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With it’s proximity to San Francisco, Vallejo presents a great opportunity for anyone looking to invest in Bay Area real estate. Our guest today is Doug Brien, CEO of Mynd Property Management, who will be discussing why investing in Vallejo makes sense now and going forward.
Alex Osenenko: Hey, boys and girls. This is Alex with Mynd property management. Today we’re talking all about investing in real estate in Vallejo. And I have a guest, today, who will help me unpack some of the major reasons why Vallejo is a great market to invest in. His name is Doug Brien. Doug, how are you?
Doug Brien: I’m doing well.
Alex Osenenko: Awesome. So just to set this up for our viewers and readers, Doug was the CEO of a company called Waypoint which purchased over 750 foreclosed and distressed properties in Vallejo over time between 2010 and 2016. He has got a wealth of experience and is now CEO of Mynd. Let’s get into the topic, Doug. Why do you think Vallejo makes sense in today’s economy and moving forward?
Doug Brien: Yeah, you know, that’s a good question, Alex. It’s always the question that I like to start with when I’m thinking about a market to invest in. I think that the fundamental question is: why do more people want to live here or in any particular location? I think there’s some really good reasons why people want to live in Vallejo. First and foremost, it’s a bedroom community in the Bay Area. Obviously the Bay Area is one of the premier job engines in the world in terms of producing high-paying jobs. So, one of the challenges in the Bay Area is having areas where more blue collar workers can afford to live. It’s so incredibly expensive in the Bay Area.
And so, Vallejo is a relatively inexpensive place to live in the Bay Area and it’s actually not that far out. What ends up happening is a lot of people are commuting from Modesto or Stockton or way out and Oakley or Brentwood. Vallejo is much, much closer. It’s actually on the water. It’s interesting. It’s really beautiful real estate. So it’s fairly proximate to the job centers. There’s good public transportation. There’s a BART station in Richmond, which isn’t too far from certain parts of Vallejo, and there’s also a ferry that goes to San Francisco.
So I like that the proximity of it and the public transportation that’s available and, for an investor, the ability to get some pretty good cash flow. It’s hard to buy higher cap rate deals in the Bay Area. Vallejo has some of the higher cap rates you’re going to see. You can buy properties at 5-6% cap rates, which is relatively unheard of in the Bay Area.
I think two other factors I want to highlight that I like about Vallejo are: the UC system is actually creating another Berkeley satellite school. UC Berkeley is not that far away, but they own a bunch of land on the water in Vallejo. Actually, the land is in Richmond but is fairly close to Vallejo that’s going to stimulate that area.
Vallejo By the Numbers
Distance from San Francisco: 32 miles
Q3 2019 Year-Over-Year Rent Growth: 3.5%
Q3 2919 Rental Housing Vacancy Rate: 4.9%
Median Home Price (September 2019): $413,000
[Sources: CoStar, Zillow]
Alex Osenenko: That’s a juicy nugget, that’s for sure.
Doug Brien: Yeah, so the timing of when that all gets developed and built out is a little hard to predict, but it’s in that area. And it’ll drive more job growth to Richmond and Vallejo and people can live in that area. The other thing that’s really interesting is that Mare Island is an old Navy base and there’s a lot of redevelopment happening. Mare Island is actually an island in the bay right off of downtown Vallejo and there’s a ton of redevelopment happening. There’s a modular home company that’s locating. There a big developers doing a mass mixed-use development. So a lot of interesting things happening there, which I think will feed into downtown Vallejo and will feed further desirability in the area as well as job growth and household formation.
So, that’s why I think Vallejo is an interesting market to look at as you look at how to invest in the Bay Area and get some reasonable cash flow. I think Vallejo is an interesting option.
Alex Osenenko: Gotcha. So to sum this up, we are talking about proximity and availability for the workforce to actually make their way into the Bay Area where most of the jobs are. The cap rate is probably the best in the Bay Area, and there’s opportunistic development—potential development—happening through UC Berkeley and the Navy. All those things combined sound like a pretty interesting opportunity for investors to take a deeper look at Vallejo.
If you guys want, Doug and I will be doing the whole series specifically on Vallejo, so check us out on Mynd.co. M-Y-N-D dot CO, and just search for Vallejo investing or Vallejo property management and you’ll find our other episodes. Until then, thank you very much for watching and Doug, thank you for your time.
Doug Brien: Thanks, Alex.
Vallejo certainly profits from its proximity to San Francisco, presenting serious opportunities to potential investors. Though more blue collar than some of its more cosmopolitan neighbors, major redevelopment projects and a great public transportation system are major attractors to new families and young professionals. And boasting such a diverse market with one of the highest cap rates in the Bay Area, Vallejo is an interesting option for investors looking to create some reasonable long-term cash flow.