Math, Math. (And only then, Location).

These are the (new) three most important words in real estate today.

In preparation for my class of the above name on Thursday, I scoured the Las Vegas Multiple Listing Service for residential resales to use as examples.  Here’s what I found:

Property 1:

3 bedrooms/3 baths, 1180 square feet in northeast Las Vegas just 4 miles from Nellis Air Force Base.
Seller is a bank or finance company.
List price is $50,900. Year built, 2007
Based on photos, the property is in good condition with artificial wood floors, clean carpet and new paint, but no appliances.
At list price with a 20% down payment, 6% in closing costs, $1800 for appliances and a 5% 30-year fixed loan, the property is estimated to cash flow at $2,221 before taxes.

If you could get the seller to discount the price to $46,800, the annual income jumps to $2,739.

Property 2:
3 bedrooms/3 baths, 1598 square feet in Henderson, Nevada, near the intersection of two auxiliary interstate highways.
This is a short sale.
List price is $79,900. Year built, 2001
Based on photos, the property is in good condition with carpeted floors throughout and all appliances.
At list price with a 20% down payment, 6% in closing costs and a 5% 30-year fixed loan, the property is estimated to cash flow at $3,941 before taxes.

I thought the list price was high so I also ran the numbers with a sales price of $69,900 (a 12.5% discount).  The reduced price brings in $4,456 before taxes.

Property 3:
3 bedrooms/2 baths in Henderson, Nevada within one of the top school zones in the county.
This is a short sale.
List price is $95,000. Year built 1985
Based on photos, the property is in fair condition.
At list price with 20% down payment, 6% in closing costs and a 5% 30-year fixed loan, the property is estimated to cash flow at $3,753 before taxes.

At $90,000, the property would cash flow $4,010.

An embarrassment of riches.  Each property flows positively.  Each would make a great investment. If you were investing, which property would you choose and why?

If you want to learn more about these properties and similar ones; how to calculate rates of return for real estate investments; and how to find, negotiate and close on great real estate deals, come to my class:

Thursday, October 20th, 2pm
Keller Williams Realty Las Vegas
3090 S. Durango #100 (at Sahara)

**This article is featured in theHow to Make Money with Real Estate Blog Carnival: December 1, 2011 Edition**





No Strings Attached?

From a utilitarian perspective, giving gifts makes no sense. Generally speaking, you buy gifts for people who are likely to buy you gifts – hence the term “exchanging”. Receive a gift from someone you had no intention of buying anything for, and you’re selfish and inconsiderate. Do the opposite and you’re a sucker or a suck-up. And if you do buy something for someone who buys something for you, custom dictates that the gifts can’t be of disparate value: hence the ludicrous practice of removing price labels. After all, nothing ruins the joy of receiving a thoughtful and apposite gift than finding out the donor spent too little on it.

Think about it: you spend money to get people things that you hope they’ll like. If they don’t, you’ve wasted your time and resources. Thus the most useful possible gift is the one perfectly adaptable one: cash. But again, the suitability of cash runs into the brick wall of decorum. ‘Tis the season to be gauche. And again, if the recipient adopts the same logic about gift-giving, you end up exchanging cash for cash. Reduced to its fundamentals, the transaction is easy if quotidian: instead of you buying me a $150 gift and me buying you a $160 one, I should just give you $10. Then we can spend the next year discussing how I’m tacky and you’re cheap.

If you’re the parent of a young adult, or otherwise have someone in your life whose net worth isn’t yet where yours is, here’s a mutually beneficial idea for a decidedly American gift that isn’t cash: the next best thing, credit.

The average college graduate receives that bachelor’s degree with a five-digit Sallie Mae obligation. As for the prudent and responsible students who manage to graduate with no or minimal student loans, doing so usually means there’s hardly enough money remaining to create any kind of nest egg. The wealth-building years have begun in earnest, but there’s almost nothing to lay a foundation with. Renting an apartment for the next few years (an investment with a guaranteed rate of return of -100%) wipes away much of the equity a young person could be building.

If you can afford it, lend your upwardly mobile kid enough to cover the down payment on a modest little domicile. Even buying the tiniest of townhomes gives him or her the opportunity to build equity, and to exercise the care and consideration for one’s things that renters have no incentive to.

Say you find an $80,000 condo that requires a 20% down payment to avoid private mortgage insurance costs. Financing the remaining $64,000 at today’s 4.24% 15-year rates means your kid would write monthly checks for $481.13, which makes far more sense than spending $800 on a larger rental house in a fancier part of town.

Remember, this isn’t a gift in the traditional sense. As the giver, you’re expecting something in return – regular payments, with interest. If you can give your kid a 100-basis point break on market rates, she could pay back that $16,000 loan back to you in $112.35 monthly installments. Which should be pretty easy to do, especially if she’s collecting rent from a roommate. Of course, we’re assuming she’ll be making gradually more money throughout the life of her concurrent loans.

The real “gift” in this situation is something intangible but vital: an introduction to real-world finance, and a chance to exercise responsibility. It’s the ideal meeting of a recipient whose ambitions outweigh her wherewithal, and a donor with the ability to make the recipient’s transition into the world of commerce run a little more smoothly.

Juice Up Your Business: How to Turn Obstacles into Opportunities

What are the questions that keep you awake in the middle of the night?

How will I pay my bills?

Why can’t I get my deals to close?

How do I sell houses to buyers who are afraid of losing their jobs?

My recent teleseminar for the Women’s Council of REALTORS gives you insight on how to turn your problems into opportunities.

Listen to the call