Friday, May 13, 2005

They Discovered More Land In Las Vegas

If you are considering buying a piece of the Las Vegas area desert, read this article. It seems that not only is the Bureau of Land Management still selling land, the city is starting to balk at taking on more growth. "If the federal government is going to take the majority of the money raised in Nevada via Bureau of Land Management land auctions, then just don't have the sales, or drastically reduce what is sold."

"Woodbury counters that growth would not stop under his plan, pointing to the thousands of acres already sold at BLM auctions that have yet to be developed."

And a roundup at the bottom of the page included this about apartments. "Apartment rents continue to fall, according to CB Richard Ellis, Las Vegas."

Office space; "A California-based real estate investment firm, purchased its first property in Nevada: the Park Flamingo, an 112,682-square-foot office building. The purchase price was $10.25 million and occupancy was 42 percent at the time of sale."


At 5:42 PM, Anonymous sam said...

We've made some good money picking up underperforming properties. But we have a long time horizon (5-10 years at least). But that's not possible right now. I'd bet that 42% occupancy bldg in LV was sold for top dollar.

I've been involved in RE for 30 years and I'm seeing things that just don't compute. It makes me worry that maybe things are passing me by I'm pretty much an add, substract, multiply & divide kind of guy. Is there some new math out there I don't understand?

Of course, I felt that way about the stock market in the late '90s. When I don't understand something, my instinct is to not get involved. So i'm sitting this out.

At 5:54 PM, Blogger deb said...


You "don't understand" and you are an experienced investor, yet, kids who have never seen RE decline even $1 declare that "RE never goes down" and "it's a totally new paradigm". Then they buy as much as they can leverage themselves into with neg am IO ARMs. (Worse yet, the lenders actully give them the $$ to do it!)

Somehow, I don't think it will end well.

At 7:13 PM, Anonymous John Vosilla said...

Sam, it's all in the financing and expected appreciation for these new age investors. 1% cap rates work both cash flow and IRR wise if you pencil in these 20% appreciation figures with 1% pay rates on negative amo oprtion ARM's. Off course anyone familiar with past cycles knows most investors were wiped out using as low as 8% cap rates, which is what many of the insitutional investors were doing on half empty brand new office buildings in the late 80's. Those today have a zero percent chance of making these deals happen for a long term horizon. Perhaps break even over 10-15 years as best case scenario. At the last bottom around 1993 land was worthless, commercial buildings were 30 cents on the dollar and certain overbuilt pockets of residential were down 20-40%. In Florida single family held up pretty good but condos declined 30-40%. In Houston the condo market bust in 1984 with no recovery yet. You can still pick up condos at bargain prices even 20 years later.

At 7:38 PM, Anonymous Anonymous said...

A year or so before the dot-com bust, I regularly endured hearing my obnoxious brother-in-law chuckle and crow, "I can't believe how much money I made in the stock market today." Never mind that I had tried to educate my sister about stop-losses and that I owned not a single share of stock in anything. Of course, he lost big-time.

Until the bust, I felt left-out and perhaps a little "chicken." After the bust, I rejoiced for my good fortune.

Right now, I am selling my only property, an expensive (to me) oceanfront Florida condo. I will lease a bigger condo on the river and wait awhile. Chances are, I'll be able to buy a nicer place later, for cash, as the market tanks. Worst case, I buy a nice home in a neighboring state. But at least I will not lose what I believe many are about to lose -- most or all of their RE equity.

Sheep. Shearin' time. Big Bro says so.

At 8:06 PM, Anonymous sam said...

(it's all in the financing and expected appreciation for these new age investors. 1% cap rates work both cash flow and IRR wise if you pencil in these 20% appreciation figures)

I understand what you're saying. I suppose if it were real smart, i'd set up a bunch of shell corps and borrow to the hilt and see if i could get hit the jackpot. But i'm looking to lower my stress, not raise it. So count me out of that game.

Whenever i've evaluated income prop, I look at the current and potential income as my cue to valuation. I have never factored in appreciation, unless it's some special situation. An example would be if we felt the area was destined to improve and would bring higher rents.

There are probably some smart operators making hay right now. But I wonder about the retail (i.e., residential) folks. You can always Chap 11 a corp and turn the keys back and you don't get hurt personally (except for your reputation). But individuals don't have that protection.They are fully exposing themselves right now. Maybe some think it's no big deal to go bankrupt. I guarantee you they don't want to go through that.

At 8:39 PM, Blogger Nayrab said...

This is so true, concerning the past stock bubble. I remember a 60+/- year old utility inspector bragging to me he had made another $50k in stocks in just six months. I was flabbergasted. He retired shortly after that and about six months later the market tanked. He died soon after of a heart attack. I still wonder if the market may have caused the death.

My wife's Grandpa was the rich one on the family, and was known for sending extravagant birthday and Christmas gifts. One Christmas all she got was a card. He called shortly thereafter amd told her he had lost so much in the stock market, he might have to get a job. He was 75+/- at the time. Gad,s too bad he didn't follow Buffet's investment strategy.

At 2:34 AM, Anonymous Anonymous said...

Our economy is becoming a colossal casino. No one is thinking about getting rich being productive anymore. Really depressing.

At 7:59 PM, Anonymous Anonymous said...

Good point! I like it!

At 4:43 PM, Anonymous Anonymous said...

Good point 2:34.

It's funny that you should mention 'Casino' because I had been thinking the same thing the last few days. It seems that the media is helping to make us a nation of gamblers ... just look at all the professional poker shows.


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