Home Hacking in Utah

[Lukas J Ridd]

What is up Utah BP RE family? I am just getting started out of college here in Utah and have a job working for a home developer. My wife and I decided a home hack is probably our best option for where we are at in life. We were hoping to do it anywhere from American Fork to Murray. I noticed that to find a duplex or triplex is pretty tough, especially in that area. 

So here are my questions:

Does anyone have a good investment agent that can help me find a solid deal by mid-summer? How would I find these niche agents?

Any considerations for cash flow when looking at duplexes? 

What has been the best value add in rehab if I decide to put in a bit of sweat equity?

How much is too much when looking at a property like this? I was hoping to be in the 200-350k range but Utah seems to blow that idea away.

Thanks,guys!

[Greg Troester]

As my wife and I were on the hunt for our first investment property, we found that anything that mentioned the key words like "duplex" (et. all), mother-in-law/MIL, etc. were priced high and went fast. That said, basically everything is going fast - there was a blip of pullback in March, where we went from being 3rd-5th in line to buy a property to having sellers call us and say "hey, do you still want it?". Since then, it's been back to the races - throwing offers in very quickly (often w/o walkthrough) in order to try to tie up a property and give it a real look

That said, to your questions:

• Yes, your stated price range is low for Utah - I was seeing $400k+ when looking
• Cashflow/price/etc. - SL County is super hard to hit a 1% rule, 50% rule, etc. Only after owning our own home for 3.5 years, refinancing, and renting it out after moving to a new place, do we get close (but not quite to) the 50% rule. That doesn't mean that our area is a "bad investment area", to me - it just is what it is. Don't get worried about folks saying how cheap their areas are.
• I agree with @Steven Foster Wilson - if you can add a bedroom or bathroom, you're far ahead of any other improvement, especially for a future rental. Unfinished basements are a gold mine, but will likely attract a higher price than what might seem reasonable... but will still be cheaper than a finished basement house of the same type. Other considerations: kitchen remodel, bathroom remodel, exterior paint/limewash
• As far as how much is too much... that's for you to decide. If you're leveraging a lot (low down payment), I would caution you against putting yourself in a situation when your margin over fixed expenses is lower than $600 - always account for CapEx and vacancy. So if you're evaluating a property, consider what it will ultimately rent for when you move out in X-months/years, and estimate conservatively.

If I were you, I'd start the same way that I did a few years ago and am working on now: find a place that can be modified to have MIL, something that you can live-in rehab, or something with an unfinished basement. Failing that, you can patiently wait in a house that you buy - 3 bed / 2 bath seems to be a sweet spot, then plan on prepping it for renters over the next few years... We ended up with the last option and have now moved into a house that needs a ton of work, back-renting our first house. The first house is completely self-sustaining and will be used to "feed the machine" for future investments after it builds up cash. In the meantime, we are rehabbing/improving our fixer-upper, planning on ultimately building a MIL downstairs and using that to further accelerate our investments. Hoping to buy an outright rental (20% down, etc) in a few years or less.

Welcome and good luck! I recommend reading the BP book "The Book on Rental Property Investing" - gives you a front-to-back overview and some high water marks to aim for. But remember - our area of Utah is NOT the easiest/cheapest market to invest in... but that's kind of a great thing, I think.