All Forum Posts by: Trevor Richardson

Welcome. Just a little terms cleanup, 5-10 is small multifamily. Large would be 50 or 100 units plus.

The challenge I see right now with small multifamily is the acquisition and getting a typical DSCR loan. These are a nightmare right now (depending on the market and properties cash flow). But I have been in battles and deals lately where the properties existing cash flow will require no less than 50% down. So if you have a $750k 6 plex opportunity (in my market) the buyer will need at least $375,000 to buy it. Interest rates and the conservative nature of lenders right now coupled with owners poor cash flow are making these hard to buy.

However because of all of that if you can get financing on a deal, the prices are good because 90% of consumers don’t want to put 50% down on SMF. So conversely I’ve seen spectacular deals lately primarily from cash or 1031ex buyers. 

Are you looking on the NV or CA side?

Quote from @Carlos Ptriawan:

Hi Trevor, the problem is Reno avg SF price is 520k while Sacramento is 470k. Sacramento just two hours from the bay and the capital of the state. So even if I purchase duplex in both location I would say the cap rate in Sac. is slightly better or very similar. No ? just curious....

if Reno avg SF is 300k then the thesis maybe correct.

Reno is very similar to Sac in terms of cap rates. The main difference is Reno does not have all of the California things. Nevada is landlord friendly, low real estate taxes, no income tax and close to Northern California. We have had investors select Reno even if the cap rate is similar because they can manage the property in a landlord friendly state.

There is no rent control, Nevada is a no-cause state. Which is a major difference because landlords don’t have to continue tenants to increase rents. I could go on and on.

Two weeks ago we found a 6%+ cap single family and we have seen 6-7% small multifamily opportunities. You just have to know who to talk to to analyze the market.

We tracked a lot of investment trends in 2023

Tired of California's competitive markets and skyrocketing prices? You're not alone. In 2023, a staggering 50% of investor purchases in the Golden State were made by out-of-state buyers, seeking greener (and more affordable) pastures. Reno, Nevada, with its booming economy, diverse housing market, and attractive tax benefits, is emerging as a top contender for California investors looking to diversify and grow their portfolios in 2024.

Why Reno is Attracting California Investors:

• Lower price point: Enjoy significantly more bang for your buck compared to California's expensive markets like San Francisco, Los Angeles, and San Diego.
• Tax-friendly environment: No state income tax and lower property taxes offer substantial savings for long-term investors.
• Growing economy: Boasting a diverse economy driven by healthcare, technology, and tourism, Reno offers strong job growth and rental demand. Tesla is planning on building the Tesla Semi truck factory outside of Reno. 
• Thriving housing market: With a mix of established neighborhoods, exciting new construction, and upcoming development projects, Reno caters to a variety of investor preferences.
• Quality of life: Reno offers stunning natural beauty, vibrant entertainment options, and a laid-back atmosphere, making it a desirable place to live and invest.

New Construction: California Investors' Favorite Trend

In 2023, we saw a clear trend amongst California investors – they love new construction! The modern amenities, low maintenance requirements, and attractive rental potential of new builds make them a compelling choice. Luckily, Reno has a robust pipeline of new developments catering to this preference, offering options for every budget and investment strategy.

Ready to Make Your Move?

If you're a California investor looking for a fresh start in 2024, Reno might be the perfect fit. Join the discussion and share your California market insights in the comments below!

Quote from @Peyton From:

@Nicholas L.

Yes thats correct. I live in San Francisco CA and invest in Chattanooga TN. Because San Francisco is so expensive, i have ruled out house hacking, which is a bummer because i love that strategy!

Have you looked at Reno to invest?

Just to clarify here. Invitation Homes (Blackstone), Progress Residential, and American Homes 4 Rent are the big three institutional SFR investors.

Quote from @Greg M.:

Unless there is rent control in that area, I'd just move forward at $1650.

Going to $1800 nets you $150/month or $1800 for the year. If this "bidding" sets the process back two weeks, you've just lost $900 of that. 

Except if you lease it out at the higher rate for 3 years you just made $4,500 more even after losing $900 for two weeks. Those two weeks just bought you that major repair item you now need. If you use the “rent faster” logic on 2 rentals that delta is now $9,000 after 3 years. 

Real estate investors, a recent vacant duplex deal in the Reno market slipped away from us, but it highlights a crucial point: incredible deals can be found on the open market. I know this is contrary to the BP forum beliefs that no good deals can be found on MLS. That's just not true.

This on-market MLS property, sold by a church (which created the opportunity) for just $159/sf, offered a projected 7.2% cap based on local market rental rates. Which is a full percentage point above our market average cap rates for the area. While we missed out on this opportunity, it reinforces our belief that analyzing open market properties can lead to lucrative investments.

Reno Multifamily Report Q3 2023

It is time for a new quarterly update on the Reno, NV multifamily market. The reno multifamily report dives into sales data, rental rates and trends, and market information. Message me for a link to the Reno Multifamily PDF Report.

This report contains information solely based on the small multifamily (3-10 units), large multifamily (11+ units) and duplexes (2 units) within the Reno area. The report covers neighborhoods all over the Reno area. Below you can see the specific neighborhoods and their boundaries.

Below are the rental trends by unit type (*DATA PROVIDED BY JOHNSON PERKINS GRIFFIN APARTMENT SURVEY):

Below are the multifamily $/unit sales trends (*DATA PROVIDED BY WASHOE COUNTY ASSESSOR):

Small multifamily (3-10 units) had a simple average of $181.6k per unit. There were 37 units total sold during the second quarter and the total dollar amount of sales was $6.6m. Below you can see the percentage of the areas in which units were sold.

*data provided by washoe county assessor

Large multifamily (11+ units) had a simple average of $209.6k per unit. There were 286 units total sold during the second quarter and the total dollar amount of sales was $59.8m. Below you can see the areas in which units were sold.

*data provided by washoe county assessor

Duplex (2 units) had a simple average of $223.2k per unit. There were 30 units sold during the second quarter and the total dollar amount of sales was $6.7m. Below you can see the percentage of the areas in which units were sold.

*data provided by washoe county assessor

The rental market in the Reno/Sparks area experienced a slight increase in rental rates in Q3 compared to the previous quarter, decreasing by $8 to $1,653. Seasonally, Q3 is usually a high point but this average is $1 less than in Q3 of 2022 showing leveling off of the market.

The overall vacancy rate increased to 2.73%, indicating there is still strong demand for rental properties in the area, but it is important to keep in mind the rent rate and vacancy data only include 80+ unit properties that are stabilized at 90% occupancy. There are several new projects taking a prolonged amount of time to reach stabilization and we believe underlying vacancy for the entire market, to include smaller buildings, is higher. Many new properties in the lease-up stage are offering concessions and we have noticed a higher than usual surplus of rental listings.

Below you will find the total new multifamily units:

*data provided by Johnson Perkins Griffin Apartments Survey

The number of units planned or under construction for multifamily properties increased slightly to 10,620 units. The most significant obstacles to new supply continue to be the limited availability of developable land, rising prices, and increasing construction costs.

*data provided by Johnson Perkins Griffin Apartments Survey

*data provided by Johnson Perkins Griffin Apartments Survey

Meanwhile, on the demand side, job growth remains robust as more corporations seek to expand or relocate to the area. Nevada has seen a high influx of inbound moves, which may be driving demand for housing. Furthermore, affordability concerns in the single-family housing market have further elevated the demand for multifamily properties.

Thank you for taking the time to read my post. Please feel free to reach out if you have questions or would like to discuss investing in the Reno, NV area.

It might in higher density cities where extra livable sqft may make sense. In most cities converting a garage doesn’t make sense especially for a standard single family home. It can cost a lot to convert a garage into living space and not worth the extra income. Then you lose a garage which is valuable in itself and could effect the long term value when you go to sell. Single family owner occupiers are going to want that garage and are going to wonder what happened it. Typically I don’t think it’s worth it.