Do Salt Lake Duplexes Cashflow?

Question

So I've been looking to buy a duplex in Salt Lake City that would be owner occupied. More specifically in salt lake valley, excluding rose park or west valley (my wife is on board for anywhere else). The trouble is, when I run the numbers nothing seems to work. The investors I've spoken to say that Utah is more of a 1% place, which I'm ok with. But when I try and do due diligence on any duplex/multiunit property that i can find it appears to negatively cash flow.

Am I doing something wrong? How do you find deals in SLC? I've been sticking to MLS and i've been working with an agent who is also a fellow investor. And how are people who buy these properties making money?

I've been comparing rents through rentometer dot com. And have using a few different buy and hold analysis spread sheets from BP file place.

Esaul Viramontes · Answer

Market is too hot at the moment, so it will be tough to find something with a nice cash flow. I am currently selling my own residence MLS#1303663 (you can input the number on realtor.com) My home has a mother-in law basement apt. that rents at $950.00, the top part should rent for at least that, if not much more. It is in WVC. West Valley has a bad rap but its a huge area which extends from 1200 w. to 7200w. and 2500 s. to about 6200s. so its kind of unfair to judge this huge city poorly when, like everywhere else, it has its bad parts and nice parts......

Jeffrey S. Breglio · Answer

Tyson,

Because the market's so hot right now, finding good "deals" on the MLS can be challenging (I've found it generally is). Many beginners or uneducated investors are happy with negatively cash-flowing rentals, not knowing any better, and so they buy and sell them at prices that don't make much sense to other investors--especially right now, like I said.

If you're dedicated to working with this agent, start asking if the owners will seller-carry or seller-finance. These seller-fi deals might may or may not cash flow better, but the goal should be to get in the duplex with little or no down payment. That way, if your cash flow isn't great, you've still saved a massive amount in the down-payment, which is available to invest in other opportunities.

I myself prefer non-MLS opportunities. You can get lists from title cos. of "absentee" or non-owner occupied multi-units, including duplexes. Then you can mail postcards directly to the owners, asking if they'd like to sell. Contacting owners this way can be the best way to find under-performing or non-cash flowing properties, that you can then take and repair, raise rents on, etc. It's hard to find an investment property to buy that's already performing optimally, at a price point that makes sense to an investor.

There are many avenues to locate properties aside from the ol' MLS. Most agents just trawl the MLS, sometimes they find gold, most of the time not.

One thing you might not be considering is that yes, while your duplex might be not be a positive cash flow property, what's your replacement alternative? You're going to need a place to live for you no matter what, perhaps a mildly negative cash flowing duplex is better than an extremely negative single family or worse yet, RENTING!

Tyson R. · Answer

@Cody Steck I've looked into wholesalers and have been pretty disappointed. Unfortunately all the wholesalers buyers lists I have gotten onto seem to focus on expensive fix and flips. I haven't seen a single multifamily, and the majority of deal have been on the MLS anyway. Whoever the Legit wholesalers are I haven't found them. In fact, after looking at there emails for months without anything i'm remotely interested in I've stopped opening their emails all together.

Charles Knudsen · Answer

My experience is similar to @Esaul Veramontes and @Travis Fisher. It is easier to just include utilities in a basement rental at a higher fixed rate and people would rather live in "home" over an apartment. I'm selling my house w/ a mother-in-law in Pleasant Grove right now after 3 years of the basement rent covering the full mortgage. My only house expenses were the utilities.

Tyson R. · Answer

@Esaul Viramontes not to be rude but how are you charging $ 950 for a two bedroom basement way out near the west mountains? That seems crazy expensive to me. I don't know that area well, but a quick rentometer dot com  check puts 2 bedroom average in that area around 720.

Jeffrey  BreglioI've considered marketing for homes but I guess I've always just assumed thats manly for wholesalers. Have you had much experience and success with mailers to pick up just one single property?

Esaul Viramontes · Answer

It's listed as a 2 bed BUT has a large possible 3rd bed( no window /closet) . Also, at 950 utilities are included. Over the years I have charged 750-800 per month and SPLIT utilities. I have found a Fixed rate of 950 works well. Like you mentioned, the reason we can get away with it, I believe is because people would rather live in a "home" rather an apartment. Over the last few years this entire area has grown quite a bit :)

Travis Fisher · Answer

A basement apartment includes all paid utilities and water. And lots of times free Internet and cable since they can piggyback off the neighbors upstairs.  So looking at total cost it can come out cheaper than a comparable $720 apartment. Plus I think a lot of people enjoy not having to live in an apartment complex.  Living in a home, even if it's just the basement, eliminates a lot of "apartment neighbor drama".

Travis Fisher · Answer

I knew that had to be a BiggerPockets member when I saw House Hacking mentioned in the listing!  :).  I need a few more bedrooms to fit my family or I would check your house out.  I'm looking for something with a mother in law apartment too.

Good luck with the sale!

Cody Steck · Answer

Duplexes in the Salt Lake valley are quite hard to find where they will still produce nicely. Especially in this hot market. I'd recommend getting in touch with wholesalers who might be able to point you in the way of an off market deal when one comes up.

Good luck!

Do Salt Lake Duplexes Cashflow?

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