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All Forum Posts by: Race Ostler

Race Ostler has started 5 posts and replied 22 times.

Great post Robert. What kind of cost per square foot are you seeing in Boise to build multi-family / townhomes?

Post: To buy Meth or Not to buy Meth...

Race OstlerPosted
  • Investor
  • Orem, UT
  • Posts 25
  • Votes 22

@John Lewis,

I can vouch for what Eric said. I bought a fourplex two years ago that had meth in it. During the walkthrough the seller's agent said "remember if an apartment smells like cat urine it could be meth". I took the hint and got it tested and it came back super high.

I got some quotes from professional remedation companies that it wold be just $4,000 to fully remediate it. The city will come in and put a do not enter on the outside of the door (or inside of the door if you're lucky). Essentially a very temporary condemnation. Then once it's officially clean, you don't have to disclose it to future renters or buyers because it's gone. Only time you might have to bring it up if for some reason you get a subpoena.

Ending up being a very lucrative deal because I was able to get a lot more than $4k off the purchase price

Post: I'm looking to help rental property investors analyze your market

Race OstlerPosted
  • Investor
  • Orem, UT
  • Posts 25
  • Votes 22

@Josh Jensen, there are occasional BP meeetups but the most public meetups are the REIAs. The Salt Lake one is called SLREIA and there is a good northern Utah County one called UVREIA which meets Pleasant Grove. Lot of good info there and a lot of deals being done from connections made there

Post: Long-term flip Fourplex

Race OstlerPosted
  • Investor
  • Orem, UT
  • Posts 25
  • Votes 22

Investment Info:

Small multi-family (2-4 units) fix & flip investment in North Ogden.

Purchase price: $336,000
Cash invested: $30,000
Sale price: $535,000

I ended up rehabbing two of the four units. Renting out the other 3 units while I renovated a unit allowed me to break even monthly during each of the two renovations.

1 of the units tested positive for meth when I was buying it enabling me to get a big discount and during due diligence I confirmed with a reputable company that it would be cost just $4,000 to completely remediate the meth

Holding it for two years allowed me to see a lot of appreciation & get the lower capital gains tax rate

What made you interested in investing in this type of deal?

This was a long-term flip fourplex (two duplex on the same tax ID). I was initially drawn to it by the possibility of splitting up each duplex on their own tax ID but there was not enough land per city zoning to do that

Post: I'm looking to help rental property investors analyze your market

Race OstlerPosted
  • Investor
  • Orem, UT
  • Posts 25
  • Votes 22

Welcome Robin,


Provo / Utah County is my home court. I've done a few deals here and have analyzed more than a few! If you need a sounding board I'm happy to help. Mid and long-term fundamentals look good here. A growth economy + a diverse economy is a compelling combination.

Hi Hua,

Many new investors see the word "rule" on terms like the 1% rule or the 50% rule and that leads them to believe that if they do a deal that doesn't fit all these made-up metrics then they are doing something wrong. That's not necessarily true. In my view they are more like 'potentially meaningful guidelines or benchmarks' rather than rules.

The reason I say that is because right here in the Salt Lake City / Utah County areas there are people who have made a lot of money (from appreciation, value add, and principal reduction) on deals that don't fit the 1% rule on say a 3 year horizon. And there other deals that did fit the 1% rule on paper but after multiple evictions, and months of not collecting rent it turned out to not be a great investment.

Value-add investing is how you make money in today's market. Find a value-add deal, it can even be just an okay price, and pull the trigger. So many people wait on the sidelines for years and years because they feel they don't know enough. But the truth is for the most part you actually only learn by doing. So the lessons you will learn by just getting in the game will prove to be very lucrative to you further down the road.

Post: Subleasing/ subletting to decrease living expenses

Race OstlerPosted
  • Investor
  • Orem, UT
  • Posts 25
  • Votes 22

Hi Jonathan,

I don't have experience subletting my own residence. Seems doable but also inconvenient. I would personally rather find out a way to make $400 extra per month doing some other side gig rather than saving $400 by subletting due to the inconvenience but that's just me.

I'm a big fan of fourplexes but house-hacking a fourplex or triplex via FHA in Utah from what I've seen is actually almost impossible to do right now. Reason being is for triplexes and fourplexes, in order to get an FHA loan, the total PITI mortgage payment cannot be less than 75% of the all the rents added up. E.g. an average fourplex on the Wasatch Front right now is $500k with rents coming in at $800 per unit. Your monthly PITI on 500k with just 3.5% down would be approx $2,900. But 75% of the total monthly income of $3,200 would only be $2,400. And yet the example I gave is probably an above-average deal in Utah and it comes in at a gross cap-rate of 7.7% (total annual rental income / purchase price). In order to comply with this rule you'd need a gross cap rate of at least 9% which is very hard to find in Utah esp in a place you'd want to live :) Duplexes don't have this 75% rule for FHA which in my opinion explains why in Provo you are seeing duplexes go for nearly $400k and a fourplex for just $500k. More people able to qualify for duplexes looks like it's driving up the demand/cost. Feel free to have some lenders run numbers on FHA fourplexes here but that has been my experience lately with the ones I've talked to. Would love to hear other Utah investors' thoughts on this if they are running into the same thing when attempting to qualify for an FHA quad or tri.

With duplexes sky-high, looks like the best route for your next deal is either a mother-in-law apt or a SFR. I'd say look for a mother-in-law apt as those are not as overvalued as duplexes right now and can cut your mortgage payment down even more than subleasing could.

Post: Nathanael Giovanni Opoulos from Ogden, Ut

Race OstlerPosted
  • Investor
  • Orem, UT
  • Posts 25
  • Votes 22

@Nathanael Giovanni Opoulos, there are many people who have aversion to risk. I think sometimes it is justified but often times it is not. People fail to consider two things:

1) that the riskiness of an investment is largely determined by your familiarity with the underlier. Meaning, house-hacking your first triplex may appear to be very risky to your parents because they have not spent hundreds of hours scouring forums, books, and the MLS. Where there is not at least some risk there can be no opportunity. Therefore risk is a good thing

2) not all debt is the same. Many people fail to make the distinction between good debt and bad debt. Some people lump consumer credit card spending on wasteful unnecessary toys in the same category as a mortgage that in 5 years makes you a lot of money. Those are two very different things but both are called debt. If something pays you that is a good thing- that's exactly what real estate mortgages do especially in the long run

Hi Randall,

In the lending world, a single-family residence up to a fourplex is financed by a residential loan. Rental properties with 5-units and up are financed by commercial loans.

I would recommend looking into Mountain America. They offer mortgages in Utah, Arizona, New Mexico, Idaho, and Nevada. They offer 2 investment property loans (up to a fourplex each one) for only 10% down. That is very uncommon and can enable you to get twice the amount of doors for your money but depends on your risk appetite. Once you max out of those two they will let you get more you just have to put 15% down

Bryan welcome! 

Regarding the best route for a first-time home buyer, I would definitely recommend an FHA loan on a multi-family property: duplex, triplex, or fourplex. The more doors the better IMO but whatever is currently available may ultimately dictate that. I've noticed that a lot of investors get tripped up on PMI or if you do an FHA loan it's actually called MIP. Many people will go to great lengths to avoid PMI or even back out of deals. My philosophy is if I am making money on a property and I have to pay PMI on it, then I absolutely love PMI. Because without it I wouldn't have been able to get the deal. If you make $1,000 cash flow on a property but you have to pay PMI of $250 that's a net effect of positive $750 a month. That's a good thing. I like $750 per month therefore I like PMI because without it I would be sidelined and prevented from enjoying the many benefits Real Estate has to offer: tax advantages, cash flow, appreciation, etc. I believe to piggyback you need 10% down. There's a chance that may be a better option, but I'm a fan of using as much of other people's money as possible. Going the FHA route, your down payment is about 3x less. That is substantial. Sure you will have to pay MIP but I imagine the second so-called piggyback mortgage interest rate is pretty high as well. In today's market it's hard to find properties that cash flow, so I'd recommend looking for homes that have been a bit neglected where you can go in and add value right off the bat.

In my experience the big banks haven't had the best rates. I have had great experience with smaller mortgage brokers. A little easier to work with as well because of less red tape.

I have a multi-family in Provo and they require a license for me to rent it out to tenants. I think it's about $60 per year. That's it.

For your first deal I wouldn't be too concerned about starting a business and buying it with a business or LLC. You don't have to. The easiest route is to just put it in your name. If you really are worried about liability issues, I would just create a single member LLC and put it in there. But considering you can always move it to an LLC if you initially just put it in your name, for simplicity's sake I'd put your first deal or two in your name.

Regarding zoning, I'm pretty sure that most of the country has that 3 non-related individual rule. I know Provo is starting to crack down on that.