Buying a first home: Las Vegas

[SteveOMS]

I'll echo alot of the sentimate above. Aggressivly negitoate any deal you make in LV. Bargains are to be had today if you search and try and cut prices see if you find a seller just ready to go right now and you can get next years price declines today. I wouldn't do this as an investment, but if your sure your ready to settle and live in one place in LV you'll be fine. I'd just caution when looking at new homebuilders with lots of inventory, I wouldn't buy in 'failed communities' with lots of vacancy's unsold homes and the like for quality of life issues and future values will hurt more in communites that never got off the ground and never should have been built. If looking at new home homebuilders I'd stick to communites that have high sales % overall and high occupancy rates and they are just looking to clear out the last inventory there.

Steve

[Taylor Caby]

good2cu,

i would be very, very careful about this. let me preface this by saying i am not an expert, but i've done some reading on the subject, taken a few RE courses in college, etc.

the prices look great now, compared to how they were at the peak of the biggest real estate bubble in our countries history just a year ago.

the way i see it, things aren't THAT bad right now. yeah, prices are certainly cheaper than they were, but i'd wait till we started to see the decline in prices in Vegas flatten a little bit before jumping back in. Prices are significantly lower than they were 6 or even 3 months ago, and I don't think anyone really knows when that is going to stop. i read about quite a few people saying "my house lost X value, but it will bounce back so I'm just going to ride it out for another 6-12 months." Assuming this doesn't happen, there's going to be another surge of motivated sellers, selling at much cheaper prices than you can find today, in another year+.

I am going to look to buy in Las Vegas in 18-24 months if the market continues to soften and I can get a summer home for 40-50% cheaper than they were in 2006.

tc

[SlowHabit]

Waiting to buy a home cheaply is great but there are a few things we must consider.

Good2cu is currently a professional poker player who claimed he has won a lot (we'll take his word for it). Considering that he's also an online player, it's also important for him to operate in an environment where he feels fresh. Here are the advantages of him buying right now.

1. Tax deductible off his mortgage interest to lower some of his income.
2. His home office, which can be 1/5th or 1/6th of the mortgage payment if he choose to operate in a large room.
3. The rent for WSOP.
4. No state income taxes.

The above advantages are monetary and are obvious. Here are the intangibles of owning a Vegas home.

1. Raise his street cred and feel good about himself.
2. Can you imagine the opportunities for boning girls at this house? It's freaking Vegas.
3. Friends visiting him all the time. Ok, maybe not this one.

Lastly, the market outlook. We do not know how much the Vegas RE will go down. The majority consensus is that it will go down with a range of 2 years. I'm going to go ahead and stick my neck out and say no one know whether this range is correct. 2 years is just a number that "seems" right and since everyone is saying it, it must be correct.

But look at the upside, we are saving a lot of taxes. Our quality of life will probably increase. We get to bang more girls. Mostly importantly, OP gets to learn to make a big financial decision at an early age. And this is assuming that the Vegas RE is in deep shiet and will continue to plummet. Now imagine if the Vegas RE manage to depreciate at a lower rate. Compare this amount to the amount that Good2cu saves from taxes, it might be a good investment. That is, assuming Good2cu makes over 150k [an educated random number]. My reasoning is obviously flawed if he makes less than 150k.

[Taylor Caby]

Slow,
these are good points. he doesn't need to own a house out in vegas though, he can rent, so the state income tax should work either way. also, from what i have been told, claiming the home office thing is one of the surest ways to get audited. for getting a tax rebate on 1/6th of his mortgage payment, as a professional poker player who probably has some things he wouldn't want the IRS seeing, that might not be the wisest decision.

i guess what i'm thinking about reading all of these replies is that there really is no "right" answer here. i don't think anyone can argue that renting is not the safer course of action here. if i'm an internet poker player (which i am), i'm certainly looking to minimize any other risks in my life over the next two years, at least until we all know more about how the environment in which we work in will change.

tc

[SlowHabit]

[ QUOTE ]
Slow,
these are good points. he doesn't need to own a house out in vegas though, he can rent, so the state income tax should work either way. also, from what i have been told, claiming the home office thing is one of the surest ways to get audited. for getting a tax rebate on 1/6th of his mortgage payment, as a professional poker player who probably has some things he wouldn't want the IRS seeing, that might not be the wisest decision.

i guess what i'm thinking about reading all of these replies is that there really is no "right" answer here. i don't think anyone can argue that renting is not the safer course of action here. if i'm an internet poker player (which i am), i'm certainly looking to minimize any other risks in my life over the next two years, at least until we all know more about how the environment in which we work in will change.

tc

[/ QUOTE ]
I don't know about others but I file my taxes so I don't care if I get audit. That does not mean I do not think getting audited is probably a pain in the ass and I will try to do my best to avoid getting audited. However, that does not mean I won't try to minimize my tax liability legally.

As for claiming 1/5th or 1/6th of the mortgage, it was just an estimation. If I buy a house with 2000 square feet in it and my home office is 500 square feet, I wouldn't forgive myself if I do not claim 1/4th of my mortgage.

As for renting is probably the safest route, you're right. But keep in mind that Good2cu wants to bang hot girls and raise his street cred. Renting just doesn't get it done. Well, it might if he already own a place somewhere else.

Another factor, which I think is very important, is that he's a poker player. It's not a job where adults will hear upon introduction and instantly think, "young man, I wouldn't mind if my daughter walk down the aisle with you." By having some type of asset, at least he'll feel better about himself and his profession. One might argue that he doesn't care what others think of his choice of his work but I am sure that he would be giggling from ear to ear if his job title generates compliments instead of "oh."

Which reminds me, when you introduce yourself to adults, do you introduce yourself as an entrepreneur/businessman [considering that you co-found CR] or do you say you're a professional poker player? I'll bet you $1 at even odds that you say the former more often [img]/images/graemlins/cool.gif[/img]

[MatthewRyan]

[ QUOTE ]
Waiting to buy a home cheaply is great but there are a few things we must consider.

Good2cu is currently a professional poker player who claimed he has won a lot (we'll take his word for it). Considering that he's also an online player, it's also important for him to operate in an environment where he feels fresh. Here are the advantages of him buying right now.

1. Tax deductible off his mortgage interest to lower some of his income.
2. His home office, which can be 1/5th or 1/6th of the mortgage payment if he choose to operate in a large room.
3. The rent for WSOP.
4. No state income taxes.

The above advantages are monetary and are obvious. Here are the intangibles of owning a Vegas home.

1. Raise his street cred and feel good about himself.
2. Can you imagine the opportunities for boning girls at this house? It's freaking Vegas.
3. Friends visiting him all the time. Ok, maybe not this one.

Lastly, the market outlook. We do not know how much the Vegas RE will go down. The majority consensus is that it will go down with a range of 2 years. I'm going to go ahead and stick my neck out and say no one know whether this range is correct. 2 years is just a number that "seems" right and since everyone is saying it, it must be correct.

But look at the upside, we are saving a lot of taxes. Our quality of life will probably increase. We get to bang more girls. Mostly importantly, OP gets to learn to make a big financial decision at an early age. And this is assuming that the Vegas RE is in deep shiet and will continue to plummet. Now imagine if the Vegas RE manage to depreciate at a lower rate. Compare this amount to the amount that Good2cu saves from taxes, it might be a good investment. That is, assuming Good2cu makes over 150k [an educated random number]. My reasoning is obviously flawed if he makes less than 150k.

[/ QUOTE ]

sh- wow sick good post. It is like you read my mind

[fees]

Last weeks business week has an article on the real estate market and it touches on vegas, I would look into it.. fwiw vegas has 48k homes with no resident that have literally just been built.. LOL donks

[soko]

Even if prices don't drop much further, now is a good time to wait and see. Right now you can rent a place much cheaper without any of the risk involved. All the fundamentals are there that even if housing doesn't fall, it sure isn't going to go up any time soon.

If you took out a $250,000 mortgage fixed for 30 years at 7% interest you would be paying $1,600 per month.

For the first year you will be paying about $1,400 in interest from that loan building a measly $200 in equity per month. It won't be 10 years before you're still flushing $1,200 per month down the drain in interest alone.

Not to mention if your house depreciates at all you not only lose your interest payments your equity would be evaporating faster than you're putting it in.

Right now you can rent a 3 bedroom, 2 bath house for around $1,300 a month, You could find a 2 bedroom apartment for less than $1,000. If you rented for 1-2 years you could easily put the $300-$700 month you save in a good interest earning place for a few years when the market is in less turmoil.

Sure it's a good time to buy now. The chances are very high it will be a BETTER time to buy in the coming months so it's an EVEN BETTER time to rent now.

[DesertCat]

[ QUOTE ]

If you took out a $250,000 mortgage fixed for 30 years at 7% interest you would be paying $1,600 per month.

...

Right now you can rent a 3 bedroom, 2 bath house for around $1,300 a month, You could find a 2 bedroom apartment for less than $1,000. If you rented for 1-2 years you could easily put the $300-$700 month you save in a good interest earning place for a few years when the market is in less turmoil.


[/ QUOTE ]

I think you are on the right track. It's impossible for the vast majority of us to time markets. But it's possible to compare the cost of owning vs. the cost of renting. Though owning has some intangible benefits, you really want the costs to be at least similar before you own. After all if you make a mistake purchasing a home it's a very expensive and time consuming mistake to undo. And if you are a renter it's a lot less hassle because you don't have to maintain the place.

In this example, we haven't considered property taxes, insurance costs, maintenance, and lost interest/investment gains on our downpayment. Assuming this $250k mortgage is on a $300k home with $3K per year property taxes, $1k per year insurance, $1k per year maintenance and required a $50k downpayment, which could have been earning $2.5k per year in interest (5%). Your gross costs are $25k per year, or almost $2,100 per month.

Then you need to figure out how much of a tax deduction you will get. First you have to itemize, and if you make over $100k per year, you may lose some or most of your tax deduction because of the AMT calculation. But assuming you can keep all of it, and that you are in the 28% federal bracket, you'd be able to benefit around $5500 per year. So your net costs are about $1,600 per month.

Note: Don't get hung up on my estimates, use your own accurate numbers, I'm just showing you the template to doing the math.

But if you did estimate your ownership costs at $1,600 per month, and renting a similar place cost a similar amount, owning probably makes sense if you are planning to stay at least five years. Eventually you'll see some appreciation. You need at least 7% appreciation just to pay the realtor fees when you sell the place and break even, but everything over that will be gravy, so the longer you stay in the place the better ownership will work out.

If you are only going to own for a couple years, I'd just avoid the hassle and rent if the costs were similar.

[PanchoVilla]

I much prefer owning to renting as I think the extra freedom is worth some premium. That said there are only a few places that if I moved to right now I would not buy a home. Vegas and Phoenix are at the top of that list. They had massive runups based on speculative california buyers. I would seriously consider leasing a place for a year or two, or maybe even some type of lease-option. Do I know that the market will lose money over the next 2 years? No, but it seems far, far more likely there, than in many other places. There are many, many investor owned properties there.

The one exception I might make is if I came across a property that priced in a 8-10% decrease per year over the next two years. If you can get that sort of discount, then you might be worth considering. That is just my .02.