New investor: Do Brrrr’s exist in our current Utah market?

Question

Like so many other posts I’ve read in the this thread, I’m new to real estate investing and looking to get started here in Utah. I’m really interested in using a Brrrr approach to acquire a portfolio of rentals. So to begin I’ve been trying to review MLS listings daily and I just contacted my realtor to get Hot Sheets emailed for properties that fit what I’m looking for. I’m meeting with a lender who has his own rental properties to pick his brain a bit. I’ve also been reading/listening to BP and reading through some of the threads on here.

With all that learning and scouring of listings, I’m feeling kind of lost in the Utah market. The examples I read about don’t compare to the prices I’m seeing around here. So, I’m wondering what I need to/can do as a brand new investor to really find a deal that fits within the Brrrr strategy at my price point and can get me started. Even though I’d really like to start with Brrrr, is it possible to do in Utah right now? Should I be looking to get my start somewhere else?

Thanks in advance! Reading through the threads you can tell this is an awesome community. Also, in an effort to provide value for value, if anyone has marketing or web design questions, feel free to PM me, that’s my area of expertise.

Hadar Orkibi · Answer

@James Taylor Utah is a very hot market. Salt Lake City is good market if you are looking for steady economy, minimum cash flow  and long term rent growth.

to do BRRRR usefully you need to fined properties at a discount and add value to them.

once you add value you can refinance and pull your money out.

I see that you are in Eagle Mountain, i don't know this market, you may want to connect with your local REIA to see what local investors are doing.

In my View, a good BRRRR is when you are able to refinance on 3-6 months by adding value. this is hard to do in Hot market if you pay retail precises.

Get to know the values in your target areas so when a deal does come up you know that you can buy it for X spend Y and that it would be worth Z. The Z should be 20%-30% above your cost. ie. you can refinance the property based on Z value and get all your money out.

I hope it makes sense.

Joe Au · Answer

Location is critical for STR, you will get more bookings if your property is located to where the travelers go. For example, if they are coming for a ski trip, they are not going to look at anything west of I-15. Just keep that in mind. And it's not cheap to be in a good location.

It's hard to find anything under $200k in Salt Lake County on MLS. So you will need another channel to find deals.

Joe Au · Answer

Local REIA is always a good place to meet agent or wholesaler for deals.

Dean Letfus · Answer

@James Taylor, cashflow is the only thing that makes a market unsuitable. If you're in an area where house prices are sky high and yields therefore are low then you'll have cashflow issues holding the homes.  Apart from that point you can do it anywhere. It's about learning how to buy wholesale from as many sources as possible and ensuring you have a lender who will refi when you're done rehabbing.

Hadar Orkibi · Answer

HI @James Taylor, YES - Im doing it in Arkansas while I'm in New Zealand!

They Key is to first have a good team on the ground you can trust, and know that they are capable and have experience in Rehabbing properties to good standard.

Then you need to fined a good deal that have enough equity upside in it.

Ryan E. · Answer

You can absolutely have success with short term rentals in the valley. Just download the app and do a search and see how many are available. A friend of a friend is having a lot of success doing it close to Liberty Park in SLC. Cross checking to make sure short term rentals are ok with the city would be important though.

James Taylor · Answer

@Ryan E. Those are great suggestions. I've been wary of trying AirBnB, but maybe I shouldn't be. I'm stuck in the mindset that maybe Park City or Garden City would work for AirBnB properties, but is it a method that works elsewhere? Thanks for the reply!

@Hadar Orkibi Thanks for the review of the BRRRR methodology. Sometimes it helps to hear it put so straightforward and simply, so I really appreciate it. Have you ever done this outside of your own market? Was it a successful venture? Seems like for my first property it would be better to stay in my own market, but I'd be curious to know what you think. In Utah currently, everywhere seems to be a hot market, so the prices are quite high on properties.

@Josh E. Correct, I'm more wondering if it can be done here in Utah. I think what you're saying is what's leading me to ask this question in the first place. It seems like the deals that would work for a Brrrr are rare enough that it might not be worth pursuing since I'm just starting out. Which leaves me in a bit of a tough spot because I'd rather start small (under $100K) with my first property and do it in the Utah market I'm familiar with, but just checking MLS daily I feel like it will be hard find deals that fit what I need (especially before a more knowledgeable investor gets them first). That being said, maybe just looking for more of a turnkey rental would work better. I'm trying to figure out my overall strategy. Thanks for taking the time to respond, I really appreciate it.

Ryan E. · Answer

@James Taylor this is something I’d like to do as well. I think one problem you may run into is rent to value ratios once your rehab is complete. That being said, I’ll bet you can still do it. You may have to get creative...find a duplex in a good area and Airbnb the units or find an SFR with a legal accessory dwelling unit and live in the smaller unit while renting out the main etc.

James Taylor · Answer

@Joe Au Thanks for the advice. What you're saying about STR confirms my own hypothesis about them. I think I'll try to get my start a different way, but good information for the future. I'm wondering what some of those other channels are for finding deals. I've heard of Direct Mail (which seems a little out of my league to begin with), driving for cash, and reaching out to property managers to see if clients want to sell. Is those in the genre of channels you're talking about? Are there any I'm missing?

@Hadar Orkibi It's cool to hear about your success doing long distance real-estate. It gives me motivation to look into it more. I went ahead and purchased David Greene's book. We'll see where it takes me.

@Dean Letfus I'm definitely wanting to tackle a more buy and hold approach. The Utah market housing prices are higher than I think I'll be able to afford right now, thought I think there is some cashflow to be had out there if you have the pocketbook for it. I'll start looking into finding wholesale deals. Thanks for the advice!