The Belvedere might be the most unappreciated investment opportunity in Reno right now.  Yes, the product isn’t up to the standards of the Palladio or Montage.  Yes, the project is in bankruptcy and the recorded mechanic’s leans number in the hundreds (I wouldn’t touch a short sale here with a 10 pole).  But I think there are bargains worth the risks showing up on the REO market and as Trustee’s sales on the courthouse steps.

So far, 29 units have been taken back by the banks or have been sold as Trustee’s Sales.  There are a slew lost in limbo between NOS and TD that keep getting postponed.  One 392 SF unit has been purchased as an REO for $19,200 in January. Terras Altas LLC  bought 2 units as TDs last November, 367 SF for $10,100 and 535 SF for $14,000.  2 more TD sales went down this week, though they haven’t recorded yet – a 168 (?   7-464-11) SF unit for $7500 and a 352 SF unit for $12,000.  Both were bid up a bit from the opening bid at the sale.  Floorplans are on the Belvedere’s web site, as well as “pricing”.  A quick perusal of Craig’s List has the management office offering a 1 bedroom at $1000, a furnished 1 bedroom at $1250, and a 2 bedroom at $1050.

I’m not 100% sure what the HOA dues cover, currently at about $.43/SF/MO, but I think it is all common are expenses, garbage, and maybe heat/H20.

So for a 1 bedroom purchased for $14,000, taxes are $120 per month (and declining), HOA is about $230, insurance is about $20 for a total of $380.  This should generate $400 cash flow at $800 per month rent, not unreasonable downtown.  Your initial investment would be paid off in less than 3 years if things remain stable in a worst case scenario, faster if you can get rents closer to what the management office is asking.

And what if the Belvedere situation goes to hell, which is certainly possible.  It takes a LONG time for the county to react on tax liens, and a HOA in BK is also notoriously slow to react.  All the time  the rent rolls in.  So I see a situation that for a minimal purchase price, rents would pay off your investment rather quickly.  If the project rights itself and values increase, you can ride the appreciation trail to fame and fortune.  If it blows up, it will take a while and you will have recouped most of your initial investment and probably at least break even.  If not, how much have you really lost on the investment?

Risk / Reward.  The investment opportunities defy conventional wisdom right now.  Call me crazy, and I know you will.

Advertisements