Yucca valley/desert hot springs?!?!

[Albert Melo]

Hey Guys, I'm looking into buying a multiunit property in yucca valley or desert hot springs. I live in Palm Springs, so I'm familiar with the area and its only a 30-40 min drive for me to manage the properties. I was wondering if anyone has any properties up there? I would like to hear from someone who has any knowledge about that area ( vacancy rate, type of tenants, etc) any feedback would be great.

[Nathan Diones]

Hi Albert,

I haven't seen any larger units come up in Yucca Valley for a while now, only 2-12 unit buildings lately.  I do have 2 separate 8 unit buildings within the market right now that may be of interest to you. Let me know on these. 

Also, Yucca is pretty self-sustaining town and doesn't reply fully on the military base to fill vacancies and inject money into the local economy. Vacancy rates are rather low and you have very little turnover if you are a diligent and stand up manager. Most of my tenants are 50+ and on a fixed budget or retirement funds, very easy to manage and happy to be there.

The Yucca valley market has some very favorable returns but one thing coming down the pipeline that is going to be a cash flow killer is the sewer infrastructure and the deal that was forced upon Yucca Valley by the State Water Board.  It’s going to add THOUSAND$ of dollars to everyone's tax bills and primarily paid for by the multifamily owners. Watch out for this as its going to added to the 2017 tax bills and will stick with us for 30 years.

Here is an example - Approximately $13,196.00 per unit x 8 Units = $105,568 to be attached to the tax bill and amortized over 30 years, making the annual supplemental tax bill increase by $3,518.00 +/-. Now the monthly sewer service fees for multi-unit properties are also on a per unit basis of approximately $31.00 per unit x 8 units = $248.00 per month or $2,976.00 per year that will be added to the supplemental tax bill as well. The total of these two charges are approximately $6,494.00 and will be added to the annual tax bills for the next 30 years. This is a huge burden and cash flow killer that cannot be offset by merely raising rents because the market won’t support it and will result in many vacancies.   

Let me mention that ALL single family homes regardless of size or number of bathrooms are only charged approximately $15,000 over 30 years and a $41.00 per month charge. So a triplex consisting of all 1 bed 1 baths receives a bill of $39,588 (amortized over 30 years) and incurs a monthly bill of $93.00 but yet a SFR that has 3 bedrooms and 3 bathrooms is only subject to $15,000 (over 30 years) and a $41.00 monthly sewer fee. Now ifthe triplex rents for $550 / unit or $1,650 total and a 3 bed 3 bath SFR rents for $1,500 but has 1/3 less the taxes and monthly sewer fees, where do you think the activity is gonna go?

Hope this helps.