All Forum Posts by: Cherie Orellana

Sounds like you are off to a great start if you are already househacking. I think moving every year buying owner occupied and househacking over and over is such a great strategy. One of the easiest ways to acquire properties with minimal amount down. Triplex and fourplex are a bit harder if you intend on buying FHA. There is a formula involved that can be difficult to qualify them in the salt lake market. Even with the crazy stuff going on with the earthquake and pandemic, I have not noticed anything slowing down in the real estate world in Utah. It does make me rethink adding earthquake insurance to my properties though :)

They are all over. I personally would attend a REIA meeting and ask everyone what lists they are on. I could search my email and find probably 10 different wholesalers contact info. There are some Facebook groups that wholesalers post in as well.

For me personally it would not be a deal breaker. Meth is fairly common in rental properties.  I just did 4 tests this afternoon on a property for one of my buyers.  Sometimes I even test my own properties between tenants.  

Utah’s required action level of 1.0ug, meaning there should be no risk of health concern under that.  2.24 is fairly low, however it does require remediation. I have seen tests come in well over 100

Very general range guide of meth contamination: .01ug to 3.5ug=Occasional Meth use in a home, 3.6ug to 15ug- Heavy Meth use in a home, over 15ug generally means Meth was cooked in the home (Meth lab).

I would use the results to renegotiate the purchase price of the property. Depending on how educated the listing agent is on meth remediation, you might get a substantial price reduction. 

Another option would be to ask the seller to remediate the property prior to closing.
They should be willing to work with you in some way given the fact that if you withdrew they would have to disclose this new knowledge to future buyers or remediate regardless.  

In my experience depending on the size of the property or unit it averages $3,000-$6,000 in Salt Lake and surrounding areas to remediate.  I recently got a buyer a $18,000 price reduction based on a positive meth test and it cost them about $3,800 to remediate after closing.  

Definitely do your homework and due diligence to be sure you know what you are getting into.  

@Peter Petwr 

Being a buyer in Salt Lake and surrounding areas can be frustrating right now.  I think patience is key.  Are you working with a realtor?  If so, I would suggest you have them search expired listings of homes that meet your criteria and reach out to them to see if they are still interested in selling. 
Another option is researching homes on list source or another provider to locate properties that meet your criteria and reaching out to them directly. Driving for dollars is always a good way to find off market deals as well.  I would get on as many wholesalers buyer list as you can and watch those. Often you could get transactional funding on a buy and hold or some wholesales offer short term seller financing.  Maybe even negotiate time to get a traditional loan depending on the circumstances. 

I Am personally still buying and not concerned about the booming market. I expect another 5 years of steady growth. As long as you have a plan A, B, C on everything, I would be comfortable buying in any market. I think a lot of the people waiting for some huge market correction in Utah will be kicking themselves in a few years wishing they made a move sooner. 

You are currently wholesaling ? 
Are you just sending addresses to wholesalers?

Besides going door to door, I would search city court records online for divorces, judgements, bankruptcies, evictions. Search code violations etc. 

My favorite strategy is still driving around adding address to my notes though. Once I have a list of potential off market sellers, I search county records for the owner. If it's owned by a business or LLC, you can do a business license search to find the owners name.

Then You research their phone number. I like familytreenow because it’s free and fairly accurate at locating contact info for sellers. Matching property address to the persons profile to make sure you have the right person. Give them a call and let them know you are looking to buy. 

@Derek Larson

I personally have just advertised with cozy and set up my rental once I found a tenant. They make their payments through cozy. 
Cozy does offer upgrades for potential tenants to apply and offer screening tools.  

I personally just use a state specific application, verify everything on the application, then do a formal screening through rentprep.  

I imagine the upgrades with cozy are similar. Having someone fill out an application online through Cozy (rental history, income, references etc) and screening process. Most background checks are billed to applicant when they fill it out. For example rentprep gives you the option to pay the $35 or tenant pay. It sends them an email to complete the process and make payment. 

I use cozy as well. Tenants can set up auto pay for their rent through cozy. They can also opt to have it reported on their credit. Basic use is free for landlords. 

I would check with a tax professional.  However I think moving into the property for 2 years to avoid capital gains is a great idea. The Utah market is expected to continue to have significant appreciation over the next few years.

The other option would be to 1031 exchange into the multi family property. The market in Utah is extremely hot right now. If that is the route you wanted to go I think you could locate the multi unit first then list your home in Utah and expect a quick close.  

At $40,000 combined income sounds like you will be in 12% tax bracket when it comes to calculating recaptured depreciation.  Again, I would consult a CPA / Tax professional to verify. 

I did find this that may be helpful on fitssmallbusiness.com 

Residential Rental Property Depreciation Recapture Example

We’re going to show you six steps to calculate depreciation recapture. First, we need to know the tax basis of the property, which is the same as the property’s purchase price plus closing costs and any capitalized expenses. We also need to know the adjusted cost basis which is the purchase price minus the annual depreciation multiplied by the number of years of ownership.

Now, let’s look at a rental property depreciation recapture example in six steps.

1. Purchase a Rental Property

Let’s assume that Jane purchased a residential income producing property for $350,000. Now, let’s assume the property has an annual depreciation of $20,000, and Jane decides to sell the property after 11 years for $430,000.

2. Calculate the Adjusted Cost Basis of the Rental Property

To figure out the adjusted cost basis, we use the purchase price minus the annual depreciation rate multiplied by the number of years of ownership, and we get $130,000.

$350,000 – ($20,000 x 11) = $130,000

3. Calculate the Realized Gain on the Rental Property

Then, we figure out the realized gain on the property by subtracting $130,000 from $430,000, and we get $300,000.

4. Calculate the Capital Gain on the Rental Property

The capital gain will be $300,000 – ($20,000 x 11), which = $80,000, and so the recapture gain is $20,000 x 11, which is $220,000.

5. Know Your Tax Brackets

Now, let’s assume a 20 percent capital gains tax and a 28 percent income tax bracket. The total amount of tax that Jane will pay on the rental property will be (0.20 x $80,000) + (0.28 x $220,000) = $16,000 + $61,600 = $77,600.

6. Calculate the Depreciation Recapture Amount

The depreciation recapture amount is 0.28 x $220,000, which is your tax bracket, expressed as a percentage, multiplied by the recapture gain.

The depreciation recapture amount will be $61,600.

As you can see from the above example, it’s quite complicated, but you were able to figure out the depreciation recapture amount. So, now you know how much you will pay when you sell a property, and you can decide if it’s worth selling and what you need to sell it for.

I absolutely think having an agent is important. They have  experience, expertise, skills, knowledge and often have personal relationships with lenders and other agents that can give you a competitive edge. As a buyer you do not pay your agent and it will only benefit you overall. Buyers often have an emotional investment in properties and your agent can help you navigate more from a business standpoint as well and making the best decisions overall. 
A seller has an agreement with the brokerage to pay a specified commission. In Utah it is typically 6% (3% listing agent commission / 3% buyer agent commission) this commission is again split with the listing or buyers agent brokerage. What many buyers do not understand is that with this agreement the seller is paying that amount regardless if the buyer comes in with an agent or not. The difference is that both sides of the commission or the full 6% in most cases would go to the listing agent as they would be representing both buyer and seller.  

There are a few occasions that this can be advantageous. I myself being a real estate broker have made offers letting the listing agent represent both sides. However right now in this market there are typically multiple offers within 24 hours of a competitively priced property. They must present all offers and it typically would be most beneficial to have an agent with experience and negotiating skills to help you make the best decisions and help get your offer accepted. Not being limited to trying to do what’s best for the other side as well as the listing agent would be.

You also mentioned Homie. I can not express how often I hear people within and outside the industry complain about this new trend/ brokerage. They are extremely difficult to get a hold of, often miss price properties well below market value and cost sellers Far more in time and money than had they paid for a full service knowledgeable listing service in the first place.  I have heard multiple appraisers complain about the incorrect information listed on the mls as well. Mistakes like this cost sellers money!  

If you are already working with an agent As you said and they are doing a good job for you I would hope that you would be loyal to them and have commitment as they have likely already worked hard helping you in your search for your property. 

It is almost always best to have a Realtor Representing your best interests when buying or selling real estate. There are of course occasional exceptions. Trying to list a home FSBO or when you are out looking for a property as a buyer are definitely not one of these few exceptions and you should definitely have knowledgeable representation.

@Skyler Smith is correct! 

If you are trying to legalize it long-term you would have to prove it was used in that manner for a specified number of years. Salt Lake I believe is from 1995 if it were to be used as separate units non-owner occupied.  It’s called unit legalization process. You can call the county to get information on it or on a specific property during your due diligence. Every city and every property is different.