Real Estate Agent · Lehi, UT · Member since 2018 · 4 posts · 1 vote
Hey BP, looking for some opinions! I live in a rapidly growing real estate market (Utah County) and I'm growing my buy & hold portfolio here. However, the rental rates haven't quite kept up with the appreciation growth here. I don't want to speculate but all the signs point to rental rates rising in the future. So my question is, if you were in my shoes, would you 1.) buy in a growing market like this now with smaller cash flow (and ROI rates) with the assumption that rates will rise, 2.) wait for rental rates to increase before buying with the potential of purchase price continuing to increase as well, or 3.) move on to outside markets for buy & hold deals.
I know there are often deals to be made in any market (just have to find them). I haven't started marketing for off-market properties yet so everything I'm basing my synopsis off of is MLS properties. Ideally I'd like to stick to local properties if possible so I can manage them myself but I'm not opposed to moving to outside markets if the deal is right.
Investor · Salt Lake City, UT · Member since 2016 · 89 posts · 41 votes
8y
@Joe Spillner how has the cost analysis been for the deals you are looking at. Do they cash flow positively when buying on your typical fixed rate 30 year mortgage? What have you been able to find as an average for the market down there?
Rental Property Investor · UT (utah) · Member since 2016 · 48 posts · 59 votes
8y
@Joe Spillner
I’ve been wary of buying locally and assuming rental rates will increase. My plan of action will be to hold the rental units I currently have here and look elsewhere. My thought is that being diversified in this way will help with both cash flow from properties in the Midwest as well as prIce appreciation here in Utah.
Real Estate Agent · Lehi, UT · Member since 2018 · 4 posts · 1 vote
8y
@Nathan P. I've found that I can still find positive cash flow but at low cash on cash ROI. I purchased a property a little over 2 years ago in Utah county with a cap rate at 9-10% and cash ROI of about 13%. I want my cash ROI to be greater than 12% for all of my properties. Honestly, in my opinion, cap rates and ROI are a bit all over the board right now and it appears as though outside investors are coming in with decent rental rates but local or older landlords aren't raising rents. At the end of the day, I'm finding cash ROI to be closer to about 8% now which doesn't meet my criteria. Am I just crazy or have you been noticing similar trends?
Real Estate Agent · Lehi, UT · Member since 2018 · 4 posts · 1 vote
8y
@Josh E. I've been looking into other markets as well but just need to get myself to pull the trigger. My biggest hurdle is that I'd like to manage my properties (at least until I grow my portfolio further). But at the end of the day, I will go wherever the deal is.
Real Estate Agent · Highland, UT · Member since 2015 · 407 posts · 272 votes
8y
@Joe Spillner I agree with @Josh E. I would never buy on assuming rental rates will increase. If you have enough in reserves and it cash flows from day one I'd jump in. There are plenty of other strategies. One I'm seeing right now is a shorter term flip where someone buys, renovates and rents for a short amount of time maybe a year or two and uses that appreciation to buy the next one. Better cash flow with the larger down payment.
I'm only finding deals off the market when I'm talking with seller thinking about listing their homes sometimes I'll make an offer before they hit the market. Also, we have lots of wholesalers if you can get on their list and find a hard money lender to lend to you. As a Realtor, you can run the number to see how close they are.
I'm a fan of being close. You know your market and know what the economy looks like as you work in it day in and day out. What if an out of state market started to shift and you miss it?