Friday, October 24, 2008

Las Vegas Condos and Condo Hotels – Where are the Deals?

Like the rest of the housing market nationwide, Las Vegas high rise condos and condo hotels have taken a “hit” in value the past couple of years. But while residential high rise condos are still moving along, albeit at reduced prices, condo hotels owners are faced with a serious dilemma.

Back in 2004 and 2005 every major lender had financing in place for condo hotel purchasers, requiring anywhere from 20% to 30% down payments. Since most developers got at least a 20% deposit on their contracts for projects under construction, borrowers thought they had all the cash they would need when the time came to close three of four years down the road.

But with the current economic conditions and tightened mortgage lending guidelines, currently there are NO lenders willing to finance condo hotels, even with a 50% or 60% down payment, verifiable income and perfect credit.

In Las Vegas, Palms Place and Trump Tower, both condo hotel projects that completed construction in 2008, the developers have not been able to close escrow on many of their units that were under contract. Would be buyers are trying to find partners with cash, someone to take over their contract, or simply walking away from their investments. Many buyers are being forced to give up over $150k in deposit money and would be delighted to get back even a fraction of that amount.

While the situation is dire for these buyers caught up in the mortgage meltdown, this is the perfect opportunity for anyone with cold hard cash to pick up prime Las Vegas real estate for less than 2004 prices! Owners at Palms Place (those who closed before the condo hotel loan programs were discontinued) report being VERY happy with the income generated on their units from the rental program. Palms Place, adjacent to the Palms Hotel, is a very “happening” resort destination. The Playboy Club, fashionable restaurants, entertainment venues and MMA sporting events keep the resort full and it has a very low vacancy rate.

Even at the MGM Residences, most of which closed before lending was shut down, there are numerous re-sales and foreclosures available at incredible prices. Since they can only sell to cash buyers, there are definitely steals to be found.

What of the MGM City Center and the Cosmopolitan, two condo hotel projects that are due to come online in late 2009 and early 2010? The Cosmopolitan, with what is unarguably the best location on Las Vegas Boulevard, was recently taken over by Deutsche Bank. And MGM City Center next door is owned in large part by Dubai World. Both these entities have “deep pockets” and their locations are superior. Word on the streets is that by the time these units are ready to close, the developers will have their own in-house financing in place. Also by that time the economy is expected to recover substantially.

But in the meantime, those with cash and aspirations to own a piece of Las Vegas are taking advantage of the times. Many are negotiating with the buyers under contract who cannot close to take over their contracts for a fraction of the original deposit. Assignments on these contracts are subject to the developer’s approval, but cash buyers are almost always approved.

Since these buyers have not yet closed, these properties are NOT in the Las Vegas MLS system. High rise agents around the city do have lists of potential assignments as well as foreclosures in the projects mentioned above. Eventually the condo hotel market will rebound, and those that are buying now, at the bottom, will make out well. To find out about some of these great Las Vegas condos, please call us at 702-985-7654 and we will put you in touch with a high rise specialist.

Friday, October 3, 2008

Financing Foreign Investors for Las Vegas Mortgages

With the dollar expected to rise against foreign currencies later this year (that trend has already started), foreign investors are hurrying to purchase real estate in the US while their dollar goes further. Most of these investors are targeting the Las Vegas real estate market in particular, where the sharp decline in prices (due to the high amount of Las Vegas foreclosures) and the world class amenities have made it an attractive get-away destination. In particular, Canadian buyers are looking to Las Vegas homes as a vacation retreat from their harsh winter climate.

Most banks will not loan on real estate outside of their own country. With all the recent shifts in the credit markets, the qualifying criteria has changed for mortgage loans in the United States across the board, including those to foreign purchasers. Prior to this year, a foreign national could obtain financing from US banks as long as they had 35% to put down with no or limited documentation. Now US mortgage lenders are requiring full documentation of income and assets on all mortgage loans without exception, though the down payment requirements have dropped.

A citizen of a country other than the US can obtain a loan for property in the US based on what classification they fall under. A permanent resident alien is a foreign national who has been granted the right to work in the US permanently and who has been given a US social security number. A permanent resident alien can purchase property under the same guidelines as a US citizen. They can get a loan with as little as 5% down payment for a primary residence, either on a fixed rate or adjustable rate mortgage at the current interest rates available to US citizens.

All other foreign nationals, including those with temporary work visas, are required to put down a minimum of 25% for properties under $650,000 or 35% for properties over $650,000, whether the property is a primary residence or a rental property. Lenders will also require the equivalent of a US TRW rating as well as full documentation of their employment income and assets. In addition, the down payment money must be “seasoned” in a US bank for at least 60 days prior to the close of escrow.

These loans to foreign nationals are only currently available as adjustable rate mortgages or ARMS. The fixed rate terms can be for 3, 5, 7 or 10 years and interest rates are currently running between 7.5% and 8.5% with approximately 5 loan discount points prepaid for the amount of the loan (points can vary on a day to day basis just like interest rates). Each point is the equivalent of 1% of the loan amount, so on a $100,000 loan 5 points would be $5,000.

Another alternative is for the foreign national to obtain an equity credit line on their property in their home country and come to the US with cash in hand. Cash offers are very strong, and enable the buyer’s agent to negotiate the best possible price on behalf of their client.

For more information on getting qualified for a Las Vegas mortgage and to receive the latest listings on great deals in Las Vegas new homes, high rise condos or MLS listings, please contact our office at 702-985-7654 or email us at