More investors are looking to buy property in the San Francisco Bay Area and, as a result, demand for rehabbed and developed commercial and residential units is on the rise.
The number of real estate transactions in the Bay Area has grown and is expected to grow further in 2015. For instance, Decron Properties Corp. just put down $86 million to buy a 187-unit complex in Mountain View, just two years after the development was flipped and renovated by a private equity firm and real estate partnership.
The growing demand for income and the rising values of Bay Area property (thanks to strong incomes and an improving economy) have helped the region make it onto a recent list of the top 20 markets for real estate investing. The Oakland-Fremont-Hayward area, the San Jose-Sunnyvale-Santa Clara area, and the San Francisco Bay all made the list as some of the best areas for real estate investment. As HomeVestors co-president Ken Channel said, “There is definitely opportunity to strike gold in the California market for real estate investing.”
What It Means for Rehabbers and Developers
This rise in investment demand tells us a few things about where the real estate market is likely to go in 2015. Firstly, it means prices are bound to go up. Prices have already been surging in the state for quite some time and the rate of sales has not slowed in most markets.
Secondly, it means added-value refurbishments are going to get the premium they deserve, whether the buyers are renters or owner-occupiers. At the moment, many people buying real estate in California are looking for income in a world where income is getting harder and harder to find. Thanks to the strong population growth and the healthy job market, becoming a landlord is more and more attractive for many investors. But since they want a passive income, they want properties in good condition that will go off the market quickly. Rehabbers, property developers, and fix and flippers are there to fill that demand, and they will get paid handsomely for their efforts.
Likewise, homebuyers who are looking to make an investment in their future are looking for well-designed, well-fitted properties that are cutting-edge and low maintenance. This means they’re bypassing affordable fixer-uppers on the market in favor of houses that don’t have problems, have new fixtures, and are fully turnkey. In fact, many buyers are willing to pay more in order to get a home that is ready to go. Matt Rand, managing partner of Better Homes and Gardens Rand Realty explains, “There is a generational shift away from the fixer-upper. People who are in their 30s and those in their 20s don’t have the skills to take on a project.”
Again, this is great news for rehabbers and developers because they have made these key investments in their properties so that occupiers don’t need to.
But How to Get Credit?
This is all great news, but a lot of investors and developers still have one question: how are they going to finance these property developments? Credit at conventional banks remains tight and low yields on mortgages mean banks are not too eager to invest money at today’s low (and falling) rates.
However, the need for credit is being met by hard money lenders who have the capital developers need. Since hard money lenders will lend at 65% LTV and are emboldened by their special expertise in real estate investing, they can fund many projects that traditional banks will not. Whether you’re a first-time buyer or an established developer, a hard money lender like Socotra Capital can meet your needs.
Your real estate assets are your best investments for the future. At Socotra Capital, we’re proud to be the premier direct hard money lender for California real estate. Contact us today to learn more about how we can help.
