How would you invest $200K in Salt Lake County real estate today?

Question

The challenge: you have $200K cash to invest in real estate in Salt Lake County, Utah in June of 2020. What do you do?

Corey Dutton · Answer

If I were you, I would take that $200K and consider doing private money loans for an annual interest rate. This gives you a first lien on the real estate and you get a check every month passively, rather than doing all of the hard work yourself on the real estate investing side. But in Utah, if you lend on residential real estate you have to be licensed as a mortgage company. (this requirement applies to all residential real estate). But you can lend your money under a licensed mortgage company. Since we are a licensed private money brokerage, many private real estate lenders work with us to find good lending opportunities on real estate deals. Reach out to me anytime on that topic. The other thing you could do to make your own money go further, is to couple it with a private money loan on a purchase, but with you as the borrower of the loan. Your private money loan covers the bulk of the purchase price and then your own money could cover the down payment and any repairs. And you can get a private money loan for 12-24 months timeframe, until you get an exit on your deal, whether as a flip, or as a refinance if you decide to hold it as a rental long term. Using Private money loans to purchase investment properties allows you to make your own money go further, across more deals simultaneously. Well, there are two really good ideas for you. Best of luck.

Cherie Orellana · Answer

That is a hard question!  I personally would use it towards a few flips.  If I was just starting I would buy one owner occupied home To househack and 2 investment properties.   However since I already have some rentals I would flip some properties and double it in a year.   Then put the $200,000 I made back into 2 rentals and do it over and over building my portfolio of long term buy and hold and passive income.   I might consider bridging some loans for a few days as a hard money lender as well. If you charged 2 discount points , which is pretty standard in my area, you could make $4,000 off your $200,000 a couple times a month if you did it right.

Now that I’m talking it out.. I would act on any of the opportunities mentioned above if the right deal came along at any time.  So if an amazing buy and hold was presented, I would go that route, a flip presented, I would act on that etc.

My husband and I just closed on a duplex a few months ago and put $100,000 down. It’s one of my favorite properties.  At the same time we transferred another $100,000 into our E*TRADE account. At this moment, I think we can triple our money in stocks in the next 12 months.  I rarely put my money in stocks. I am extremely passionate about real estate and typically all of my eggs are in the real estate basket.  However, I feel like there was an opportunity presented in stocks the last few months so I am taking advantage of it.  If a great buy and hold comes along that I can’t resist I would definitely  cash out and move on the property.

Casey Christensen · Answer

I would try and find a few partners that have a complimentary skill set to mine that also have about that much money to invest and then I would start looking for value add apartment deals in the 1.2MM range and 8-15 units that we could buy, update, increase rents, add a good amount to the NOI in the first year or so, then try and refinance most of our money out by the latest year two. I would also blog about the entire process, start building a thought leadership platform and connecting with more investors so that I could scale from 8-15 to 30-50 and eventually up to 75+. I like the idea of syndication and with 200K and a couple partners doing a JV first and moving into syndication could be a more natural move. Good luck with whatever direction you go!

Cherie Orellana · Answer

@Brian Garrett, similar to transactional lending Yes. Being a real estate agent/broker I have deals with clients sometimes that require cash up front then they immediately refinance. For instance I have a deal under contract right now that the seller refuses to do an addendum to assign the contract. The person it would be assigned to is ready to close with financing. However given the unique circumstances we have to get hard money for 3-4 days to close adding the assigned to the note with the original contract holder. Then this person will refinance the loan within a day or 2 since they have already been preparing the loan for the weeks leading up to closing.

Or there are times someone intends to buy a long term buy and hold. However they offer cash in a multiple offer situation or for a discount. They give 2-4 weeks before closing in the contract, getting appraisal and financing ready for long term financing. They use hard money to close the original contract and refinance within a week. Or close in one name and the second purchases it within the week after.

Locally, in my area , they typically charge 2 discount points and 10-12% interest. They also require 10% down.
So In my example above, the person only wants to put 3.5% down FHA loan. This is the refinance they are obtaining. They will put 10% to protect the hard money lender, but the note will only be written with 3.5% down and the other 6.5% held in escrow to protect the hard money lender. Once the refinance is complete, the title company will release the 6.5% they were holding minus the hard money costs associated with it.

You are welcome to message anytime if you want more info or explanation.

Brian Garrett · Answer

@Cherie Orellana What type of loans are you referring to that you can bridge as a HML that only take a few days? Typical HML's around my area are up to 12 months. Unless you're referring to transactional lending? For example a wholesaler just needs the funds for a double close? I ask because I'm considering starting to lend some capital.

Dave Smith · Answer

This is about you! What would you do?

Michael De Rosa · Answer

That Is not a simple question to answer without knowing your goals. Are you looking for long-term or short-term hold, do you want work or a turnkey property, multi family or single family, do you want to leverage or only use cash, what part of Salt Lake County are you looking to buy it, what type of neighborhood I could go on.

How would you invest $200K in Salt Lake County real estate today?

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