Real Estate Investing

It is no secret that the housing market in Las Vegas, and Nevada as a whole, took a hit in the recent housing slump. But according to area realtor Ken Lowman, the city’s ultra-luxury market has remained quite strong.

“The ultra-luxury market remains the best performing part of the residential real estate market today,” Lowman said to the Las Vegas Review-Journal in late January. “We have had four closings in the past five months for over $3,000,000 and I have finished the year with more momentum than it began.”

The focus of the article is on a local dentist who downgraded from a $5.6 million home with 7,000 square feet of living space to one in the same subdivision with only 5,000 square feet.
The 2-year-old, custom-built home was on the market for 118 days.

“Unique features in the estate home include a circular bar, a water wall entry feature, great room with four televisions, infinity edge pool overlooking the valley and mountains, a wine cellar, four-car garage and second-story observation loft.”

The ultra-luxury homes market is so rife with competition, in fact, that developers are scrambling to up their game. Granite countertops, high ceilings and top-notch kitchen appliances are standard expectations, according to New Homes magazine. In fact, discerning buyers looking to customize their living spaces are choosing counter surfaces like onyx and imported marble tiling. To further entice buyers, many ultra-luxury condos and developers offer on-site design centers with various levels of customization available.

Las Vegas is not the only city seeing a relatively healthy ultra-luxury housing market. The ongoing construction of ultra-lux condo projects like the Chicago Spire (scheduled opening 2011) indicate that elite buyers are indeed shopping across the United States. San Francisco statistics from February indicate that multi-million dollar home sales are strong there as well. With 68 homes on the market in the $2 to $4 million range, 15 sold in January at an average price of $2.53 million after an average 117 days on the market. Indeed, the luxury and ultra-lux homes market seems to have weathered the real estate storm just fine, perhaps thanks in part to the tremendous influx of foreign investment?

The Euro is worth very near to one and a half times the U.S. dollar. As a result, there is much speculation that Europeans will begin buying property in America. In fact, an Associated Press article quotes Dan Green of TheMortgageReports.com as saying that inquiries he’s received from overseas has grown by about five to 10 times the size it was a year ago.

A homebuyer today would need only 34,100 Euros to make a $50,000 payment toward a home. A buyer based in England would need only about 23,900 GBP to make the same $50,000 payment. Sad, isn’t it?

New York, Chicago, California and Florida are the areas expected to see the greatest influx of foreign real estate investors. And investments are exactly how foreigners are viewing this, according to the article - although undoubtedly some are also viewing it as an affordable way to score a great vacation home. If more homebuyers enter the market, it is expected to “set a floor” for the real estate market and help the market eventually stabilize, the article stated. Here’s hoping!

Chicago Tribune editors must read this blog! Just kidding, their article about investing in student housing actually ran one day before my recent post on the topic.

In the news article, readers learn how Illinois-based Prime Properties increased revenues eightfold over three years and landed on the Inc. 500 list of America’s fastest-growing privately held companies. All this success came after the company broadened its spectrum to include student housing.

Indeed, money hasn’t been the problem for Prime Properties. After all, the company has 1,544 beds in 56 buildings worth $60 million and plenty of investors waiting in the wings at the ready. Instead, one of Prime Properties’ true challenges has been keeping apartments full despite the turnover each fall, the article states.

Chicago-based Scion Group was having such success in the student housing market that it recently teamed with ASB Capital Management. The joint venture agreement tripled the size of Scion’s workforce and bolstered its buying power. Scion’s main challenge: time.

“We are limited far more by time than anything,” says Scion founder and CEO Rob Bronstein. “A building with 500 students is a complicated business. Literally every day, decisions need to be made by the manager and owner.”

Scion’s strategy: Plan multi-million dollar capital improvements like eco-friendly upgrades, pool tables and plasma screen televisions, with cost spread out over at least about five years. Don’t overlook community colleges and junior colleges. These schools are also interested in having student housing within close proximity, a niche that helped Scion get its start. Above all, remember that money alone does not ensure success. Experts recommend doing the research, knowing the “lay of the land,” carefully selecting tenants and studying up on management skills.