Thank you for sharing!

Your article was successfully shared with the contacts you provided.

LAS VEGAS-Expecting to do little of its typically business for the next couple of years at least, Montecito Cos. has decided to buy and rent single family homes here instead. Bob Schulman, a principal of the locally based land investment and retail development firm tells GlobeSt.com that after a test run with 15 homes the company has secured $80 million in cash to buy up an additional 600 homes in the region in the coming months.

The company has been paying an average of $120,000 per home, not including an additional $10,000 per home for carry costs and improvements, and has been able to rent them out within 30 days of closing on the properties. His IRR projection on a five-year hold is in the upper 20% range. His cash-on-cash return on rents is pegged at 7%, with the remainder coming through increased value.

“Our key to success is built-in appreciation,” he tells GlobeSt.com. “We found a source for bulk purchases that allows us to get under market; we believe we are buying 20% to 30% below what we see as today’s comps.”

Two years ago, on some of its 600 acres of land holdings California, Arizona and Nevada, Montecito was in various stages of development for eight shopping centers. Schulman tells GlobeSt.com that four of them never got off the ground and the four that were completed fortunately sold at peak cap rates, though the proceeds were well taxed because a planned tax-free exchange did not materialize.

Montecito also has developed office and apartment projects in the past decade. Prior to that, the company was a major homebuilder in the region. Now it might just be buying some of those homes back.

“We’re saying it’s the equivalent of apartments but makes more sense right now because we are in the most over-corrected city in our country when it comes to single family homes,” Schulman says. “We looked at every opportunity – busted up retail, condos and apartments, everything existing that one might invest in—and the only thing we found undervalued is single family homes. There might be another good distressed deal out there but you’d be buying it at today’s market value. We think we are able to buy single family homes under their current market value.”

With a record number of foreclosures in the Las Vegas Valley, Montecito expects to add substantially to its first 15 houses in the next 30- to 60 days, Schulman says. Day-to-day management of Montecito’s houses is being handled by locally based Metro Marketing and Realty.

“So far we’ve done phenomenally well; there’s so many to pick from we are finding we can get what we want,” Schulman says. “We’re buying in good areas at great prices so we can look for the best tenant instead of the best rate. I guess the negative is a positive for us.”

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


Join 1000+ of the industry's top owners, investors, developers, brokers & financiers at THE MULTIFAMILY EVENT OF THE YEAR!

Get More Information


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.