Developer builds fortune with four steps: buy, improve, raise rents and sell

Mike Flores was always good for a juicy sound bite on television news during his legal battle with Steve Wynn over the 36-unit Villa de Flores apartments between The Mirage and Treasure Island.

Wynn wanted the puny piece of land in the worst way and felt Flores' $6 million asking price was a form of extortion.

Flores sold a 20 percent interest in the property to Ralph Engelstad, the late owner of Imperial Palace, for $1 million and had the 0.6-acre parcel zoned for a time-share hotel.

Both parties sued and got into a 10-year "pissing match," Flores said.

"I guess it was personalities," the 65-year-old real estate investor said at his makeshift office in a condo unit at Fremont Manor Townhomes. "It started when I read in the R-J where he called me a 'schmuck.' I guess that's Jewish for 'prick' and I wasn't very pleased with that."

A reporter stuck a microphone in his face one day and Flores blurted, "Steve Wynn is to the good-neighbor policy what Jeffrey Dahmer is to dining etiquette."

From his first duplex to the Villa de Flores apartments to his latest endeavor, Fremont Manor Townhomes in downtown Las Vegas, Flores has bought and sold rental income property for 35 years and made a small fortune at it.

By his own estimate, Flores has grossed $100 million in sales transactions on 28 properties, generally in the $4 million to $5 million range.

"It was a real simple formula. You go in and buy a property, improve it, increase the rents and sell it," he said.

Flores came to Las Vegas in 1965 and started dealing blackjack at age 21, first at the Fremont where he knew one of the owners, Eddie Torres, and then at the Four Queens.

"There were no women dealers then, no women in the casinos, and we used real silver dollars on the tables," he said. "Your pants would fall down with a $20 buy-in."

Flores invested more than $1 million in the three-story, 36-unit Fremont Manor, where one-bedroom, 500-square-foot apartments rent for $200 a week or $800 a month. The 22-year-old building has been completely remodeled and Flores is installing an elevator at a cost of $150,000.

Question: Why did you go downtown to Fremont Street for this project?

Answer: First of all, I got a great buy. I couldn't let the property go. I'm in for $30,000 a door times 36 units and they're condos. I went through the condo conversion and automatically it's valued at 30 percent more than an apartment complex.

Question: Last year you said you were going to sell the condos starting at $99,000 with Federal Housing Administration financing for first-time home buyers. Now you're renting. Why the change in plans?

Answer: Economics. I saw that I'd sell less than anticipated, so I went to Plan B. I'm still going to sell them eventually, but I didn't want to sell six or seven. I would rather rent them out and go into escrow with all 36 people and close in one day or sell the building as a whole. I can collect $1 million in rent for a year and then sell them for $2 million.

Question: Who's your target resident?

Answer: Somebody new to town. They don't know the city, but they know Fremont and the Strip. Those are the only two streets in town. I've been renting this for six weeks and I'm half-full ... not one eviction and not one person late on their rent. You screen them.

Question: What's unique about this project?

Answer: They were condos when I bought them. That was most unique and also most problematic. It's problematic in which way to approach this thing. You can do a gingerbread remodel or you can come in and gut them like I did. Everything is new from the roof to the floor -- new appliances, new switches in the walls, granite countertops, the intercom system. If you're going to rent, you don't need to upgrade.

Question: How do you choose sites?

Answer: I look at convenience to get there. If you have to give 10 different directions to the place, you're going to spend hours explaining how to get there. I like accessibility to main streets. I know the value will be better than the day it was built. I look for fixer-uppers, multifamily projects that have been neglected that sit in areas of high traffic. I've had Strip properties and I've had off-Strip properties. The first thing you do is look at curb appeal and signage, start from the outside in.

Question: Do you think you've overestimated the value of Fremont Manor?

Answer: There are three ways to value a property. Comparable sales in which you have a willing buyer and a willing seller that sets fair market value. Replacement, what it would cost to build today. And rental. All appraisers use those. The rule of thumb is 10 times gross. If you have a $1,000 a month in rent times 12 months times 10, that's $120,000.

Question: Isn't $800 a month rent a little high for this area?

Answer: Here's what you get: free water, free trash, free cable, free local calls, free wireless Internet, a secured property, everything's brand-new. You take all those ancillary costs and add that in and $200 a week is a pretty good deal. The weekly rental business on Fremont Street now is an absolute gold mine. Two businesses have prospered in this economy: self storage and weekly rental. This complex grosses close to $400,000 a year. I've got it on the market for half the appraised value and I'm still going to make $2 million on the project.

Question: Have you thought about your next investment?

Answer: I'm doing a 156-bed assisted-living project. I think the timing is right. Everyone that opened here in the last year is full or close to full. I tried to buy one. They average $6,000 a bed a month. You take 156 beds times $6,000, that's close to $1 million gross income. I've got a doctor partner and a local architect. We want to do a 97,000-square-foot building and we need 31/2 acres. We're looking at four different sites.

Question: You worked your way to casino manager at a couple of joints around town. Why did you leave the gaming business?

Answer: I had no confidence in staying. Let's put it this way: The higher you're up in the casino, the closer you are to the door. I've got to have something else. I started with a duplex and lived on one side. I refinanced and bought another duplex, then I bought the Palm Villas behind the Flamingo and the El Sol apartments. Income property was something I could do without being there 24-7. I was never involved in raw land.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.