There are three separate investments related to this site.
Bates Stringer Reno LLC: In 2016, Real Wealth Network partnered with long-time Bay Area developer, Fred Bates to acquire 273 entitled lots on 100 acres of land just outside of Reno, commuting distance from the new $5 billion Tesla Factory.
Our group, called Bates Stringer Reno, LLC, had plans to finish out the lots and sell 176 of the smaller lots to a national builder and the 9 custom lots to a luxury builder. We would then own the remaining 88 lots free & clear, which we would build out with higher end homes.
This summer (2017), we received an offer to buy the 172 lots from Lennar Homes for $11.250 million. This was much higher than our original pro-forma, which was estimated to be between $8-$10 million.
But since lot values have increased substantially this past year, Fred countered at $13M. Lennar came back at $12.25 million, payable in 3 stages. After much evaluation, Fred turned that offer down. He has been searching the area for more lots and nothing compares to the ones we planned to sell.
Fred decided it would be more profitable to build them out himself, so he asked Real Wealth Network if we’d like to participate. Since we have investors begging for the next “Fred” deal, and missed out on Reno last year, we agreed to partner on this exciting project.
The strategy for the original investors (Bates Stringer Reno, LLC) is the same: to sell half the lots and use the proceeds to fund the constructions of the remaining lots. The difference is that buyer is not a public builder, but rather another group of Real Wealth Network investors partnering with Fred. The benefit to both groups is lower costs due to economies of scale.
Quest Reno LLC: This company was formed and will raise $12,500,000 to purchase the 172 rough graded lots from Bates Stringer – Reno LLC. It will then construct single family homes and ultimately sell the units to the retail public. 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.
Quest Reno II LLC: This is a separate company that will be lending the remaining needed capital to Quest Reno LLC. This company and was formed to accommodate self-directed retirement investors who would like to avoid UBTI. Investors in this company will receive 12.5% interest, secured in 1st lien position. The estimated timeline for this investment is 1 – 2 years.
Why We Love Reno:
Real estate investors should follow job growth, which leads to population growth. The Reno, Nevada market is busting with jobs, including:
- Tesla’s $5 billion Gigafactory
- Tahoe Reno Industrial Center Largest of it’s kind (TREC)
- Clean energy leaders, with 13 Geothermal companies
- Warehouse expansion (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 make a good cash flow on rental properties. Building much needed housing inventory is the better investment today.
Fred Bates has over 45 years experience in real estate development and construction, encompassing most product types and a number of markets. Mr. Bates is an engineering graduate of Michigan State University, and has been responsible for virtually all aspects of the development business, including acquisition, entitlement, design, construction and finance. Get his resume here:
Here are final returns from Fred’s past projects with Real Wealth Network:
- Portland Townhomes returned 20% IRR over 18 months
- Dublin Heritage Park returned 35% -40% IRR over a 3.5 year period
- Dublin Challenge Office Bldg returned 20% IRR
- Cannon Ranch commercial land outside of Tampa has received offers for 4x what we paid.
- Pleasant Hill Entitlement from Industrial to Residential: 12% IRR