Today’s Wall Street Journal published an article about large funds are moving into buying Las Vegas Foreclosures and other foreclosures around the US. Many are basing these investments on the relative health of the rental markets in most major cities, including Las Vegas, coupled with the huge drop in foreclosure pricing and the opportunity to make significant amounts of money when the markets bounce back a number of years down the road.
Firms Raising Capital for Foreclosure Investments
Silver Portal Capital LLC, a small real estate investment bank is raising $150 million to purchase foreclosed homes in San Diego, where the firm is based. To summarize, they are betting the market will turn around within five years and they will make a strong return on their investment.
Richard Campo, the CEO of Camden Property Trust which is one of the country’s largest multi-family real estate investment trusts is weighing purchases of foreclosed homes in Las Vegas, Orlando and Phoenix.
There are risks for both of these firms and others who are already investing. No one know on a national level if the market has hit bottom and if the country tips into a recession what will the impact be on rentals.
Our Thoughts and Analysis
Risk and reward live together – a delay of a few months in buying Foreclosures could mean these investors and consumers could miss the bottom of the market.
Many foreclosed homes are distressed in some ways (holes in walls, fixtures missing, carpets soiled, etc.) – if you are buying a Las Vegas Foreclosure home you must be prepared for some cosmetic repairs in some but not all cases.
As the article points out, buying Foreclosures isn’t just about crunching numbers – you need to look hard at a neighborhood – if the houses aren’t maintained, you have dogs running loose and a Starbucks isn’t close by, there is no accessible freeway nearby (to minimize commute times) – you have to think creatively as you weigh your investment or purchase.
Las Vegas is dissimilar from many major cities, in that our economy is driven by our entertainment and tourism industries and we are a getaway destination for people all over the world – fuel prices are hitting us like other major metropolitan cities, so it’s not all rosy. But, our economy is much different from San Diego or Sacramento.
Has the market bottomed out on Las Vegas Foreclosures? We think so and the fact that these large professional companies are dipping their toes in the water partially supports our analysis.
But, at times we feel like a lone voice in the wilderness when we listen to the national media, but that’s all part of being a market leader. As Ross Perot says, “you either lead follow or get out of the way”
