All Forum Posts by: Leo R.

@Don Johnson  In general, the East side of SLC usually has the best appreciation for single family homes (neighborhoods like Sugarhouse, the Aves, East Millcreek, and anything along the East bench usually has good appreciation...but they also tend to be expensive properties to buy...).  ...everyone wants to live in those areas, but there's a finite number of houses to go around, and very few new single family homes are being built in those areas, so it's a fairly straightforward issue of low supply and high demand.

However, I think I saw a stat recently that showed that some West side areas like Taylorsville had the highest appreciation in SLC last year (even higher than the East side neighborhoods)--my theory is that the East side has become so expensive, that most "normal" buyers (that is, people with fairly typical incomes) cannot afford the East side anymore, and are therefore being pushed toward West side areas like Taylorsville, driving up prices in those areas.... that's just my hunch (I don't have any data to back it up).  If the market tanks, I would expect that West side neighborhoods like Taylorsville and WVC will get hit the hardest, and the more expensive East side neighborhoods will retain their value better (again, just a hunch).

Hopefully that helps. Good luck!

John; I agree with the other folks who have said that becoming an agent solely to learn about investing is probably not the best course of action--...there are lots of much more effective (and cheaper) ways of learning about investing.

Rather than becoming an agent, you'd be much better off working with an agent who understands investing and learning from them. In my experience, working with an agent and a mortgage broker who understand RE investing has been incredibly valuable. There are also innumerable free (or very cheap) resources to help you learn (real estate podcasts, books, youtube vids, etc., etc., etc.). This is one of the cool things about RE investing--if you take the time to look for the info, you can gain a very valuable education for very little money (or no money at all).

Good luck!

@Lindsay Z. for a realtor, I'd suggest Dane Anderson at Keller Williams; I've worked with him for years, and he has extensive knowledge of, and experience with pretty much every aspect of single fam and small multi-fam investing in the SLC/Bountiful/Ogden areas (i.e.; flips, BRRRRs, cash out refis, HELOC-funded rehabs, etc., etc.).

I don't have a suggestion for a CPA, but on a related note, I do have an suggestion for an excellent mortgage broker, who I've also worked with for years--Brian Heiser at Academy Mortgage. Top-notch service, a wealth of knowledge, and very professional.

If you have any questions, just send me a message.

Good luck!

The top qualities that my realtor brings to the table that many realtors don't are as follows:

1. In-depth understanding of home rehab/repair, with extensive experience doing carpentry, plumbing and electrical work first-hand, and extensive experience hiring contractors to do the work as well. My realtor has rehabbed numerous properties and has a wealth of knowledge and experience as a result--and a willingness to commit serious time to educating me on those topics. Connections with competent contractors and tradespeople is also highly valued.

2. In-depth understanding of property management and experience as a landlord, with detailed understanding of the regional rental market, tenant relations, and all the ins-and-outs of renting a property.

3. Understanding of, and experience with the various financial maneuvers and strategies that real estate investors use (such as HELOCs, forced appreciation, BRRRR, cash-out refis, hard money, etc.).

4. The ability to see potential in a property that most other people wouldn't notice. For instance, seeing opportunities for forced appreciation via floorplan reconfigurations/rehab. Also, the ability to see past cosmetics (either good cosmetics or bad cosmetics) to see the true potential value and best use of a property.

In addition to these items, I expect the more typical competencies that most realtors should have (such as familiarity with neighborhood dynamics and values, an understanding of how to make a competitive offer and close a deal, etc.).

In my experience, it's also important to have a mortgage broker with a lot of these same skills, who understands the techniques investors use (techniques that might not be used by a typical homebuyer).

Good help is hard to find, as they say  :)

@Matt C. as you probably know, currently one of the only ways of finding cashflow in SLC is through forced value add (which is what you're doing if you're creating a new unit in your basement). When done correctly, adding a new unit to a house in the right neighborhood in SLC can produce an excellent ROI, and put you in a better position to purchase your next property (since your new rent income will be added to your DTI, and you may have access to HELOC or cash out refi money coming from the new equity you've created via the new unit you built).

When you rent this new unit, if it's your first time being a landlord, there's a lot to learn. SLC has rental markets that vary quite a bit from neighborhood to neighborhood (owning a rental unit in Sugarhouse or the Aves is a very different ballgame than owning one in, say, West Valley)--in terms of rent, the types of tenants you'll have, how easy it is to find tenants, what the tenants expect, etc., etc.

In my experience, if you plan on repeating your current formula or staying in the the RE investment space for the long-haul, it's super important to work with a mortgage broker who understands RE investing (which is quite different than the typical mortgage broker who only understands typical customers who just want to make a one-time purchase of a single family home for their residence). It's also necessary for this broker to be highly trustworthy and ethical; one who gives you accurate info, even if it means they risk not closing a deal (some brokers will just tell you what you want to hear to close the deal, in which case it's easy to paint yourself into a corner based on bad info...).  ...It's also super important to have an agent who understands RE investing, the ins and outs of being a landlord, and property construction/rehab/maintenance (i.e., an agent who has done a significant amount of their own property maintenance, house flipping, rehabs, BRRRs, etc.)--again, this is a skill set that a lot of agents do not have (although, many do).   ... Over the years, I've learned a wealth of info from my mortgage broker and agent who have this type of expertise, and it's been invaluable.

I'm in SLC; hit me up if you want to grab a beer and talk RE.

Good luck with your basement build!

 @Jim K.  Man, do I miss Pittsburgh--such a great city!

I don't know whether it's a predictor of a crash necessarily, but I have seen a few people noting that in some markets, things are so hot that flippers appear to be taking outsized risks and working on razor thin margins....Presumably, as rates go up, flippers will have fewer options for how to fund flips, and perhaps some could end up in a very tight spot.  However, I have no idea how widespread this type of problem could become, or what effect it could have on the broader market.

Another factor that doesn't seem to get discussed enough is the effects of climate change on what are currently some of the most in-demand RE markets.  Areas in the West and South like Phoenix are booming, but the West is already virtually out of water and I have no clue how the ongoing population growth in those areas can be sustained without some radical changes to water supply and usage. Most of the water in the West comes from snow melting off the mountains, and as the climate warms, our winters are becoming significantly less snowy--this has resulted in significant water shortages in recent years.  ...so, we have steadily increasing demand for water and steadily decreasing supply...who knows where that will lead (History is not without examples of cities booming and busting, and one would think that water availability would be a necessary prerequisite for continued growth).

It's hard to know when or how these issues might affect real estate in the western U.S. and the broader market (I'm not an expert on any of these topics, just a casual observer), but it's probably prudent to keep in mind that markets can be affected by more than the typical factors RE investors tend to analyze (such as rates, supply, demand, job availability, etc.).

Go Bucs!

Wow--that's a pretty large basement--lots of opportunity!

If you have a decent chunk of equity in the property (or if you have equity in other properties), then a commonly-used strategy is to fund the basement construction with a HELOC, and then roll that HELOC debt into a refi on the property with equity. When well-planned, it may even be possible to roll the HELOC debt into the refi without even making any direct repayments to the HELOC debt.

Of course, doing this was a lot easier a while ago when people were re-fi'ing from a 4% rate down to a 3% rate....now, with rates going up, the numbers may not be as appealing (particularly if you're already at a low rate), but if you hurry you may still be able to refi into a rate where the slight increase in your payment more than justifies the significant growth in the rent revenue you can get from the basement (in my experience, a 1k sq ft basement apartment build in SLC would be in the neighborhood of $50k (assuming there was an existing exterior entrance), which translated to a couple hundred a month difference on the payment after the refi, but created an apartment that could rent for 1,300-1,500 --so, a pretty decent roi...  but, this was back when it was possible to refi down to a lower rate...

Good luck!

 Personally, I've always felt that there's a fine line between buying a property in the hopes that it will appreciate and speculation (perhaps they're the same thing?).  If you can afford to hold the property with zero appreciation (or even through a crash), then that may change your calculations (though, I'd still wonder about the wisdom of buying a property that is guaranteed to lose money month over month in the near term, and where the longer term returns are far from guaranteed)...or, if you can force property appreciation or rent appreciation through value add, then that might also change your calculations... But buying a property that is guaranteed to lose you money month over month and just hoping that it will appreciate seems like a dice roll.  True, there are plenty of indicators that the market around SLC will continue to appreciate...but there are also plenty of indicators that we're in for a correction...and at the end of the day, none of us know for sure what will happen.

Also, you mentioned that new construction should have fewer repair costs...this is true in theory, but not always true in practice. A brand new building sometimes has kinks that need to be ironed out (sort of like a brand new car that is in its first year of production). I know folks who have bought brand new houses, and in the first year they've dealt with serious issues like significant foundation settling and cracking, significant flooding (basement was built too close to the water table), and premature wood frame rot due to poor design/construction....  On the other hand, if you see a 40 year old house that is in good condition today, with no evidence of settling, flooding, rot, etc., then it's doubtful that it will suddenly begin to settle or flood tomorrow...on an older house, the problems have often either been resolved, or they are plainly visible (particularly if the basement is unfinished). ...Having said all that, there's no doubt that a lot of modern construction techniques are better and more durable than some techniques that were used in the past...

Hopefully that's useful info. Good luck!

 Jadyn, I'd also suggest focusing on the numbers first and foremost--if it's a property you can afford with numbers that work for you, great.  You mentioned thinking that the rooms would rent for about 500-800 per month; although I think you're in the right ballpark, you might want to be a bit more conservative given that the house has an older interior, and therefore will require discounted rent compared to a place with a brand new interior. The number of bathrooms also has a big effect on rent value, and although this property is reasonably large, it only has 2 bathrooms.

In addition to that, here are a few other considerations:

First, zillow said the house is 2300 sq ft, which is a decent size. Usually, more square footage means more options for what you can do with the house (for instance, you may be able to add a bathroom, add a bedroom, or add the mother in law...doing these types of things tends to be much easier with a 2300 sq ft house than with a 1000 or 1500 sq ft house) --doing these types of things can potentially completely change how much money you can get in rent, as well as the value of the property (which you may want to tap into in the future by either selling the property, refi'ng, doing a HELOC, etc.). In some situations, adding a MIL basement apartment can transform a property from a place that loses hundreds of dollars a month to a place that nets hundreds (or even into the thousands)...

Second, if you do plan to make changes to the property (e.g.; adding a bathroom, a MIL, etc.), I suggest first spending considerable time at the property and really thinking through the best use of it--a poorly planned MIL vs. a well-planned MIL can make a big difference in how much rent you get, and how easy the spot is to rent. I suggest walking the property a few times with someone who's experienced with doing the work you have in mind (a contractor, a flipper, or someone who has done this type of property reconfiguration on their own house) and discussing the possibilities...if the person you consult with also has experience renting/managing similar types of properties and understands the rental market, even better (PM me if you'd like some suggestions on pros who might be willing to help with that).

Third, get quotes from contractors for what you want to do, consider how you will finance any of the changes you plan to make, and consider the cost-benefit ratio of doing various changes.  For instance, if you have a lot of equity in the property and you could build a MIL basement apartment for 50k and then roll that 50k into a refi on the property, the additional debt service on that 50k would probably only be a few hundred per month, but you'd probably be able to rent the MIL for 1100-1500/month, so that type of deal would probably make sense ....   An experienced mortgage officer can walk you through various financing options (again, PM me if you'd like a reference to a good mortgage officer).

Fourth, if you go forward with renovations, you'll probably want to read up on (or listen to podcasts about) how to vet, hire and manage a general contractor. A good GC is worth their weight in gold, but a bad GC can turn your life upside down...not only that, but the way you communicate with and manage your GC can have a huge effect on how successful the project is, how much you end up paying, how long it takes, etc.  There are a variety of BP podcasts and resources (and I'm sure lots of articles/books) on this topic.

Lastly, I suggest thinking a lot about what your end goal is with the property. Do you plan to sell it in few years if the market remains strong? Do you plan to keep it your entire life? Do you want to live in it for one year and then move, or could this be your "forever home"?  ...your personal end goal for the property will have an enormous effect on what makes sense for you to do (because of this, a property that is a total loser for one person might be a slam dunk for another person, depending on their goals).

Hopefully that helps.  If you're feeling stressed about the property, that's pretty normal...the good news is, although the first property is usually the most stressful, it gets a lot easier with repetition. Good luck!

If you house hack or BRRR, understanding the neighborhood and the rental market in your area is pretty critical. If you're not yet familiar with the various rental markets around SLC, I'd suggest talking with an experienced realtor (a realtor who has experience being a landlord around SLC), or an experienced landlord/investor who understands the rental dynamics... understanding this will help ensure that you can finance future deals (because the rent income you get from your first property will impact your financing for the 2nd property, which will impact the financing for the 3rd property, etc., etc.).

If you're a beginning investor, all other things being equal, house hacking is probably a better place to start than BRRR'ing (because house hacking tends to be more straightforward with fewer moving pieces and often less risk).

In my experience, it's also been critical to have a realtor and a mortgage officer who both understand real estate investing, house hacking, BRRRing, etc. Let me know if you'd like the contact info for the realtor & mortgage officer I work with (both of whom are excellent).