California real estate investors who were positioned to take advantage of the 2008 recession’s price reset a decade ago have realized fantastic profits over the last few years. According to Trulia, since 2012—when the recovery really started to kick in for real estate—San Francisco’s and Sacramento’s median sales prices have doubled. Our local Sacramento area has benefitted even more, with median prices up 120% since 2012.
However, it’s becoming clear to those in the real estate industry that the Golden State’s real estate is becoming overvalued, and is due for a plateau, or even a bit of a bubble burst. Even if a pricing correction is a little ways off, the ratio of investment versus profit margin is making it difficult for real estate flippers to make worthwhile profits. In addition, the volume of lower cost properties for sale in popular regions has shrunk drastically.
Thankfully, real estate investors don’t have to look far to find promising new opportunities…
Nevada was far slower than California to recover from the recession.
For a number of reasons, Nevada was slower to recover from the recession and the wave of foreclosures that followed it than the state’s western neighbor. One key reason for this was that the state responded to banks’ occasionally messy foreclosure processes by passing several bills restricting the ability of banks to foreclose.
One such bill was Senate Bill 321, known as the “Homeowner’s Bill of Rights,” required lenders to use only a single point of contact to communicate with borrowers in default, and expanded homeowners’ options to sell. Another bill, Assembly Bill 284, required lenders to verify the accuracy of foreclosure documents and show that they had the right to foreclose on a specific property.
The net effect of this was to bring foreclosures in Nevada to a screeching halt. Las Vegas’ monthly foreclosure rate dropped from 2,542 in 2011 to 992 in 2012, and slid even further the next year, dropping to 454 per month. Homeowners in default were able to spend years in their homes, while elsewhere lenders were firing off foreclosure notices at breakneck pace.
But Nevada’s fortunes are rapidly improving, and keen-eyed real estate investors should take advantage of the myriad opportunities.
However, the state’s stalled out foreclosures got back on track, and homes that were sidelined by non-paying owners are now back on the market. The timing is perfect, as Nevada is in the midst of a business boom.
Reno is seeing a large influx of new residents taking advantage of the flurry of new jobs coming available. A number of large companies have followed Amazon’s lead in building new distribution centers in and around Reno, and the Tesla Gigafactory—the largest factory in the world—in nearby Storey County is expected to employ 6,500 people. Meanwhile, Las Vegas is anticipating increased interest and tourism once the Raiders arrive in 2019 or 2020.
With the positive vibes now permeating Nevada’s business climate, there’s great potential for property investment. Right now, Nevada is right where California was around 2011 or 2012—poised for real estate values to skyrocket in the near future.
For property rehabbers and buy-and-hold investors, there are great opportunities to double or triple up on initial investments, as long as you choose your investments carefully. However, there are some caveats. The capital isn’t as readily available in Nevada as it is in California, and the regulatory environment in Nevada is much stricter, so certain costs will be higher.
But for those on the hunt for prime property investments, Nevada should definitely be on your shortlist. If you need assistance with financing property purchases in Nevada, or you’re interested in enjoying a consistent monthly income through our Real Estate Fund (which finances short term real estate projects in Nevada and elsewhere), Socotra Capital can help. Give us a call or use our contact form to learn more about Socotra’s investment opportunities.