Investor · Lehi, UT · Member since 2014 · 7 posts · 3 votes
I am new to the REI arena and have been listening to BP podcasts and am starting to read books. I am continually shocked when I am listening to how low the purchase prices are that I am reading about - single family units under $50K, duplexes under $100K. It seems these prices are necessary to operate under the 1-2% rule, 50% rule, etc.
I'm in Utah and in areas I want to invest it seems a duplex costs 160-180 and rents for ~$700 per unit. The numbers don't seem to add up in the areas I'm looking. Do I need to look a bit farther away in different areas, do I need to stop looking at MLS for listings, or do I need to lower my standards? In Utah when I look at MLS listings the only area that seems to fit well for price is Ogden. Any locals with some advice for a rookie? Anybody for that matter.
Commercial Loan Broker · Draper, UT · Member since 2013 · 6 posts · 4 votes
11y
Hey Jake
Saw your post
I am a mortgage broker here in Draper.
Utah is not the place to find $50,000 homes, or even homes that meet the 1% rule.
Most of these will be in places like Memphis, Indianapolis, Atlanta, etc.
One strategy is you can look into HOMEPATH properties. www.homepath.com.
These properties can be bought with a Homepath Non Owner Occupy Loan for as little as a 10% down payment. You could buy a nice $80,000 home in one of the cities outside of Utah for as little as a $8,000 down payment.
Utah is tough from everything I've seen here on BP and through my own limited research. The areas around Salt Lake are tough to find anything worth house hacking, much less as solid investment properties.
Keep checking out zip codes within reasonable distances from your house. It may be several hours away before you find a good start to your investing career.
Salt Lake does not seem to have any 2% rule houses. Your best bet there is to find a fire damaged place and cash out the owner's after they've gotten their insurance check. I've not looked into large developments 100+ units, but that doesn't sound like your game at this point.
Keep running through zip codes until you find your niche. Straight up rentals is one way to go about it, but make sure you look at other options in RE. Not too far from basic rentals is student housing. A bit farther away would be fix and flips.
The first thing you want to do is define your immediate goal for an investment. Mine is "Find 2-4 unit properties that cash flow $125/month/door AND give me 20% Cash on Cash return."
Broker · Logan, UT · Member since 2013 · 1k+ posts · 1k+ votes
11y
A lot of open ended questions.
You are correct that MLS listed multi's rarely hit the 1% rule in stable markets in Utah. Moreover they are not appreciating like the SFR's. At least up here, there haven't been very many interesting opportunities on the MLS in a while. We see a lot of people coming in with cash or large downs because they have emotional attachment and believe in the stability of the market without much need for the types of cash flow that you're hearing about here on BP.
However, you can do better than rent covering PITI in Utah if you develop a plan for sourcing properties. In other words, what is your competitive advantage for acquiring value? Time to scour the market? Tons of cash? Comfortable with physical distress? Wide marketing net? Sweat equity? Willing to occupy a unit in a multi?
@Trevor Thompson should chime in with details on the two primary real estate investors associations down there (UVREIA and SLREIA). I recommend you go to some of these meetings and network. Their format offers ways for newbies to get a foothold in the business as well as something for the more seasoned folks. It's a great way to start conversations with people who can set you in the right direction.
Commercial Loan Broker · Draper, UT · Member since 2013 · 6 posts · 4 votes
11y
Hey Jake
Saw your post
I am a mortgage broker here in Draper.
Utah is not the place to find $50,000 homes, or even homes that meet the 1% rule.
Most of these will be in places like Memphis, Indianapolis, Atlanta, etc.
One strategy is you can look into HOMEPATH properties. www.homepath.com.
These properties can be bought with a Homepath Non Owner Occupy Loan for as little as a 10% down payment. You could buy a nice $80,000 home in one of the cities outside of Utah for as little as a $8,000 down payment.
To find out about an area go to IREM.org search for ARM certified property managers. Call 5 ask them what parts of the city they like/dislike and why. Ask them what they see expenses running per category per unit. What do they see them selling for per unit, what is the market occupancy rate. What are the market rents? Ask them if they know anything coming up for sale. Great way to pick up some good info and possibly a deal.
You can also search NARPM.org for the RMP (Residential Management Professional) and MPM (Master Property Manager) certified.
Welcome to BP! As you can see, BP is a great community. I have nothing really to add to the great advice above. As mentioned, you should be able to find homes that at least meet the 1% rule within 2 hrs of SLC. HUD and Homepath are also very good options. I wish you the best of luck and please keep us abreast of how things go moving forward!
Property Manager · Bountiful, UT · Member since 2014 · 19 posts · 5 votes
11y
I am in the same boat! No amazing deals like what people talk about on here, but there is still money to be made. I am looking into complexes with 10-20 units, there are more of these and although more expensive, some can cash flow pretty nicely. I hope we both find something!
Real Estate Agent/Investor · Lehi, UT · Member since 2013 · 58 posts · 8 votes
11y
Jake,
I would be happy to speak with you about the different ways you can get involved with the local market. I'm interested to see what types of properties for investment you are after and help to connect you with those in the scene that can direct you.
www.slreia.com and www.uvreia.com are both great non-profit resources that are designed for networking. I am going to a free lunch today in Midvale with the Salt Lake club.
As for finding profitable rentals in the local market...
I grabbed a previous forum post that describes one purchase that our group made recently. We do this type of project with our clients regularly. 6-12 times per year.
I am not a lender, and I don't know all the specifics about your deal. Just wanted to let you know one strategy that I know of that may be useful on this deal or another in the future.
When you make a purchase with Hard Money, you should end up with a Note and Deed of Trust recorded against the property. You can start an application the day after closing for a "rate and term refinance" but few lenders understand the process to get it done correctly. There is no seasoning period. Your new refi will be Fannie Mae, or Freddie Mac, a traditional mortgage, non owner occupied.
In May of 2013 the group I work with purchased a home with HM for $98,000.
We spent about 17k in rehab on it, and 60 days later it appraised for $162,500. We keep every receipt, and bid, and take before and after pictures to show the process. On the day after I filled the property with a lease for $1200 per month, the appraiser came in and did his inspection.
In this case the appraisal came in high enough ($163,500) that we refinanced the hard money, plus the HM fees, and the closing costs for the new loan (totaling about $107,500). This amount needs to be 75% or less LTV. That way you are only refinancing the existing loan, not taking "cash out". Ours came in a little better than that.
Does that give you an alternative to waiting 6-12 months to do a cash out refi?
Real Estate Investor · Layton, UT · Member since 2014 · 21 posts · 0 votes
11y
There are at least 2 hedge fund companies that have been buying up rentals in salt lake and davis county for the past 2 years (restore utah, llc and american homes 4 rent) which has driven the price up a bit. However, there are plenty of sellers willing to take cash or terms still. The key is to market directly to the sellers. Having a conversation with them is where it all starts. I just watched another local investor buy a duplex for $51k cash with $1200 gross rents (Ogden). The biggest reason? His family was living in it and not paying rent. This investor was able to take that pain away from the owner by painting himself as the bad guy. The lead came from a post card that he mailed to absentee owners. I mailed the same guy and was 6 hours too late on it.
Investor · San Ramon, CA · Member since 2011 · 1k+ posts · 569 votes
11y
Hmmm.... bought a HUD home for $72,000 that rents for $1,350 a month... but a 4plex off Craig List for $120k that rents for $2,100 a month... another Duplex for $52k that rents for $1,200 a month and a triplex for $100k that rents for $1,300 a month.
Deals are pretty easy to find in Ogden which is an hour from SLC.
Seriously though... thread after thread of "I can't find the deals... on the MLS... in my backyard...". Guys, come on... you're smarter than that. This isn't supposed to be easy.
Expand your range... use more tools than the MLS.
I bought 8 properties in Ogden with $25,000 cash... all of them rented for at least 1.5% of purchase price and the last 7 were 100% financed. This was done through lots of research and phone calls. I'm no Guru, I'm not special, just someone willing to put in some time and effort.