On June 8th we had the Grand Opening of our new luxury homes in Reno, Nevada: Quest at Meridian 120. Investors flew in from around the country to see the syndication project in which they’d invested, and to look at some more land Fred was considering developing.
Here’s a little background on this investment:
In 2016, RealWealth partnered with long-time Bay Area developer, Fred Bates, to acquire 273 entitled lots on 100 acres of land just outside of Reno, within commuting distance from the new $5 billion Tesla Factory.
We formed a company, Bates Stringer Reno, LLC, with plans to finish out the lots and sell 176 of the smaller lots to a national builder and 9 custom lots to a luxury builder. We would then own the remaining 88 lots free & clear, on which we would build out higher end homes. We had the Grand Opening for those high end homes, Argos at Meridian 120, in June of 2018. Sales have been steady ever since, with some slow down during cold, snowy months.
Investors in Bates Stringer Reno, LLC are getting a 15% preferred return and a portion of the profits. Investors should be receiving most of their capital back in the Fall of 2019.
In 2017, we received an offer to buy 172 lots from Lennar Homes for $12.25 million. This was much higher than our original pro-forma, which was estimated to be between $8-$10 million. After much evaluation, we turned that offer down. We had been searching the area for more lots and nothing compared to the ones we were planning to sell. Job growth is strong and housing is not keeping up with demand.
We decided it would be more profitable to buy those lots ourselves. We formed a separate company, called Quest Reno, LLC.
Quest Reno LLC: This company raised $12,500,000 to purchase the 172 rough graded lots from Bates Stringer – Reno LLC. The first phase of homes have been built and the Grand Opening was in June of 2019, with lots of public interest. There is no other product in the area with this high quality at this price point.
Investors in this project are equity partners and will receive 15% preferred return and 30% of profit. Estimated timeline for this project is 3 – 4 years in total.
Quest Reno II LLC: Investors using self-directed IRAs do not want to pay UBIT income tax (unrelated business income tax) in their IRA’s. Since Bates Stringer, LLC and Quest Reno, LLC are active business (selling homes), it would trigger UBIT. We decided to offer a 3rd syndication – Quest Reno II LLC, which is structured as a loan to Quest Reno, LLC. This makes the investment truly passive investment, which is ideal for self-directed investors. Investors in this company are receiving 12.5% interest, secured in 1st lien position. The estimated timeline for this investment is 1 – 2 years. This also increases the return for equity investors.
Why We Love Reno:
Real estate investors follow job and population growth. The Reno, Nevada market is busting with jobs, including:
- Tesla’s $5 billion Gigafactory
- Tahoe Reno Industrial Center, the largest of it’s kind (TRIC)
- 13 Geothermal companies
- Warehouse expansion that can deliver to 80% of 11 Western states overnight via trucking, railroad, air
- Apple, Amazon and Google expansions, plus rumors of Toyota
What’s attracting the growth?
Like Texas, Nevada boasts no state income tax along with tax incentives for businesses. Plus, it’s only 4 hours from the bustling San Francisco Bay Area and the overpriced, highly taxed Silicon Valley.
Home prices in Reno are too high to cash flow on rental properties. Building much needed housing inventory is a more lucrative investment today.
To find out about future syndications, click here.