Advice on next REI

[Steven DeMarco]

Hello, I'm hoping for some advice on how to proceed on my next step with REI. Currently, I rent with my SO in Salt Lake City, UT. We pay $2,150/mo. to rent a 3BD/2.5BA and our lease expires at the end of June, 2023 (we do have the option to re-sign for an additional year or month-to-month). We want to stay in SLC for at least another year, at minimum. But after that, I'm not sure where we will end up. We have family/friends back East (in Pennsylvania). Last year in December of 2022, I purchased a SFH in Pittsburgh, PA, did some rehab/repairs and furnished as an STR - which was launched in March of 2023. In just our second month of operating the STR, we were cash flow positive (by about $650) and I have line of sight to cashflow positive for the next few months. I've officially got the REI bug and am eager to get to the next deal.

Right now, I'm weighing my options. I'm currently working with an investor-friendly agent in SLC to try and find a property to house hack but I'm not having much luck with finding deals that pencil out. I've got pre-approval with a lender for up to $760K and have about $30K in liquid cash for down payment and another $80K in investments (of which I'd be fine to liquidate about 20%-50% for a purchase). The two loan options I'm targeting are FHA 3.5% down or Conventional 5% down. A few properties have shown decent rent avoidance while owner-occupying, but after moving out in Year 2, I'd be cash-flow negative by renting both units as LTRs. With my experience in STRs, I have thought about going that route with one or both units, but the STR situation in SLC is something I'd like to avoid. Officially, STRs are "not allowed" in SLC but there are obviously plenty of STRs in the market. With that uncertainty, I wouldn't want to go all-in on an STR just to have some regulations come down in the future that would put me in a tough spot.

Of the house hack deals that pencil out from a rent avoidance perspective, a small minority would cover the mortgage after moving out in Year 2. When you add in reserves (maintenance, capex, PM fees, vacancy), I've yet to see a cashflow positive deal in Year 2. The closest was -$600/mo. And most of these that have a chance of covering the mortgage are further outside of greater Salt Lake City (Kearns, Taylorsville, Ogden, etc.) which doesn't exactly align with our goals of where to live/own property in Utah. If this were Deal #5 or Deal #10, maybe a small negative cashflow hit would be acceptable. But for Deal #2, I want to have much clearer line of sight to the property being able to float itself. I don't need $1K/mo. in positive cashflow, I just want the property to pay for itself.

To summarize my decision factors & goals for house hacking in SLC:

- Close to greater SLC (w/in 15-20 min drive to downtown)

- Minimum 2BD/1BA during owner occupancy

- Avoid significant portion of rent payment with a house hack

- Cash flow positive in Year 2 (with proper reserves for maintenance, capex, PM fees, vacancy)

Should I keep looking in SLC for small MF (duplex) or SFH + ADU or are my goals unrealistic?

Should I re-sign my lease, rent for another year and keep stockpiling money for my next STR investment in a more STR-friendly market?