For West Coast guys:
We've been following markets like Modesto, Fresno, and Stockon and have noticed a lot of product hitting the market recently. Some of the deals look like they'll work, but I've been having trouble wrapping my head around the exits. It seems crazy to buy a 1980s garden-style property in Modesto for $130k/door and have a market in 3-5 years where it trades again at $180k/door at a 7 cap. That's a tough story to sell to an equity partner, even if you think you can nail the execution.
Curious what other MF guys are seeing in these markets and if this pricing seems realistic.
who is going to pay 40% more for a POS modesto property 5 years from now? Rents will probably be the same, interest rates will almost certainly be higher, and your building is 5 years older.
Stockton I could see being better as more people from the bay area move there to escape the high rents of the city. I think it had the highest or second highest rent growth in the nation last quarter. Its still a risky move and I am not sure how lenders/investors will feel about it.
Fresno is probably the safest best IMO. Not a great city but improving.
I am interested to see what merced will be like in 10 years.
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