Las Vegas Economic Forecast, or “I’m going to wait until the market crashes!”

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I’ve heard it from a few people. One of them is sitting on over $130,000.00 in cash. Waiting for another 2008 market collapse.  The thing is, that money under your mattress, it’s loosing value every year due to inflation. Sure, real estate goes up & down cyclically but nobody knows exactly when those cycles hit.  There were a lot of investors in 2000-2005 who cashed out, assured we were at the peak.  I’m not telling you to time the market.

What I am saying is that the devaluation of your money is non-cyclical, and certain.  Grandpa always says when he was your age a gumball was a penny, not 25 cents.  Are you planning on buying a home, moving in, making it your own & moving out next year?  Probably not.  5-7 years maybe.  Long term inflation average between 1913 & 2013 according to InflationData.com is 3.22%.  Here’s the kicker.  Inflation of 3.22% doesn’t seem that bad to those who don’t understand the power of compounding, but as the article goes on to mention, that compound effect means an actual item that cost $100 in 1914 would now cost you $2,375.00.  As we keep printing money, homes will always be built from materials, on land, the cost of both will be affected by inflation.  So, if you need 200 2×4’s, 2,000 sq ft of flooring, etc. to build a home, and then the cost of the land.. it’s total price is all affected by inflation or the compounding devaluation of the dollar.

So yes, home prices will go up, and they will go down.. and then they will go up again but buyer’s aren’t getting homes at the prices of 30 years ago. What won’t change is your need for a place to live.  If you’re currently renting a decent 3 bedroom home in Las Vegas, and say you’re paying $1,600/month.. you’re paying $19,200/year and when you move you’ll have nothing to show for it but a U-haul bill.  If over that statistical 5-7 years you’d be in the place, you could have been paying $96,000-$134,400 towards ownership of an asset that will adjust with inflation (among other factors).  Yes, there are other factors that will adjust the value of your home than inflation, however when you look at something like gold, which some say is a solid hedge against inflation… there are other factors that affect the price of gold as well (such as stock market dips and advertisements on how safe gold is); and you can’t live in your gold.

“I’m waiting for the price of homes to drop due to rising mortgage rates!”  This is another one I’ve heard.  Thing is for most primary residence buyers, if there were a direct correlation of price reduction to interest rate hikes, the result would be no change in your monthly payment.  Unfortunately for those who haven’t dug a little deeper, there is actually an inverse correlation historically.  I could explain, but there is already a good article posted here on First American’s website.

The link above references a strong economy making housing less affordable.  As we look locally, the Las Vegas area economy is seeing over 13 billion in new capital investment, and people moving here (your competition when home buying) are younger and wealthier than before.  For more of these figures and data, see research posted here at California Credit Union League’s research on Southern Nevada.

So with a growing local economy, rising interest rates, rising home prices year over year, your savings devaluing annually, and about $19,000.00 you’re paying in rent each year, tell me again why you’re waiting to buy?

As you drive around the valley, I’m sure you’ll notice a ridiculous number of apartment projects being built.  Do you think the companies pouring millions into those projects didn’t do their homework?  They know plenty of people won’t take action today, and will be mailing them checks every month so we can ‘afford’ to live and work here.  Don’t be one of those income streams for these corporations.  Call or email me today and let us help you get on a better path to financial freedom and home ownership, Las Vegas.

It May Be Cold Outside, But January is a Hot Time To Buy Las Vegas Real Estate.

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This time last year, our family purchased a new home in Mountain’s Edge, a great community in the South West of Las Vegas.  We were scouring the MLS for two months looking for a perfect place to call home for an expanding family.  Our first contract was on a home a bit bigger than we needed.  It was owned by a California investor who’d let deferred maintenance pile up and was unwilling to negotiate for repairs that would be needed.  The balcony had a crack in the flooring that the inspector said may or may not be a big issue.  Luckily it rained two days before the end of our due diligence period & I was able to bring a moisture meter to check the absorption.  Turns out the entire plywood surface under the stucco had absorbed so much water it would present and un-safe structural issue.  This repair alone would total about $10,000.00.  The rest of the drywall, plumbing, and stucco repair would be about another $10,000.00!

Because of this blessing in disguise, we had already been approved by our lender’s underwriter, meaning they had checked off all of the boxes they needed to be sure they could loan us all the money we’d need.  Once we decided we weren’t going to buy a home that the seller wouldn’t concede on cost to make it fit, we canceled the contract.  What we lost was the cost of inspection, and appraisal; about $1,000.00 in total.  What we kept, by navigating our contract properly was our earnest money deposit.. and our underwriting approval.

We took both and continued our shopping.  Viewing a few more homes with more clarity on what was necessary, and what was negotiable in our wish list. We found a home more nicely appointed and certainly more well cared for in the same area.. for $40,000.00 less.  Because we’d narrowed down what we really needed and where we wanted to be, we found our new home before the sign was even up in the yard (use the MLS, not Zillow!)  We submitted an offer with prior underwriting approval from the last deal that went south.  This isn’t the same as coming in with cash, but it is a close second meaning the likelihood of our contract coming to fruition is much better than those competitors who have only a pre-qualification.

By getting the home under contract in January when competition is less than the peak season, we were able to purchase the home before the busy summer months when it had already appreciated $15-$20,000.00 due to the competition driving prices up.  By having our financing in a more secure position than many others, our seller’s agent told the 4 other offers that came in to not even bother submitting.  Assurance we CAN close can be better than even a few thousand hypothetical more dollars to the seller (it’s not always about the highest bid!).

If you’re thinking of buying a new home at any point this year, the best time to start getting a plan together is right away.  There is a lot to consider and a lot to prepare, especially for your financing if you’re not planning to buy with cash.  A good Las Vegas area Realtor can assist you with this checklist so you’re in the best position to buy, be it this month or further down the road.  I look forward to hearing from you & seeing how we can best prepare you for a great transaction, and a smooth transition to your new home.  You can contact me at SteveChristmas@gmail.com or call me at the number listed in our Contact section.

Bonita Rental

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Thanks for your interest in our downtown 3 bed/ 2 Bath rental home.  604 Bonita sits on just under a quarter of an acre & has new ceramic & LVP flooring through out.  This home boasts a large kitchen with double ovens, plenty of counter space, custom cabinets, a dishwasher,  and upgraded cooktop.  Appliances are included in the $1,600.00/ month rental price.

Large family room and living room provide plenty of living space, and a formal dining room is also featured.  All bedrooms are ample sized so all residents will have a comfortable space to call their own.  It is pre-wired with ADT security system, as well as exterior security cameras, and custom iron bars on all points of entry, making it one of the most secure living options in the centrally located downtown area.

You’ll be a 5 minute drive from Fremont east, an even shorter trip to the Main street corridor, and just minutes from both the I-15 and the I-95.  John C. Fremont middle school and the adjacent neighborhood park are only .5 miles away.  Shopping, entertainment, and dining options are some of the best in the city near this home & downtown living can be yours by April 1st.  Give us a call at 702-879-8502 & arrange a time to view the property and submit an application for rental.  Pictures of the property are found below.  The home is currently occupied so please do not disturb our current resident.  Applications to rent can be made at: https://home.cozy.co/apply/394788   Owner is licensee with Very Vintage Vegas Realty. Thank you for your interest.

Buying a New Construction Home, The Right Way.

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When you’re looking to buy a home, you have many options.  If you’re looking at a new construction home rather than a pre-existing one, you’ll be given an entire list of options, much like buying a new car.  Many of these upgrades offered by builders are places for them to maximize their profits.   By positioning themselves as a “one stop shop” they can make the process as simple as checking boxes with dollar signs next to them.  The simplicity of saying ‘I’d like quartz counter tops, this tile flooring, these cabinets, etc’ can be alluring, but you’re trading your time for top-dollar prices on materials & labor.

How many smaller items do you purchase without shopping around? If you’re furnishing your home do you walk into a store & “say I need a couch”, take what ever they bring out to your car & pay what ever they’re asking?  If you do, stop reading, I can’t help you.  These upgrades, while much smaller in price than say a car, or a home itself, can add up very quickly.  Perhaps you could assess the upgrades offered & select the ones most important to you, then buy the new home from a builder,  and get multiple bids from quality contractors that can even do a better job, with better products, for less money.  Doing this means you’ve added value to your home for less expense thereby creating net worth for yourself when it comes time to sell or refinance.

Now one more thing to keep in mind, is the idea of diminishing returns.  Meaning what you pay for a luxury in some cases increases the overall objective value of the home (what an appraiser says it’s worth) beyond what you paid for them.  Many, however will not.  If you have a list of upgrades you liked from the builder, and you’re going to hire an appraiser to value the home for you, you may be able to ask the appraiser to review the upgrades you’re looking at doing and ask him if the cost of upgrading will result in  getting your money back when you sell, result in loosing money when you sell, or result in just covering the cost of upgrades yet the cost is worth it for your quality of life while living in the home.

Remember if used properly a home purchase can be not only a move that provides an ideal space for living, but can create value when it comes to your net worth.  One of the larger potential upgrades in Nevada, is the option for a pool.  According to HouseLogic.com, a pool may be a good investment if it won’t add more than 10-15% of the cost of the home without it.  This cost needs to be weighed against how much your family will really use it.  Will you get enough enjoyment out of it that the cost of both purchasing, maintaining, and in most cases the cost of financing it make sense?  Another thing to consider, which ties back into the 10%-15% of the home cost is that many families buying homes under $300,000.00 may not want the yearly expenses of cleaning and maintaining a pool & might opt for the home for sale next to yours because it’s in a nice neighborhood & they can just afford to live there but not afford maintaining a pool.  If you’re in a neighborhood where many homes have pools, and cost over $350,000.00, your family will use the pool weekly & it provides quality of life your willing to pay for, maybe it makes sense.

Speaking of the value of homes near yours in new construction subdivisions here’s the biggest thing to consider: Where does your home line up in the overall price of homes in the neighborhood?  Markets will always swing up and down through the years.  One thing that will always stay consistent however, especially in an area with an HOA, is how your home compares to other homes in the neighborhood.

Let me explain.  Let’s say you’ve spoken with your mortgage lender and been safely pre-approved for a $400,000.00 home.  Great! You’re excited, you want to drive around to the different home sites & start looking at models.  What should you be considering before worrying about the specific home you want, much less the upgrades? The homes around it.  That $400,000.00 you qualified for can buy you the nicest home in the neighborhood if homes there range from $250,000.00 to $400,000.00.  It can also buy you the smallest, or least upgraded home in a neighborhood where home prices range from $400,000.00 to $650,000.00.

What’s the thing to consider here? That both homes, in both neighborhoods may be very similar.  What your getting with the least expensive home in a more expensive community is increased desirability when it comes time to sell, statistically speaking that time will come, so set your self up to make money.  Being around all those really nice homes you can’t afford, will make your $400,000.00 home more desirable to a prospective buyer than being the ‘nicest home’ in a less desirable community.   In a much exaggerated example, think of some peoples reaction to your address: “wow, you live in Spanish Trail?” versus “oh, you’re in Rhodes Ranch, ok”.  (no, I’m not currently aware of a $400,000.00 foreclosure in Spanish trail, that’s to illustrate a point)  Why are these two reactions so different?  Because of the surrounding neighborhood. Maybe when it’s time to sell; being a part of that prestigious community is what your prospective buyer is really after.  To him/her location is more important than the home itself.

So at the end of the day, remember:

  1. Buy as much house as you want to, that you can safely afford.  Just do it where everything else around you is more expensive.
  2. Don’t get up-sold on overpriced upgrades, you can always do those later & probably for less money.  What you can’t do is change where the home you bought is located.
  3. If you’re looking to buy or sell a home in Las Vegas call me.  Steve Christmas 702-879-8502

 

 

Buying a Home – The Financially Responsible Way.

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If you’re like many people who just moved to a new area, or decided you’d like to stop making your landlord rich & start building some real wealth for your family, you may be getting excited about buying a home.  You’ve got a lot of things to consider before you jump into a car & start looking at something you saw online.

Firstly, are you qualified to complete a purchase?  If you haven’t spoken with a mortgage lender yet, you may be getting excited for nothing.  Do you know what your credit score is, do you know what credit score you’ll need to secure a decent loan?   How about a good loan?  There are many ways to get an idea of your credit score & credit history if you’re just getting started.  The easiest is by using a site such as CreditKarma.com.  Keep in mind, nothing is truly free, your credit information is provided to you here in exchange for the ads offering you credit cards & other loans.  Provided you can avoid any temptation to to get a card you don’t need (which may actually temporarily hurt your score, depending on your situation) you may be well served to keep an eye on your score & find ways to improve it before making a large purchase such as a home.

Once you know where your creditworthiness lies, it’s time to think about down payments & closing costs.  Yes, you may be able to get an FHA loan with very little money down.  Again, nothing is free, since March of 2013 this now comes with a PMI (private mortgage insurance) monthly fee that will now stay on your loan until it is paid off or refinanced.  That being said, if you can get into a property in an area where appreciation will result in your equity growing substantially over the next few years, your ability to refinance out of the FHA into a conventional loan may happen more quickly than if you were just paying down 20% of what you bought it for.

For example, I buy a $100,000.00 house with 3.5% down My loan would be for $96,500.00 . In the first few years, most of your monthly payments are going to interest, not paying down the principle much.   However if in a few years, appreciation has been good in the area, maybe my home is now worth $120,000.00.  80% of 120,000.00 is $96,000.00 . In a few years, I will have paid $500.00 off my principle & be able to refinance out of needing the PMI (which only benefits your lender’s risk, not your  families’ wealth.)

If your credit is ok, & you’re looking to start saving now to amass the funds needed for down payment, remember you’ll also have closing costs which can range around 2-5% of the purchase price .  Of course, you’ll have moving expenses, maybe new furniture, paint & remodeling expenses… the list goes on.  The thing is, real estate can be a phenomenal wealth generator for you & your family.  Maybe buying something when you can afford to close, but need to wait a few years to repaint the exterior is not a bad idea.

Maybe you’re looking at other ways OWNING something can benefit your bottom line.. You were renting for years, putting money in your landlord’s pocket. Now you can be the landlord! Maybe you’re thinking of buying a duplex & renting out the other half?  Maybe buying both halves will mean you get to live in one of them for 80% less than it would cost had you only bought one half.   This is a concept referred to as ‘House Hacking’ & it’s commonly referenced on sites such as BiggerPockets.com, a place I’m personally going to learn more about real estate investing all the time.

You don’t need to buy a duplex or a fourplex to save money while your tenants or room mates pay down your mortgage for you though, maybe you get the concept & find a home you love that has a nice size casita you can get $500.00/ month for.  If your Mortgage is only $1,200/month then you’re living for $700 & you get the whole house, your tenant has only the casita!

The best part about house hacking is the money you save.  Here’s why.  Let’s say you own your primary residence & you’re looking to start buying investment property.  Every dollar you’re able to save while living a comparable lifestyle to the one you currently enjoy, is another $1.(your tax bracket+[your tax bracket x your tax bracket]) that you would have to earn.  Meaning if your tax bracket is 25%, every dollar you could go out & earn in a second job would only net you $0.75.  Or every dollar you’re able to save is another $1.33 you’d have to go earn in a 25% tax bracket ([.25x.25=.0625]+1.25=1.33).

See why saving is hugely more effective than just earning more? Look at the example above, That $500/month is $6000/year multiply that out by the tax saving of 1.33 & it’s like you just got a $7,980.00/year raise before taxes.  Live frugally, it doesn’t mean you can’t enjoy your life, just start saving & have fun doing it.  Look for creative ways to do so.  It becomes a fun game & the more you do it, the easier it gets to do more.  I saved up $4000.00 for a rainy day fund.  Then I took the deductibles on my wife’s truck & my car & moved them from $500.00 to $2000.00.  Now I’m saving $360/year on insurance premiums.

Though it’d been in my face all my life, I’ve never had a wholesale club membership, just didn’t think about it until i was looking for ways to save more money to invest in real estate.  Now, I spend my previous weekly grocery budget & get 3 weeks worth of better quality food.  I also make one trip every three weeks & spend less time shopping & more time with my family.  My $60 Costco membership will save me $4,000.00 per year on gas & groceries.  What’s $4000.00 x 1.33? $5,320.00 . It’s like i just got a good raise, or a part time job doing nothing.. my lifestyle is the same or better & it doesn’t up my taxes due.

All this is not to say that picking up a side hustle and earning more money is a bad thing, especially if instead of going on vacation with that money or buying shoes, you are working your plan on your additional income from the saving side as well.  That’s actually one of the reasons I decided to sell real estate & write this blog.  I got excited when I started learning the secrets of how money really works, the power of compounding returns, & the advantages of frugal living.  It’s some of the most powerful knowledge I’ve accumulated in my life & I can’t believe it’s not taught in school.  You have to self educate and as you learn, you’ll likely become as excited as I am about learning more.  My goal is to share this knowledge with those I know & care about as well as anyone who’s ready to learn & take control of their financial future.  I want to help others build net worth using frugal living and real estate as a powerful vehicle to enhance their sense of security and happiness.

Owning real estate provides unique benefits such as mortgage interest tax deductions, appreciation on 100% of your investment that you may have acquired control of for an investment of only 6% of it’s value (3.5% down + 2.5% closing costs).  I’ll dive more into some of these items & looking at your home as an investment as well as a place to live in a future blog, so subscribe to my updates & I’ll do everything I can to pass along information.  If you’re ready to talk about buying a home or an investment property, call me at 702-879-8502 & let’s get your life on track.  Once we have an idea of your goals & situation, I have phenomenal mortgage agents who can help you choose the best options for leverage.

Here are a list of some of the best books I’ve read if you want more detailed information on the topics of building net worth.

Set For Life by Scott Trench,

The Millionaire Next Door by Thomas J. Stanley & William D. Danko,

The Book on Rental Property Investing: How to Create Wealth and Passive Income Through Intelligent Buy & Hold Real Estate Investing! by Brandon Turner.