Investing in the Barstow Real Estate Market

In the slowdown after the national housing boom, Barstow’s real estate market offers low prices and strong growth potential, particularly in raw land. Like much of the country …

In the slowdown after the national housing boom, Barstow’s real estate market offers low prices and strong growth potential, particularly in raw land.

Like much of the country and the state of California, Barstow experienced a boom in 2004 and 2005 and has now slowed down, Ann Marie Hammond of Coldwell Banker Golden West Real Estate in Barstow said.

The market correction has been less dramatic in Barstow because the boom there was less dramatic than in San Diego, Los Angeles or Orange County, Dave Strachan, broker/associate with Elite Realty and a local investor, said.

Developers think that Barstow is positioned for growth and “that there’s an opportunity…to get land or commercial or residential at really bargain prices when compared to the rest of California,” Strachan said.

“These soft patches, they offer real opportunities for bargains,” Strachan said. “I believe the next two to three years will provide a myriad of bargain opportunities to investors in Barstow.”

When Victorville and the Victor Valley took off, “not many people really spent much time looking at the Barstow market,” Joseph W. Brady, co-founder of the Bradco Companies and co-owner of Coldwell Banker Golden West Real Estate, said. With attention focused mainly on Victorville, real estate values there rose much faster than values in Barstow.

Because Victorville’s prices more than tripled in many places during the boom, while Barstow appreciated more slowly, “now Barstow looks exciting because it has potential to do that in the future,” Tom Berchtold, a real estate consultant and broker with Gold Point Realty, said. Barstow’s more affordable housing will also likely attract many of the people employed at Victorville’s airport.

New residential development

An unprecedented amount of residential development is underway in Barstow, which will increase the attractive, newer housing available for residents and investors.

If inventory outstrips the pace of job and population growth, prices will drop, but new inventory will be available for investors, and the number of major companies investing in the area indicate that they believe the area will take off.

“We have just recently had new track home builders come into our city, and right now there’s…three that are actually building new homes right now,” Hammond said. “I see that as a really good positive sign….These people don’t come in and build new homes when they don’t see that there’s going to be new growth here.”

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“There’s about 28,000—almost 30,000—units in the planning or approved stages for development within the Barstow market, which makes it very interesting when you have a population base of about 23,000 people total,” Brady said.

SunCal Companies are planning a 20,000 to 25,000 home master planned community right along Interstate 15, Strachan said. “When you bring in 20,000 to 25,000 new homes, you’re talking about an influx of anywhere from 50,000 to 100,000 more people.” The SunCal project is a 30-year plan, so the new inventory will be brought onto the market over a long period of time.

The SunCal project alone “will be a brand new city within a city,” Brady said. The project is located in the southern part of town, along with most of the residential growth.

“What it’s really starting to look like now is jobs are coming, housing is coming, so Barstow’s next problem will probably be growing pains,” Brady said.

One potential area for growing pains is the city’s water supply; after all, Barstow is located in the desert. However, Barstow is strategically positioned adjacent to the Mojave River, which provides a huge underground water source, Strachan said.

The Mojave River groundwater supply is being depleted faster than it can be naturally replaced, but this problem can be reversed by changing the water use habits of residents, according to the Lewis Center for Educational Research.

Major developers in the area have researched the water supply and discussed the issue with water boards, and they are satisfied that there is enough water to sustain the level of growth in progress in the city, Strachan said.

Investment strategies

“Barstow would be a good area to rehab, but…it’s not the time to flip properties because there’s not enough jobs, there’s not enough demand for homes. Homes just aren’t going to appreciate fast until we get more jobs in the area,” Berchtold said. “Right now I would…just rent and rehab later when the growth starts to take place. The only reason I would suggest to buy now is because you can get homes for under $200,000.”

Many of Barstow’s existing homes are undesirable small homes of 900 to 1,000 square feet, with two bedrooms and one bathroom, Strachan said. The newer homes in progress are modern, larger homes that are more appealing to buyers and renters, he said.

Existing inventory of single family and multi-family properties is limited and properties tend to be older. Similarly, “commercial buildings are typically old, very specific use, sold as is, and in my opinion, I think they’re overpriced…running somewhere for sale $27 to $204 a square foot,” Berchtold said.

Large box stores with their own strip centers create competition, “so I really don’t see commercial [as] an area to target,” Berchtold said. “If I were coming in as an investor I’d probably look more at duplexes or apartments [to] provide the best cash flow.”

“Duplexes…start at about $175,000 and rent from $500 to $600 a unit, and this can go all the way up to 10 units at $595,000 with an average of $600 a unit for rent,” Berchtold said. “Rental homes, which would include mobile homes, range from $104,000 to $250,000. They typically rent between $500 and $900.”

Although buying properties to rent them out for cash flow can be successful, “today, land would be the best investment,” Berchtold said. “You know what your cost is up front, the land is going to appreciate, we know progress is heading to Barstow.”

Annual taxes are just 1 percent on land, closing costs are low and it’s easy to buy and sell land, Berchtold said. “Land is going to require the least amount of work and probably get about the best amount of return on investment.”

Areas of opportunity

Most of the growth in Barstow is happening south of Interstate 15, Hammond said. “That’s where the new homes are being built and that’s where the slated casino will be.”

“I don’t think it gets much better than the southwest area, the area I’ve mentioned around the Lenwood outlet center and that whole Lenwood area in general. And then south central,” Strachan said. “When you look at where the newer developments are coming in, that’s where they’re going, and I believe that’s where the future of Barstow lies.”

Those areas are especially good for long-term appreciation in land, Strachan said. “That’s where the most land is, and that’s where…Barstow really has the room to grow. Barstow was built along the banks of the Mojave River, and so trying to expand to the north would be much more difficult.”

“We still have a lot of land available around Barstow for under $50,000,” Berchtold said. Higher priced land opportunities will be located around the distribution center or where the main stores are coming in, as well as around Yermal, where the marine logistics base is located and there is talk of a new industrial park, he said.

“For the people who are looking for [land opportunities of] $50,000 or less, I’d probably suggest Hinkley,” Berchtold said. “It has the Harper Lake energy park, which consists of a solar plant that’s already been functioning for years…and they’re also proposing to put in a methane plant run by dairy condos for some 90,000 cows.”

The east side of Barstow, around Newbury Springs, also offers land for around $50,000, he said. “It’s a good area because it’s located between I-15 and I-40, so it’s between two major highways. There is a proposed retirement project for the area. It’s also known as one of the waterskiing capitals of the area.”

For investors seeking strong growth potential, Barstow offers a rare opportunity to enter the southern California market at bargain prices.

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