Gambling on Las Vegas Real Estate

Alan Koder and Ken Wu discuss their experiences using home equity loans to buy more properties in the hot markets of Las Vegas, Tucson and Austin.

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RENEE MONTAGNE, host:

On Fridays, our business segment is about money. Today, we focus on the real estate boom. Soaring property prices have inspired lots of people to start real estate investment clubs. Among them are biologist Alan Koder and Ken Wu who works for a software company. After their own homes in San Diego skyrocketed in value, they took out home equity loans and used the cash to buy more properties. NPR's Steve Inskeep asked Ken Wu and his partner about their first real estate gamble in Las Vegas.

STEVE INSKEEP, host:

This must be kind of exciting to buy real estate in Las Vegas.

Mr. KEN WU (Real Estate Investor): Oh, it's very exciting. You know, I used to think gambling was fun and exciting in Vegas, and I would go out there a lot to gamble and play blackjack and stuff, but, you know, to me, real estate is even more fun and exciting.

INSKEEP: So what else have you bought?

Mr. ALAN KODER (Real Estate Investor): Well, Ken and our other partner--I stayed out of this one--they purchased a place in Tucson. That one's been doing very well, as I understand, but our most latest purchase was in Albuquerque, New Mexico.

INSKEEP: Do you feel like there's a lot of risk here?

Mr. WU: This is Ken. I don't feel like there's a tremendous amount of risk in the properties that we've purchased, and the reason I say that is because we try to look at a number of factors, including the economic data, the demographic information, you know, the number of people and jobs moving into and out of the cities, their relationship of rent to mortgage and whether we feel that's going up or down, and I think most importantly is the feedback that we get from both Realtors and brokers in the area, as well as economic professionals, you know, who study this thing for a living. For me personally, I tend to rely on those reports quite a bit when making these decisions so I don't feel like I'm taking an enormous amount of risk.

Mr. KODER: Well, this is Alan again. Like Ken said, I think we make sure our investments are sustainable through down times. We have a pretty in-depth work sheet that we go to, which is kind of our business plan. It tells us what our return on investment's going to be given different scenarios, so we're definitely thinking long term. We're not looking to flip these properties quickly.

INSKEEP: What do you gentlemen think about when you hear news stories about a real estate bubble?

Mr. KODER: I don't feel like prices will actually go down. You know, everyone needs to have a home. Everyone needs to have a shelter, so there's significant value to that. So I think prices are actually just reaching what they should be.

Mr. WU: This is Ken. I don't think I share the same optimism that Alan does. Without a doubt, there are areas of the United States that are overvalued, and I see some pain coming in the near future for some of these property owners.

INSKEEP: There's a famous story about Joseph Kennedy, the father of President Kennedy. Right before the stock market crash in 1929, he found himself getting stock tips from a shoeshine boy and decided that when a shoeshine boy was giving him stock tips, it was time to sell everything and get out of the market. Not to pick on you, Alan Koder, but do you ever find yourself thinking that, well, when a biologist gets into the real estate market, it might be time to get out of real estate?

Mr. KODER: Well, I would have to say no. I mean...

INSKEEP: Well, of course.

Mr. KODER: ...I think it depends on the level of risk that you want to take and, you know, how you determine the risk of a certain investment.

INSKEEP: Ken Wu and Alan Koder, the new Donald Trumps. Gentlemen, thanks very much.

Mr. KODER: Thank you.

Mr. WU: Thank you.

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