Do BRRR deals work in the Utah market?
Member since 2019 · 3 posts · 0 votes
My wife and I are exploring options to begin seriously investing in real estate. We are reading Brandon Turner's book "the Book on Rental Property Investing." We like the concept of starting with a couple of BRRR's per year. We're targeting a 5% to 10% cash-on-cash return. The numbers only pencil if you're able to purchase at 70% of ARV (or less). Relative to the mid-west pricing Brandon describes in the book, Utah is a hot market with high demand for housing. Prices are high. I've looked into a few wholesale deals in the past and they all get dozens of offers within hours of listing.
Does anyone have advice for how to find great deals in Utah? Is BRRR a viable strategy here or should we pivot?
Thanks in advance!
I've done the partial BRRR several times in Salt Lake area, leaving behind cash in each one but not the 20-25% down most investment property mortgages require because I forced appreciation before refinancing, so all in I'm in the 3-10% down area. I'm meeting a lot of other important rental metrics like cash flow per door, profit/value/spread per door, cash on cash return, low vacancy rates, in rapidly reliably appreciating markets like Provo. So getting 100% of my money out has so far only happened once (in stages with several down payments from the tenant from a wholetail lease option I refinanced then seller financed to him on a wrap), my other rentals are cash flowing well to get the rest of my cash out gradually. It's not all at once, but get creative and don't overlook a partial BRRR in this area.
I also buy in Pocatello ID where I can still BRRR, it's like having Indianapolis prices in our backyard for cash flow with a Utah economy for appreciation. I'm doing only large multi-family at this point though, but we are looking at a SFH project in Magna that fell in our laps that looks like it can be 100% BRRR right now. Maybe not, but if I can get close I'll still do it because it's Utah!
@Jake VandeMerwe, I'm a pretty new investor too. I looked at Utah, around Salt Lake specifically, starting out as well. I think pulling off a BRRRR in the sense where you refi out 100% of your capital is difficult regardless when you're new, and is heightened in really competitive markets with home prices say in the 400+ range instead of a midwest home at 60k. That said, there are people successfully investing in any market, and I'm sure there are people who are able to BRRRR or flipping in Utah. One tough thing starting out is networking to the point that you have a crack at a deal where the #'s could actually work. If you're on wholesaling lists, some of those may be junk deals and if there are good ones, then as you say there are many other people throwing in offers right away. Since you're investing in the market you live in, could you try to find your own deal?
In this market you'd do a lot better to house hack with these killer interest rates. Finding 30% equity and reasonable cash flow in Utah right now is very hard, even for those with decades of experience.
I've done the partial BRRR several times in Salt Lake area, leaving behind cash in each one but not the 20-25% down most investment property mortgages require because I forced appreciation before refinancing, so all in I'm in the 3-10% down area. I'm meeting a lot of other important rental metrics like cash flow per door, profit/value/spread per door, cash on cash return, low vacancy rates, in rapidly reliably appreciating markets like Provo. So getting 100% of my money out has so far only happened once (in stages with several down payments from the tenant from a wholetail lease option I refinanced then seller financed to him on a wrap), my other rentals are cash flowing well to get the rest of my cash out gradually. It's not all at once, but get creative and don't overlook a partial BRRR in this area.
I also buy in Pocatello ID where I can still BRRR, it's like having Indianapolis prices in our backyard for cash flow with a Utah economy for appreciation. I'm doing only large multi-family at this point though, but we are looking at a SFH project in Magna that fell in our laps that looks like it can be 100% BRRR right now. Maybe not, but if I can get close I'll still do it because it's Utah!
@Jake VandeMerwe I do occasionally see off-market or wholesale deals where the numbers for BRRR would work, but to your point it is extremely competitive. To get a deal at 70% ARV... I'd recommend off market where you are reaching out to property owners directly. I do think house hacking is one of the most powerful things you can do in the Utah market (I might be a little biased though because that's what I do!) But with that strategy you'd be limited to one property a year. There's nothing wrong with doing both, or house hacking while searching for a BRRR deal.
Another thing to note is where in Utah are you looking? The numbers vary wildly as I'm sure you know... I was just looking at a property in Ogden that would be about double the price in Sugarhouse. So if you are flexible on the location or are even open to more rural areas, there's definitely more opportunities out there.
Please keep us posted on your investing journey, I'd love to hear about the properties you end up buying!
@Jake VandeMerwe
I'm an agent and an investor in Ogden. There is absolutely opportunity in this market. House hacking is always a win, but there are tons of properties that you could BRRR. The first thing I'd advise you to do is get your financing figured out first. Once you're prequalified, you can move as fast as the market does, with a realistic picture of where you need to be with rents and renovation costs. There is also a property that just came up on the MLS that is fully occupied, cheap and cash flows! Things go fast, so when you find something that might work, you have to be ready to make an offer. Analysis paralysis loses every deal when interest rates are this low.
Thanks for the insights everyone! Totally with you on house hacking, we've been doing that for a few years now. It's been a one trick pony for us because we have 4 kids and don't really want to move frequently, but I don't think I'll ever own a home without a basement apartment. No sense in paying my mortgage all by myself.
Our situation now is that we have steady income, $100k to invest, and we want to spread it as far as we can. I've been able to find deals that cash flow in Utah, but I don't really want to throw all my capital into just one or two deals for a few hundred dollars per month in income. BRRR is appealing because we could recycle our capital. Even if we can't get 100% out, if I could do 4 or 5 deals instead of 1 or 2, my guess is it probably makes sense. We'd prefer to invest somewhere within driving distance from Salt Lake County, so Pocatello would work.
What advice do you have for finding good deals? What meet ups or groups should we be a part of?
If BRRR doesn't work, we've thought about buying in good locations for Airbnb. If I can't get my capital back out through a near term refi, maybe Airbnb would cash flow more? What strategies are you using that work in Utah?