Mother-in-law apartments- Good places to look?

Question

Hi all,

My wife and I have been renting in SLC for the last 6 months saving up for 20% down payment on a house with a Mother-in-law apartment near our work in SLC.  I've found some decent homes costing roughly $1.25 per sq. foot around Salt Lake county, and also found some much better-priced homes with MIL's in Toole/Stansbury Park.

Where are some good towns within 1/2 an hour of downtown SLC to look for houses with MIL's?  Has anyone had any experiences they'd be willing to share with owning a house and renting out the MIL apartment to cover mortgage?

Jordan Atkin · Answer

Howdy Jeremiah!If you have 20% to put down you might consider purchasing a duplex or 4 Plex. If the 2nd unit is legal the bank will allow you to use its income to help you qualify, which will allow you to buy a bigger and better property. It also might be more tax efficient because you could separate the units and claim one as your primary and the other as a rental, but I'm not a tax guy so check into that.

When you go to sell the single with MIL your buyer pool will be limited and the extra unit that you think so highly of might not be important to the person looking to purchase your home. If it's a true multi then you know you're selling it to a like-minded investor.

For the right situation, I like the FHA owner occupied 3.5% down program. The low down forces PMI on you and you have a higher payment (more leverage) but If you intend on living there and can stomach the higher payment this will keep more of your savings liquid for repairs or another down payment!

Location- Personally, I invest exclusively north of I80 and east of I15 in SLC. I live, work and play here so I understand why people would want to be in this area. As the population continues to grow downtown will continue to densify which will support more businesses making the area even more attractive to live in, especially for those tenants you want to pay top dollar to live in your basement. However, if your open to living on the west side I'd buy something in the Glendale area between the I215 and I15. Little dicey for my primary but that area is going to see really good growth in the mid-term.
I will ask for another 60 seconds of your attention and this is the most important. Please don't let the tenants know that you're the owner. It might seem trivial but your safety and headspace will be greatly improved if you don't. It will save you from late night maintenance calls and mental anguish of people telling you every reason that they are late or cant pay. To top it off people can get really weird really fast when it comes to money and you want to separate yourself from that emotion.
Best of Luck
Jordan
TAG SLC

Jim D. · Answer

Wishing you good luck on your search! I am going to disagree with some of the advice on this thread:

1. You can still get the same tax benefits from a MIL rental; it doesn't need to be a formal duplex.2. MIL houses sell just fine, there are a lot of buyers who are looking for them especially in a high-priced market like SLC.3. Don't do FHA. There are low down payment conventional loans available for single and multifamily owner occupied. Conventional HomePossible has far better PMI terms than FHA if you go that route and is still just 5% down for 2-4 units (the PMI is cheaper and drops off once you hit 78% LTV, whereas FHA stays on forever).4. I've house hacked 5 properties (MIL and duplexes) and have never had a single issue from the tenants knowing I am the owner.

Spencer P. · Answer

My experience is you should really focus on where YOU want to live. A MIL is a great way to offset your mortgage, but with as hot as the market is in SLC you can quickly find yourself looking in areas you don't actually want to be just to "make the numbers work".  Similarly, because the market is so hot I think its prudent to look for somewhere that you are comfortable buying and holding long term regardless of whether you will owner occupy or not for the long term.

Ryan Naylor · Answer

Kristen,

I sent you a message, the first thing you would want to know, is how much house you can afford.

That will determine the affordability of a duplex, MIL, Multi-Fam etc.

And then we can work with a Real Estate Agent to discover what is available in your price range and narrow down the specifics as to size, area, purchasing power, etc.

Ryan

Kristen Kenney · Answer

I also am looking for a MIL home in a sugarhouse area that I can 1) reside in and 2) rent for additional income . I am debating however on buying a MIL single family home or multi family.

If anyone has feedback please comment below! Thank you!

Jaiden Olsen · Answer

@Jeremiah Quinn There are a lot of basement MIL's, or MIL's over garages. There are some out building MIL's too, but they aren't as common.

Jordan Atkin · Answer

@Jeremiah Quinn -I think most areas in SL County have good qualities. Either they are established and nice or up and coming with growth potential. You have to decide for yourself what you're looking for and on a primary residence, it gets even trickier. So Sandy and Draper are great and if you like the vibe down there it could be a great place to live. I don't track the market as closely on the south end of the valley but I would think there are less legal multi units compared to SLC. As you move south, homes get bigger. So if you're looking for a 3 bedroom you'll have a much easier time looking outside of SLC. I'd recommend not getting to hung up on the size. If you have a growing family and have demonstrated the ability to save significant amounts of money, I doubt that the house hacking lifestyle will last too long. Once you have a 2nd or 3rd kid you will likely want your own space, so don't pass on quality 2 bedroom units because you might need more space someday. There are some pretty nice 4 plexes out there that are set us as townhomes that might be a good fit as well, quite expensive but a higher quality living environment. ADU's- I'm involved with a startup, MODAL, who is bringing pre-fabed stand-alone MIL units to SLC as a response to SLC's change in ADU policies, they have a model unit down at the City Creek Food Court. If you have more questions you can DM me.

Cherie Orellana · Answer

As others said there are lots of options when you purchase your home.  I think FHA would be a good option if you were doing a live in multiunit up to a four Plex.  However multiunit seem to be overpriced right now in my opinion compared to cash flow which makes MIL homes more ideal. You can get a 3% down home ready loan possibly which is conventional as well. That way you won’t have PMI for the life of the loan. I feel like am MIL properties go  under contract pretty fast as well.  Another option is watching for one that could be converted.  For instance if it has a wet bar below that you could convert to a kitchen.  I have a couple of projects I’m working on one in mill creek and one in Kearns you are welcome to swing by if you would like to get some ideas.

Ryan Naylor · Answer

Agreed, You don't need all of 20% down, plenty of good options and  loan programs available for the perfect house hack, BRRRR or live in  flip while rates are still low.

With SLC house purchase prices the Ma-In-Law is a great  help, but it won't cover the monthly payment. Duplex and 4 plex will get  you much closer to covering your mortgage.

I am doing a loan right now on a 4-plex and the monthly payment will be about 150, mostly for insurance.

Shoot me a PM if you would like to discuss further.

Jaiden Olsen · Answer

I second what @Jordan Atkin says about using the FHA loan instead of a conventional 20% down mortgage.

I live in Kaysville in a home with an accessory dwelling unit (ADU) that covers our principal and interest payments. Kaysville is pretty relaxed as far as renting space in an owner occupied home goes. There are a lot of homes that have ADU's on the property, but they don't last very long when they hit the market. Also, homes in Kaysville, and even into Layton are within 30 minutes of downtown, but the homes are way cheaper than South Davis and North Salt Lake Counties.

Mother-in-law apartments- Good places to look?

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