All Forum Posts by: Leo R.

 Carter, could you post the listing?

As you probably know, Sugarhouse/Liberty Wells is a neighborhood that has some characteristics that are uniquely advantageous for appreciation.

Specifically, the natural boundaries of the mountains the North and East, and the man-made boundaries of the interstates to the South and West are probably a big factor in driving appreciation in that area (since supply of single family houses inside those boundaries is limited--and there are very few new single family homes being built inside those boundaries).

Not only is that beneficial for inflation, but it makes your property in-demand for renters who will pay a premium to be inside those boundaries. 

I assume I'm not saying anything you don't already realize, but in my opinion, I'd be hard-pressed to walk away from a property that has good appreciation potential, easy rentability, and which is cashflowing (as we all know, in today's market, finding another property that has all those characteristics is very difficult, if not impossible)...so, with that in mind, I'd probably agree with folks who have mentioned using a cash out or HELOC (though, the coming rate hikes could complicate that strategy)...IDK--we're in a tricky market these days ... good luck!

 Hey Brett,

I shopped around a bit for this, and the only local place I found that would do a HELOC on a rental property was America First Credit Union (there may be other places that do it, but AMFCU was the only local one I could find). Of course, there are plenty of places that will do a HELOC on your primary residence. Hope that helps!

I was not at the REI meeting --the skiing was too good to pass up today, so I was on the mountain :)
I've been thinking about attending a SLREIA meeting at some point in the future, though...

@Elianna Zuluaga I think @Will Barnard brings up a good point--unless one has a background in finance, real estate, and real estate law, buying and rehabbing a foreclosure property with hard money may not be advisable.

Also, as Will points out, having a solid team in place is pretty essential (e.g.; a skilled mortgage officer, a good contractor, and a good realtor). I'm happy to provide references to the mortgage officer, contractors and realtor I've worked with over the years--just message me if you'd like any of that info.

Happy house hunting!

@Luke Schumacher I feel your pain! Almost impossible to find cashflow these days in SLC.

A couple thoughts: first, in my experience, one of the few ways of getting cashflow in SLC right now is to create cashflow via some type of value add maneuver (e.g.; splitting a single family into a duplex, doing a rehab, etc.)...though, you mentioned off market rehabs, so it sounds like you're already considering this approach...

Second, you mention tolerating very low CF in hopes of appreciation...obviously, this is where it's very important to be conservative and make sure that you can afford to keep the property even in a worst-case scenario like no appreciation or even a market crash...  Also, this is where understanding the neighborhoods is very important... You didn't mention how familiar you are with SLC, so you might already be aware of this, but higher income neighborhoods (e.g.; the Aves, Yalecrest, Sugarhouse, the East bench, etc.) tend to do the best with appreciation and also are often the most shielded from market downturns...

If you're new to SLC, I'm happy to put you in touch with my realtor who I've worked with for many years, and who is top-notch when it comes to navigating this challenging market (just message me).

Good luck!

@Brent Fisher I think all the previous posts are worth considering...another consideration is: do you plan to ever sell this property, and/or do you ever plan to leverage it (e.g.; a HELOC or a cash out refi), and if so, how will the changes you make now affect how the property appraises in the future?

It may be worth talking with an appraiser (or just looking at the criteria that appraisers use) to see how the different approaches you mentioned would affect the value of the property...my general impression is that garages often don't add that much value to a property (at least, I've noticed that it seems like the cost to build a garage is often a good bit more than how much value the garage adds to the property), whereas adding a bedroom or a bathroom sometimes costs less than the amount of value a new br or ba adds to the property...but, that's just my subjective impression (I'm not an appraiser)... good luck!

@Keith Mikkelson  I hate to rain on your parade, but I'd suggest re-evaluating some of these assumptions.

First, I'm wondering what properties you're seeing that cashflow well in southeast SLC? (I can imagine certain properties cashflowing with a very large downpayment, but otherwise it tends to be very, very difficult to find a property in SLC that will cashflow right out of the gate in the current market--particularly with a low downpayment...at least, that's my experience). IMO, with prices being so high, getting an SLC property to cashflow these days often requires some type of significant value add approach (e.g.; splitting a single family house into a duplex, finding an off market fixer upper and rehabbing it, etc., etc.)

Second, traditionally (when the market is "normal"), summer tends to be the worst time to buy, and the best time to sell because demand usually peaks in the summer months, and demand usually slows in the winter (especially around the holidays). However, the SLC market has been so hot that this year, we didn't experience any slowdown in demand in the winter--in fact, demand seemed stronger than ever this winter! (in other words, this year there didn't seem to be any significant seasonal shift in the market--it was continuously a seller's market) ...and what @Sherief Elbassuoni mentioned about interest rates is correct; it's very likely interest rates will continue to increase through this coming summer.

Lastly, I'm not sure how you'd find a 2 or 3 unit property in SLC for 600k--particularly in southeast SLC (if you do find it, I'd say buy it!). A standard 1700 sq foot 3 br 2 ba single family home in that area is typically 550k-650k right now...I'm not as knowledgeable about multi family, but my impression is that a duplex or triplex in southeast SLC  would usually be in the 850k to 1.2 million range (or potentially a lot more, particularly if it's close to the mountains)..the agents/appraisers on here can correct me if I'm wrong, but southeast SLC tends to be pricey--and the closer you get to the mountains, the higher the prices.  ...here's some recent data on single family homes (note that this covers all of Salt Lake County, which includes everything from very high income neighborhoods to very low income neighborhoods): https://www.biggerpockets.com/...

Having said all that, there are lots of decent real estate opportunities in SLC if one goes in with the right knowledge, expectations and team. I work with an excellent realtor and mortgage officer, each of whom I've worked with for years; Dane Anderson at Keller Williams ( https://www.kw.com/agent/UPA-6... ) and Brian Heiser at Academy Mortgage ( https://academymortgage.com/ab... ).  Give 'em a call, and they can help you out... 

Happy to throw my 2 cents in on any other questions you may have. Good luck!

@Eric Balken  Interesting; could you maybe ask your finance friend to elaborate on that and maybe provide some hypothetical scenarios with numbers?

From an investor's perspective, I feel like there could be some instances where an earthquake policy could still make sense on a rental property--even if one had minimal equity.

Let's say you have a rental house in SLC that you owe 400k on (and the house is only worth 415k, so you have minimal equity). However, the house is cashflowing, and the cashflow would be enough to pay for typical maintenance, plus a pricey earthquake policy (for now, let's put aside the fact that it's very difficult or impossible to buy a house in SLC that cashflows right out of the gate).  In this scenario, if you DON'T get an earthquake policy, you get a bit extra in cashflow, but if the house is destroyed by an earthquake, you owe 400k on a pile of rubble...for some smaller investors, I'm guessing that could be enough to bankrupt them (particularly if that scenario happened across numerous properties...if, for instance, you ended up owing 1.5-2 million on 3-5 properties that were all turned to rubble, I'm guessing that would be game over for most smaller mom & pop investors who tend to have 3-5 properties).  On the other hand, if you DO get an earthquake policy, your cashflow is a bit lower (but still sustainable), and you're protected against that disaster scenario (in theory, at least).

...so, in that example, it seems like an earthquake policy would make sense, even if you have minimal equity (I'm guessing most investors are willing to sacrifice a bit of cashflow if it means protecting against potential bankruptcy)...

Now, let's flip it around--let's say you only owe 100k on your rental that's worth 415k, so you've got solid equity.  Same as the prior scenario, let's say if you get the earthquake policy, the property still cashflows (just not quite as well)...if you don't get the earthquake policy, it cashflows a bit better, but you risk owing 100k on a pile of rubble after an earthquake--maybe not as devastating as owing 400k on a pile of rubble, but still a pretty bad situation... 

So, in either of those scenarios (low equity or high equity), it seems like an earthquake policy could make sense, particularly if the person didn't have the cash to stay afloat if an earthquake demolished their property/properties....

Would you agree that in either of those scenarios (low or high equity), it could make sense for an investor to consider an EQ policy?    ....or perhaps I'm missing a key issue? (if so, please let me know).

As for the seismic retrofitting of older homes, I'm no expert on the topic, but from the few articles I've read, the retrofits are often aimed at preventing the roof from collapsing and chimneys from falling--the goal is to give the occupants a better chance of survival/escape (which should obviously be the top priority). However, even with retrofits, the house could still suffer serious damage; from what I understand, even a retrofitted home could still be fairly likely to suffer damage so severe that the home would need to be condemned after a quake (again, I'm not an expert on this, that's just my understanding after reading a few articles).

From what I've read, the experts say there's about a 43% chance of a magnitude 7 or greater quake in/around SLC in the next 50 years (for context, a 7+ quake would be devastating; they say 80-85% of homes would have moderate to severe damage, with the older brick homes in areas like Sugarhouse/U of U/ Aves experiencing about 70-100% structure loss).  After reading up on some of the local news stories and resources on this topic, I'm more convinced than ever that these are issues local investors, homeowners and politicians will need to educate themselves on and take action on quickly...  Here are a few articles/resources on the topic I found very useful:

https://nichehomes.com/what-ev...

https://www.slc.gov/em/fix-the...

https://www.sltrib.com/news/20...

Hey folks, I posted some questions about earthquake insurance and preparedness in the "insurance" forum, but I'm hoping I can get some replies from local SLC / UT people, since it's certainly a relevant topic for us...

Here's the link:

https://www.biggerpockets.com/...

Thanks!