Investing in Tahoe & Truckee
Investments can be financially based or lifestyle inspired. Real Estate generally combines both of these elements to some degree or another. We love sharing our insights in both realms and counseling clients in how to make the most of their investment choices while avoiding common investment pitfalls.
General Investment Outlook for Tahoe & Truckee
The natural environment and recreational opportunities make Tahoe and Truckee tremendously popular destinations for both tourists and long term residents. Land and development is limited. With the advent of high speed internet, many people have decided to work remotely and relocate to our area. The demand here, and in many towns throughout the Mountain West, is growing with no foreseeable limit in sight. We believe that this pressure, along with limited inventory, will keep property values and appreciation relatively strong. For current market conditions, please reach out and ask us.
Housing & Long Term Rentals
Housing is an essential service that we take very seriously. In the Tahoe-Truckee Area, there is a tremendous shortage of long term rental housing. If you are considering entering this market as an investor, there are good reasons to do so, as well as major drawbacks to take into consideration; expenses can be higher due to labor shortages, taxes, and extreme weather conditions. The best candidates for investments are people who have an underlying connection and interest in the community. If you think you may one day want to use your property, or are just looking for a place where properties will likely continue to be in demand over time, Tahoe or Truckee may be a good choice for you. While rents are high in our area, so are property values and expenses. If you are looking for high income return on investment, we can recommend other agents in other markets.
Vacation Homes & Short Term Rentals
If you will be using your home occasionally and want to cover some of your expenses, vacation renting your home may be a good option for you. Vacation rental revenues in our area rarely cover all of a home’s expenses if there is also a mortgage. In order to keep neighborhoods livable, different homeowners associations, cities and counties regulate how properties may be rented. Each neighborhood has different regulations, so careful consideration is important. We can recommend rental agencies, if you do not want to handle your own booking and cleaning. Some resort communities have onsite rental management to make vacation home ownership easy.
Investment Property Evaluation & Selection
Not every property is suited to be a successful monetary or lifestyle investment. A good long term rental property will have very different features than an ideal vacation home. What makes for a good rental property won’t necessarily translate into a good full time residence and visa versa. We enjoy educating clients on the ins and outs of selecting properties that will best suit their needs; helping people analyze, evaluate and select the best property is a big part of what we do.
Tax Deferred 1031 Exchanges
One vehicle that is commonly used to defer capital gains taxes on investment properties is the 1031 Exchange. The 1031 Exchange allows the seller of an investment property to roll the gains into the purchase of another investment property and defer tax payment. There are many rules and timelines to be followed. We work with qualified intermediaries to ensure that all requirements are satisfied. The 1031 vehicle allows for a variety of options, and can involve multiple properties, money for improvements, and a variety of types of income producing properties.
Renovation & Resale (aka Flips)
One recently popularized investment strategy is rehabilitating and reselling outdated and/or dilapidated properties. Depending how this is done, it can also be a service to the community. The best deals and the most needed neighborhood rehabilitation projects occur when an investor has cash to invest in a property on which banks cannot lend. A ‘flipper” may be able to remedy problems and modernize homes that then allow the next buyer to purchase the property with a loan. Whether or not you are a cash buyer, it is important to understand what kinds of items need to be addressed. Prior to investing, you should know what renovations could cost and in which price bracket the renovated home could be expected to sell.
Land Acquisition & Building
Given the prices of existing homes, it’s fun to imagine buying a lot or acreage, and building a new home. The trick is that not every lot is buildable. In addition to the usual constraints of zoning, slope, and setbacks, there may be impervious coverage limitations, tree removal limitations, land capability scores, stream zones and shore zones. Many neighborhoods in Tahoe and Truckee have several layers of permitting, including homeowners’ association design review boards and municipal, county, and regional governments. Investors should consider the time and money involved not just for design, permitting, and engineering, but also for local labor costs, contractor and trades availability, and of course seasonal weather challenges. Traditionally, the people who were most suited for new custom construction had sufficient funds to delegate to local professionals, or they had substantial local experience building for themselves. We now have two exciting new alternatives to the traditional model. First, we have several communities that offer standardized new construction. Second, some prefabricated homes and tiny factory built homes now come with attractive designs and sufficient snow ratings. Permitting, site development and foundation work will still add expense, and some neighborhoods are far easier than others for building from scratch.