There’s a truism in real estate that art studios pave the way for gentrification- just look at the famous Prada shop in Marfa, a desert town in Texas the became a thriving commercial and tourist destination. If that’s the case, then it looks like the Mojave is the new Malibu. With artists like Andrea Zittel and High Desert Test Sites paving the way toward a hipper, upscale Joshua Tree, it’s only natural that commerce will follow and residential prices will shoot up. Investors that have a pulse on the changing tastes of the SoCal creative class can cash in on this market at the ground-level and rehab sleek, modern homes to suit the growing demographic of successful young entrepreneurs, wealthy retirees, and vacation home shoppers who are setting their sights inland for luxury living, rather than old-school destinations like Ventura County. With its abundant natural lighting, temperate climate, and rising property values, the San Bernardino and the California desert is a developer’s dream.
What’s to Love in A Desert?
Just as the allure of natural lighting can’t be overstated when it comes to architecture, natural light is an asset in real estate too. Retirees have always flocked to desert oases like Phoenix for the health benefits of a warm, arid environment. Likewise, the sheer solitude that comes from being able to find affordable five-acre parcels makes personal space- a luxury asset in most cities- into an affordable choice for all who seek it. Market studies have proven natural light to be a valuable asset that can radically raise the value of a property. A 2014 study by Lonergan Research found that 80% of prospective buyers were willing to spend up to an additional $5,000 to ensure their home would be built to have natural sunlight, and 17% were willing to invest over $5,000 on additional measures to allow natural light into their home.[1. Display Villages Report, June 2014 by Lonergan Research on behalf of CSR. The research was sourced from a selection of second and third home buyers surveyed at three key Display Villages in Sydney in June 2014]
Cultural Capital in the New Cultural Capitol
The fringe, almost underworld-ish festivals and events that used to draw people to the California desert for leisure quickly became mainstream- Burning Man, Coachella, and the like. In turn the area itself began to receive more widespread attention as a tourist destination. Now that the area is gaining cultural capital, real estate prices are seeing an uptick in real estate prices as well. In the city of Joshua Tree, median home sales prices have increased an impressive 45.7% since this time last year.[2. “Joshua Tree Real-Estate Market Overview.” Real Estate Overview for Joshua Tree, CA. Accessed November 30, 2015. http://www.trulia.com/real_estate/Joshua_Tree-California/.] As housing prices rise in the more coastal metropolises, San Bernardino is on the ups for commuting professionals, families, and luxury home shoppers alike.
Practical Considerations for Building in the Desert
It would be wildly naive to buy real estate in a desert during a drought without a little forethought for how the property’s water resources are going to weather the years. That said, the possibility of earthquakes have never stopped a home from being built in the Palisades- a reasonable up-front in a sound geological report and a quick chat with your local well-digger should give you the idea as to how the property is going to hold up. Just do your homework first so you don’t end up high and dry. The good news is you won’t be hard-pressed to find a site for your foundation in the desert. Whereas the California beach bluffs offer myriad geologic complexities that prevent developers from using poured-slab foundations, the desert is frankly open, with much fewer obstacles to building. Kiss those coastal development permits adieu! You’re in the land of opportunity.
Additionally, contemporary home buyers look for more than just your standard electrical and water utilities- sustainably built homes that minimize their water and electrical consumption are a hot item on the market. According to a 2011 study by the Earth Advantage Institute, homes that were built to third-party standards (ie, Energy Star standards or LEED for homes) to be certified for sustainability and energy efficiency showed a 9% increase in sales prices than homes without those certifications. The sustainably certified houses also sold more quickly on average.[3. “How a Sustainable Home Could Earn You Money | Desert Star Construction Custom Home Building Blog.” Desert Star Construction Blog The DSC Standard Premier Luxury Custom Home Builder. April 22, 2015. Accessed November 30, 2015. http://blog.desertstarconstruction.com/2015/04/go-green-to-get-green-4-reasons-a-sustainable-home-could-earn-you-money/.]
The Nitty Gritty: Where to Lay Your Foundation
Fix and flip developers in the desert should look to the small metro areas like Yucca Valley and Joshua Tree, which are seeing noticeable gentrification and rising home values, but still are home to older desert houses that could use modernization. Keep the desert aesthetic in mind- architectural-style desert homes with extensive glass windowpanes are fetishized in the luxury market for their natural light. Hilltops and mesas that provide panoramic views of the landscape are also an asset to look for; a property’s view can greatly impact the final value of the home. A 2011 study published in Landscape and Urban Planning found that a truly stunning view can elevate a property’s appraisal value up to 50%.[4. “The Value of View through the Eyes of Real Estate Experts: A Fuzzy Delphi Approach.” The Value of View through the Eyes of Real Estate Experts: A Fuzzy Delphi Approach. Accessed November 30, 2015. http://www.sciencedirect.com/science/article/pii/S0169204611000673.]
For developers looking to work on a more ground-up operation or even a serious renovation will often look to first-generation desert homes and cabins that have worn down over the years, leaving little but a foundation and (hopefully) a pulled water and electric meter. In these cases, you’ll likely want to take out a construction loan, design the project from the ground up, and resale at a significant return; the benefit with these properties is saving the cost of pulling utilities out to a completely undeveloped tract, as well as the opportunity to tailor the design of the property to fit an upscale, contemporary market.
Get Rolling: Financing your Desert Development
The real estate market in San Bernardino County and desert communities like Joshua and Yucca Valley are rife with opportunity for creative investors that can capitalize on the area’s burgeoning cultural capital and reputation as a hot-spot destination. If you’re looking to modernize an older home to suit the contemporary desert aesthetic, Socotra can get you the hard money to create tech-enabled and green homes and make the desert bloom. Socotra is California’s premier hard-money lender- contact us today to get started on your quick approval.