Utah Realtor Saying Impossible to Find Deals @ 20% off Market

17 Replies

My wife and I are going to move our family (three kids) into a fourplex in Utah in the next few months. We've read Brandon Turner's books which say that in order to get a good deal we should be putting in offers at 20%-40% off the market value, shoot for 10% forced appreciation in the first year, and settle for no less than $200/unit Cash Flow. 

We have spoken with a couple realtors in Utah who tell me that this criteria is absolutely impossible. I realize that in order to find these great deals we'll have to put in several (40+) offers per year. Is it realistic to expect realtors to put in this many offers to help us find these great deals? Anyone in Utah finding these deals? If so, did you use a realtor?

I think it's completely possiable however you won't find them on th MLS. You'll have to network find owners who want out of the business. Or find properties that are very distressed. We have a strong market in Utah with a lot of "investors" who don't run the numbers and over pay for properties which make them hard to come by.

It is possible, but you will most likely not find something on the MLS with that criteria.

I have some contacts that can help you find a multi family depending on the area you are looking. Shoot me a PM and I can help get you introduced.

David,

The market in Utah is pretty hot, but anybody who says there are no deals isn't looking hard enough. You just need to be creative. Drive for dollars, look up county records. It's best to find an agent who is willing to work with you. Most traditional agents don't want to submit low-ball offers or put in a bunch of them because it is time consuming to them and they don't always understand your end-goal, so I'd recommend you find an agent that is investor-friendly. As has been said, there are deals, but most will be found off the MLS.

I'd also recommend you go to your local REIA event. I know the UVREIA is always pretty full and everybody's got info that can help you. Hope you find what you're looking for.

Thanks for the quick responses. Shmuel, I appreciate the post you referenced. Thank you all. It's easy to get discouraged when you're new and the first few realtors are telling us what we want is impossible to find. I appreciate your encouraging responses. 

@David Healey

I am a local wholesaler here in Utah. The market is very competitive and is certainly over saturated with investors. However, there are certainly deals to be found. I just wholesaled a duplex in South Salt Lake for $205K with an ARV of $285K. Keep in mind that most sellers for multi family are asking way too much for their properties. Especially when you analyze it in relation to the rents. The key to wholesaling is to make offers.

If you want to play on the MLS you can find deals. It is not my first or second choice but you can find them. I think you would have more luck finding deals on single family residences or houses that have mother in law apartments. Find the right realtor(s) that will be ok with making your offers and be consistent. Make lots of offers right away and follow up when these properties sit on the market for awhile.

I would also consider the art of owner financing.   I am working on a deal that I am paying more than what the seller was asking for on his duplex.  I am structuring it with a smaller down payment and interest of 2% over the next 5 years.  The cash flow will be about $300 net every month and the paydown will be tremendous over the 5 year term.  In this case, I can pay market value or even more and the numbers work just fine!

David you have to take books with a grain of salt. When Brandon started investing it was a very down time in the markets.

Properties like that are not as abundant today.

You should stick to your goal within reason. If you have to buy within a certain time frame you might have to move out of the area a little or compromise some on the purchase price.

Expecting a broker or agent to shot gun low offers all over creation just isn't realistic. If they are new and have no business then maybe they will do it.

If a busy broker/agent is getting hammered with investors who will pay within 5 to 10% of seller list price then nobody can blame them for wanting a quick sale. In the time they put in 40 offers to find maybe one that works in say 6 months time they can close 10 deals or more with the same effort.

Just like investors the brokers want efficiency with closings and commissions. Especially on the residential side where they have to turn over many closings to get by. If they sell you a place at 200k for 6,000 commission and give half to the brokerage they are at 3,000 gross before expenses. They are having to pump out 3 closings a month to make maybe 100k a year.

My situation is different in commercial real estate. I can wait and find clients the right properties because my checks per deal are in the six figures. What they are seeking still has to be in the realm or reality. If cap rates were 9 cap 3 years ago for multifamily and stuff is trading at a 6 cap  today maybe a deal is a 7 but a 9 is just dreaming.

I hope you find the holy grail that gets you going I really do. You might have to buy something that needs lots of work and rehab and lease up yourself to get the return and equity you want.

I know guys from a few years ago up there that did that. They would rehab and rent out and be in for an 8 cap and then sell at a 5 to 6. If they just bought something already cash flowing there was not any value to extract.

@David Healey

The numbers on the South SL duplex were like this - purchase price to investor $205K.  The rents were low and $1,375 per month.  They should be $1,900 per month with the owner paying only water, sewer and garbage.  There was a 3 bed/2 bath unit and a 2 bed/1 bath unit.  The property was built in 1915 so it needed some updating.  Mostly cosmetics like paint, flooring, some bathroom work and then some exterior work like soffit and fascia.  The new investor will be into about $230K that brings in $1,900 per month.  He has some built in equity of about $50K+.  Not a screaming deal but certainly better than most you will find right now.  The investor also has the opportunity to do the work, raise the rents and flip the property to another buy/hold investor and make some money that way.  

Hi David, I'm an investor and mentor/coach in UT and I find deals on the MLS for 20% off market all the time. I can show you my MLS spreadsheets. What I do is to get 30 days solds to analyze an entire county for the hot spots. Then I do further analysis on the 3 top selling zip codes to determine the most popular ARV in the area, then get a list of actives with a price cap of 30% less than that (and 90 days solds to use as comps for all of those properties).

As I analyze each of those properties for an individual ARV, I am always pleasantly surprised to see how many of those are 15 to 25% off market and how many of them are motivated sellers, short sales, HUD's, etc.

It is absolutely possible. You just have to know how to find them and how to find investor savvy agents. You can email me privately if you want to discuss more detail about it. My email is on my profile.

Hey David, great to have you here! Very smart to get reading, and I think @Brandon Turner might change some of his strategies with agents after he ends up getting his license, but his advice is solid.

Sorry you've struck out with agents so far. Good news though, I think it might be in the way you're pitching your agents (and possibly not finding the right ones.) Here are my thoughts in no particular order.

Make sure you understand the implications of your numbers. When you say they need to cash flow $200 per unit, give your agent something more to work with. If you're putting 30% down then it's much easier to get that cash flow. If you are putting 3.5% down on an FHA it's a whole different story.

I ran in to the same issue as you when I started out, and I ended up getting my license for that very reason. There's more to it than just having the agent fire off the offer, but I'm sure you'll find someone to do it once you know how to approach them. In the same way you want to present your best face to the bank and use terms a bank will want to hear, I'd practice how you approach a Realtor.

You'll want to suggest that they set you up with automatic "hotsheet" emails with your criteria, so you will always know when a new multi family building pops up or changes price. It's free for them and keeps them from missing anything.

It sounds like you're planning on making offers every other week, so keep in mind how much your agent will be making per hour if you only buy one property a year. I've had clients asking me to do exactly what you're talking about who understand that it would be too much work to call the listing agent, ask the normal questions about the property, tell them a little bit about my client, explain that we've got an offer, but also why it's coming in low - and why they should take it anyway - so they ask me to just submit the offer and be done with it. Imagine the listing agent getting an email from an agent they haven't talked to on a property they haven't seen or shown for an FHA at 40% below asking price. How do you expect that offer will be presented to the client? Perhaps consider calling the listing agent yourself and do some of that leg work. You might never have to work with that listing agent again, but your Realtor almost certainly will.

Be the type of client an agent could only dream of. Get a mini pitch deck together, maybe build a spread sheet that you can fire off that practically writes the offer itself. I would die if a client asked me to write an offer and emailed me this info:

MLS:

Tax ID:

Purchaser: (e.g. my cool LLC)

List price:

Offer price:

Highest I'll go:

Highest I'll REALLY go: (gotta find an agent you trust to use this one)

Concessions:

Special inclusions/exclusions:

Home warranty: (yes/no)

Due diligence deadline:

Financing/appraisal deadline:

Settlement deadline:

I could write that offer in 5 minutes and be on my way, especially if you already had a chat with the listing agent. ("Yeah I just wanted to personally introduce myself and let you know that I do have an agent, it's Skyler and he'll be sending my offer over shortly. The property looks great, but it needs X and I'll have to get in there and Y, so the offer is coming in at $Z for that reason.")

Finally, you'll have to be buying some place like Ogden or Box Elder county to really score some of those awesome multifamily deals. Otherwise they'll never let it go for 20-30% below market if it's on the MLS the way things are going now. Shoot me a private message and count me in on your next round of agent interviews. I think we could work something out.

@Lori Greene, @Joel Owens, Thank you very much for your responses. 

@Skyler Smith, do you think @Brandon Turner will ever get his license? I've considered getting mine but was advised against it from a mentor as we're newbs and therefore should be spending our time learning about real estate investing. What helped you decide to pursue the RE license as an investor?

Originally posted by @Jeff Rappaport :

@David Healey

The numbers on the South SL duplex were like this - purchase price to investor $205K.  The rents were low and $1,375 per month.  They should be $1,900 per month with the owner paying only water, sewer and garbage.  There was a 3 bed/2 bath unit and a 2 bed/1 bath unit.  The property was built in 1915 so it needed some updating.  Mostly cosmetics like paint, flooring, some bathroom work and then some exterior work like soffit and fascia.  The new investor will be into about $230K that brings in $1,900 per month.  He has some built in equity of about $50K+.  Not a screaming deal but certainly better than most you will find right now.  The investor also has the opportunity to do the work, raise the rents and flip the property to another buy/hold investor and make some money that way.  

 When the example of a decent deal for a Utah Multi-family is a 5 cap, might be time to sit on your cash for a while. If interest rates will ever get back up a few points, cap rates will follow. 

If you want to put in 40+ offers per year at a 40% discount...you need to either get your own license, or pay an agent on a per offer basis.  

@David Healey Only Brandon could tell us if he will eventually get his license, but I think he will. It makes so much sense to have, it's not too expensive to keep up and you get access to a lot of data. Some investors talk to so many home owners, but just throw away any retail leads they might have. Licensed investors can refer those out to a trusted agent and get a referral fee. Wholesalers especially who do a lot of direct prospecting could make quite a bit of money with this strategy. It's not uncommon for agents to pay 25-35% of a closed commission for somewhat qualified leads. 

I'd be interested to hear why your mentor doesn't want you to have your license. I agree with focusing on just one thing at a time, but being licensed has been only a boon to my investing. Aside from MLS access and making my own offers, it gives instant credibility when I'm talking to owners, buyers, and other agents. The biggest complaint I see investors use is that they have to disclose that they're licensed. I don't really see enough drawbacks, aside from the several hundred dollars in fees that you end up paying to keep it up every year. After I got my license I also ended up transitioning in to quitting my job and working as a full time agent. It's great!

@Skyler Smith My mentor is a lender by trade and an investor on the side. He also started to pursue his real estate license but was advised by his dad (who was a licensed agent) not to. His dad said he license training is designed to teach an agent how to stay out of jail, whereas proper self-directed investor training would teach him how to invest and manage investments strategies, tenants, etc. As new as we are I feel our time is best spent learning to invest, but later could be getting a license.

I like what you said in your original post about being able to assist in the agent's efforts. I feel this is gives me some much needed direction.