All Forum Posts by: Beckie Reynosa

James, 

I agree with Carson.  As a commercial loan officer, I see this business model or similar business models quite often.  Flex space is very desirable IF it is located in the right place.  Most of my clients in the downtown Salt Lake area are getting quite a bit more in rent per square foot, but many of my clients are providing remodeled and modernized flex space.  On average my clients are getting rents in this range:

Basement units (no store front):  $1.50-$1.75/SF

Main floor with store front:  $1.75-$2.25/SF

Again, this is just an average of what I see and it does vary based on location, traffic flow, etc.

However, if you are buying the property, the lower the rents on the property, the better for you. The value and purchase price should be determined by the NOI over cap rate. Lower rents = better purchase price for you. Depending on where it is located, you may be able to remodel it and increase the rents.

If you are interested in going over the project with more depth, send me a private message and we can walk through some specifics.

I agree with Adam Richins.  If you are new to investing you really shouldn't use a rule of thumb.  You need more concrete numbers.

I usually call Alan Armstrong with Armstrong Construction.  He gives me great prices on the work to be done and is happy to help me estimate rehab costs.  However, as with all contractors, don't waste his or their time.  I usually pay him for his time to rehab costs on any house that I don't end up purchasing.  That way he is paid for his time.  He doesn't require me to pay him.  I just do because it is the fair and honest thing to do.  He is providing me a service that is incredibly valuable to me in my business.  If you waste a contractor's time too often, they will be unwilling to give you future estimates and when they do, they will likely price things higher than they would otherwise price them to help recover money for all of the wasted time.

Also, I usually add an additional 5-10% on top of the bid from Alan and on top of all of my other estimated expenses for things I can do myself.  That is the cushion in case of unanticipated problems in the house.  If the scope of work on the house is large, I will increase that to 15%.  If it is just some relatively minor work to be complete, I will decrease it to a 5% cushion. 

Good luck.

I have done a few BRRRR properties in the Midvale/Murray/Cottonwood Heights areas. They are certainly harder to find right now than they have been in the past, but they are out there. However, it is like flipping houses. If you think we are headed toward a recession, you need to buy right and time it right. It may be harder to get your refinance value upon completion of the rehab if the economy is soft.

As far as who to use, I LOVE using Wesley Barlow for my mortgage loans. He is with Bank of Utah. He both really understand the real estate investment realm. You will have the highest success with the BRRRR if you have held the property for 6 months or longer. Before the 6 month mark the lenders almost all go off of the purchase price of the property. After the 6 month mark, they almost all flip to the appraised value of the property. Knowing that time frame requirement may help you to make more efficient business cash flow projections.

Also, if you can be creative to find a solution for people, you can often find great values that are not on the market. I have purchased homes from people in financial distress at good prices by helping the people to find another place to live at a price that works for them. I have had much more success with that strategy than I have with properties on the MLS. However, if you find the great realtors, they will sometimes have good pocket deals.

Good luck

I have loved Alan Armstrong with Armstong Construction.  He has worked on 2 projects for us and they did a great job.  Send me a private message and I will send you his phone number.  I am forbidden from posting it here.

That's awesome!  Yeah, Midvale's conditional use permit fee is about $300 but it's the inspection that kills you with various costs to meet codes of a duplex including the firewall, which can be costly to retrofit if the house is already built.  

Murray does sound ideal.  I will look into Murray more in the future for my personal investing.  Thanks!

Charlie,

Make sure the house is approved to rent out the basement.  That address is in Midvale City.  In Midvale City (and most cities in the salt lake area) in order to rent out your basement legally you must have either a legal duplex or a conditional use permit to allow it to be rented.  Otherwise you are in violation of city zoning and they can place a lien on your home for non-compliance.  Only certain areas in each city are zoned with a duplex overlay to allow it to be operated as a duplex.  Without the duplex overlay, you are very unlikely to obtain permission for a conditional use permit.  In a duplex overlay area to obtain a conditional use permit the second unit must meet a variety of requirements including being separately metered (unless you are going to pay all utilities) and it must have a 2 hour firewall between the units.  There may be other requirements, but those are the two I know about immediately with regards to Midvale City.

I would strongly recommend you check into the zoning code on this proposal.  If you have questions, call the Midvale City Planner, Lesley Burns.  I am forbiden from posting her number, but if you search her name at midvalecity.org you will find it pretty easily.  I have always found her to be very helpful.

We have LOVED using Alan Armstrong from Armstrong Construction for everything that needs a General Contractor.  His work bid is consistently lower than the other contractors that bid the work and he includes more in his scope of work.  His quality of work is excellent! 
For example:  We put Hardie Board siding on one of our duplex properties.  We obtained 4 bids from various companies (some that specialize in exterior only and some from general contractors) for both Hardie Board and for vinyl siding.  His price for Hardie Board siding, new soffit & fascia was almost the same price as all three of the other bids for vinyl siding only (no soffit & fascia).  For Hardie Board siding the bids from the other companies was almost DOUBLE the bid from Armstrong Construction.  The work quality was excellent and he did some extra work free of charge (added a garage door to make it a 3 car garage instead of 2).  This has been the case with every project in which he has bid for us.  Always lower price but not lower quality.  I can't post his contact information here, but message me and I will give it to you.  

Yes Taylor. That is an option as long as your first lien holder notes don't preclude additional indebtedness on the collateral. It would likely operate a little differently than an owner-occupied HELOC because it is not your primary residence, but still work well for your business needs. Let's sit down and walk through your whole portfolio specifically and I can walk you through your some options you may not have realized are available to you.

I am a commercial lender in Salt Lake City, UT and I agree with the comments above.  Most of my clients who have historically primarily flipped single family residential properties are slowing down the flip side of their businesses and moving into long-term holds like apartments, retail strip malls, and office buildings because making flips pencil in SLC or even in the surrounding areas is getting harder.  It is still possible, but much harder.  Most of them who still flip properties get their deal flow nearly exclusively from wholesalers and properties off market and the margins in the flips are decreasing.  

There are various portfolio lenders in Utah but to direct you to them, I first need to know what type of a portfolio loan you need.  There are residential portfolio lenders and commercial portfolio lenders.  Residential portfolio lenders keep the residential loans on the portfolio of the bank/credit union rather than selling the loans to Fannie Mae, Freddy Mac, or a larger institution.  A commercial portfolio lender will lend based on your existing portfolio of real estate and your loan options are as broad as your imagination.  It just has to make sense for you and for the Bank.  Using your existing portfolio of real estate as collateral, you can get a revolving line of credit, a long-term amortizing loan, a short-term amortizing loan, a short-term semi-amortizing loan, etc.  The best loan for you will really depend on your intended use of the funds (to make sure your short-term and long-term plans align with the loan) and the equity and trust deed positions within your current real estate portfolio.   If you can give me more details, I will direct you to people that may be able to help you. 

Either way, I recommend you sit down and discuss your position with a very good commercial lender.  You may think you need a residential portfolio loan and discover that a commercial loan makes more sense for your long-term plans or vice versa.  A really good commercial lender who specializes in real estate will be able to help you determine your options.