Forecasting Large New Employer Impact On Local RE Markets

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Forecasting Large New Employer Impact On Local RE Markets

A Taylor
CA · Member since 2019 · 3 posts · 0 votes

How have you guys in the past on certain deals; determined whether a market that will have a new major employer moving into the area,(an example is the boon for residential and commercial real estate in Sparks Nevada when Tesla opened its huge GigaFactory outside Sparks) a good market for speculative residential or commercial purchases?

I am looking at a particular market that is very similar to Sparks Nevada PRE Tesla (in a state in the Eastern seaboard) that has a new High Tech employer moving (actually building a new plant from scratch) into area and is projected to bring 3200 high tech mfg jobs to area.

I for example can buy Single Family in this area today while prices are still reasonable but would not be able to raise rents above the current local rent average until time that the new Tech Company's plant is up and running and employees have relocated to area from California. (in about 2 years)

My goal will be short term strong price appreciation of the property/ies that hopefully will occur (as happened in Sparks Nevada) within a couple of years of the High Tech Employers opening.

Any thoughts?

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  • Chris Coleman
    Rental Property Investor · Washington, DC · Member since 2015 · 429 posts · 393 votes
    6y

    @A Taylor are saying that you’re considering buy for appreciation only? If so, it is risky. It’s always better if you can cash flow, and allow appreciation to be icing on the cake.

    I fully understand your scenario, as I live in Northern Virginia here Amazon HQ2 has already been sending housing prices skyrocketing, and it hasn’t even started building yet. It can be tempting yes.

    But you should really weigh the risk, the amount of money you’ll have to offset from your appreciation by losing cash flow every month, the delays that can occur in corporate moves, a general downturn in the market, etc. Numerous factors that cause speculation on appreciation to be a very risky game.

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  • Logan Russell
    Investor · Botkins, OH · Member since 2017 · 21 posts · 15 votes
    6y

    This is more of a mutual fund power play than a strategy for an individual investor. What are you going to do with the hoped appreciation? Liquidate and cash out? Liquidate and roll into another property? Ect, ect. Buy property if you can get it to cash flow now and if rents go up it's your icing on the cake. If you know this is going to happen it's often better to be the guy selling the shovels than the one mining the gold.  

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  • A Taylor
    OP
    CA · Member since 2019 · 3 posts · 0 votes
    6y

    Logan...these single families will each be owned by a Single Purpose Delaware LLC so yes will liquidate and 1031 into new properties and when a certain dollar amount is saved from 1031's of appreciated properties move on into multifamily..so I have a sound strategy in place.

    Chris, since these properties will be in an area that is today not quite frothy yet like Sparks Nevada there will be very low cash flow for the first 12 months as I have to keep rents in line with comparable properties in the area. The plan will be after said High Tech Manufacturing employees move into area en masse from the Bay Area, raise rents about 25% to 30% and at that time will be cash flow positive.

    Thats why..since these would be short term (less than 3 years) plays...I am focusing on thoughts in terms of how to better gauge the impact the New employer is having in the area on RE so that I can be ahead of the curve in terms of buying cheap and selling with appreciation.

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