All Forum Posts by: Sam Levin

Hi Nik. On your question about the bonus depreciation the answer is yes. As long as you are the first person to put the property into "service" as a rental. I have purchased several brand new investment properties that were under construction when I put them under contract. I had them already leased out (tenants standing by) when I closed on them upon building completion and have never had to come out of pocket for any mortgage payments. By the time the first mortgage payment came due I had already collected one 1.5 months rent.

One of these building was new fourplex purchased in December and it has already had an offer to purchase it for $95k above what I paid for it. I attribute this instant equity to several things including the strength of the market during those months but there are a few other key ingredients that I believe made this bump so pronounced. There's another property that I bought more recently for $410k using the same timing strategy. I have since received an offer on it for $475k.  Goth of those offers came almost immediately and I am pleased to say that I turned them both down and still have these two properties in my portfolio today.

My CPA has confirmed that the bonus depreciation does apply to both of them. The building purchased in 2016 has $90k in depreciation "loss" that's allowed by the IRS, most of that is in the bonus. Needless to say I will be continuing to use this approach this year, as the data that I rely on shows a clear continuation of market growth in Utah County for the next year or more. Even if all of that data turns out to be wrong and the Utah market levels out in the meantime, or even takes a step backwards, I won't get hurt in any way because I am targeting properties based upon their rental characteristics (data) so there will always be a tenant in there who is happy to pay the mortgage for me :)

I own a bunch of units in Utah County and my vacancy rate so far is 1%. Average vacancy around here is 3% or less.

Hi Brandon and welcome to the BP community. I'm glad you are enthusiastic about real estate investing. There are many great opportunities to do so Utah. Please reach out if you ever have any questions about anything.

This is a brand new townhome duplex in Vineyard. I have just leased out both sides for 6 months. Once the surrounding construction is completed and the whole development is landscaped these units will easily rent for $3,200+/mo combined. At that time the price will increase to $525k but it can be purchased now for $495k.

Many upgrades including quartz counter tops, stainless appliances, cabinets, floors, carpet with "pet pad" underneath it, etc.

Lane Aldrich with First Colony Mortgage has financed hundreds of fourplexes. He's Provo based but that shouldn't really matter.

Thanks Nate. I will have my assistant Yuki email you the full pro forma. Bigger Pockets doesn't allow us to post company information here.

Great question Grant. Buying pre-construction (or buying during construction) already provides me with substantial "free" equity upon completion. When done correctly this can easily equal or exceed the $ value of buying something used and rehabbing it, without any of the time, effort, complexity and $ uncertainty (hidden defects) of that process.

It might be useful to think of it like buying fleet vehicles for a transportation business. You could buy used and potentially mistreated vehicles and have them painted and tuned up before putting them into service in the hopes that there won't be expensive repairs lurking beneath the surface (PS - there will eventually be a lemon which could potentially ruin your whole business). If you could actually pre-order the fleet an pay wholesale directly to the mfr at a cost per car equal to or less than the cost of the former scenario, AND get the full mfr (builder) warranty on them, wouldn't that make more sense?

It's also easier to lease the new units and they will fetch the high market rate, thus attracting a more affluent clientele that is much more likely to pay their rent and treat your assets with respect. In short, I can see many reasons why buying used could go wrong, none of which are present when I buy new. It's worked great for me so far and I will continue doing it. Here's the current situation:

The fourplex I bought upon completion in December 2016 for $550k is now already worth $645k (actual sales comp from identical building) and I haven't put a dime into it. The duplex that I am closing on this week for $410k will be worth $460k+ by this summer when the development is complete and landscaped, same $0 capital investment. The triplex that I have under contract at $525k in American Fork will be worth $650k by next summer when it's done and has grass around it, and I will spen no time or money worrying about repairs, contractors showing up, etc. All of them came with a builder's warranty. Life is good!

I'm in the investing business to create personal financial freedom not to take on a 2nd full time job as a general contractor. If you'd like to talk more about this and see these examples in real life please let me know. Helping people make the best real estate investment decisions is what I do all day, and most nights :)

Provo UT is basically Disneyland for rental property investing. There's no vacancy and the renter's are all very reliable people.