes out 21% return on your investment.

Leverage is the key to profiting from real estate. It is possible to double or triple your return on capital invested by financing a portion of the deal. The lower your down payment the greater return on you money. Using leverage to invest in income property is the smartest way to get the most of your capital.

The other thing to remember is that you could use the balance of your funds to purchase 4 more properties that would get similar returns so paying cash is not always the king when it comes to investing in real estate income property. It is possible to get even better returns on your money in real estate investing and I will discuss those in other posts.

Wednesday, March 7, 2012

income property at incredible prices in las vegas

If you have considered investment property that can give you incredible returns past and been unable to find suitable real estate it is time to look again. Real Estate prices in Las Vegas, Nevada are back to levels equal to the year of 1997 but the rents are still at 2009 levels. This means that you can make tremendous cash flow from investment properties with very small investments.

High quality property in a four plex can be purchased for as little as $200000 today that still generates over $3000 per month in rent. It can easily generate over 1000 or more a month in positive cash flow per month after expenses. This is the time to make large sums of money very quickly in the rental business and it is the time to set your self up for a wealthy future.

 Times like these are when people make their fortunes.  It is buying at the bottom of the market when you make the most money.  It is when the average buyer is running scared and afraid to take on any risk.  The reality is that when the market is down their is far less risk of loss than when it is at its peak.  The even better deal is that property at these prices produces much greater cash flow and a much better return on your investment. 

If you want to make money investing in real estate then now is the time to take advantage of the pricing.  You are able to buy income property at a major discount right now and you will see great cash flow and higher returns so get your financing in order and start looking at property today.

Tuesday, March 6, 2012

Advantages of buying occupied rental property

Some investors will always say that you are better off buying rental property that is unoccupied so you can start fresh.  With an empty property you can handle all repairs and remodels before having to deal with a tenant.  You also will be able to screen your own tenants and be sure about the quality of tenant you have in your property.  However, there are several advantages that can often lead to more money in your pocket if you are buying a fully rented income property.  I will list a few for you and you can make your own case as to what would be best for you. 

The number one reason I like property that is already rented is that you an receive rent income right at closing.  You can stipulate that if you close on the 5th of the month that the owner must collect all rents and transfer them to you at closing for the 25 days remaining in the month.  The prorated rents for a four plex could be as much as 3000 off of you needed cash as closing.  You also can collect the deposits at closing from the previous owner that may be in the same amount.  Another 3000 would make the bonus of cash up to 6000 to your side of the ledger. 

Now depending on the property and the previous owner you may just get the owner to put up the amount of rent rather than collecting it.  If the current owner has a "don't wanter" he may be tired of dealing with tenants and rent collection and may see the 6000 as cost of getting the property off his hands.  Either way it is money in your pocket and that is the idea with income property.  Income in your pocket. 

You have to consider the downside as well but I have found it much easier to take over a building that was fully occupied in most cases.  It is usually a good indicator of the habitability of the property as well.  If you can verify leases of several months or more and see that the tenants have paid the rent you will be less likely to have problems.