Choosing between two newly developed units in Utah. Breakdown:
- SALT LAKE COUNTY (near main I-15 freeway):
- 2-bedroom: $220k (not including any other closing fees), projected monthly rent $1,600+, monthly HOA $100+, common/shared swimming pool.
- 3-bedroom: $250k (not including any other closing fees), projected monthly rent $1,800+, monthly HOA $100+, common/shared swimming pool.
- WASATCH COUNTY (walking distance from local public high school):
- 3-bedroom: $245k (not including any other closing fees), projected monthly rent $1,600+, monthly HOA $125+, onsite property management fee (screening, leasing, marketing, managing) $100/month, common/shared swimming pool and sport court.
The market in Utah is awful for rentals but I prefer it for my first investment. 25% down payment, 4.5% mortgage rate ($2,500 closing fees) and a $950 monthly payment. What am I missing or are there superior opportunities? I would also consider fix-and-flip opportunities but I don't realistically see the market offering good opportunities in that area. I prefer a newer unit so I don't have to hire property management the first few years and I don't have to really fix anything. I encourage ALL feedback! Thanks!
Hi @Nate W. ! Honestly, none of those sound like great deals to me, just by using the 1% rule of thumb which isn't always exact, but it helps find a quick yet rough answer. Your properties before the cost of HOA only get to about 0.7%, which means in the long run you'll fall about 30% short from what you need. I don't know anything about these counties, so maybe there's something there that I'm unaware of, such as lots of job and population growth.
As for property management, they're not just there to fix things. They find the tenants and do all the paperwork, take the phone calls from tenants, make the phone calls to contractors, etc. They don't just fix the physical issues. It's fine to not account for the cost of property management if you want to go that route, but keep in mind that you're simultaneously saying that any time you spend on this property (marketing, screening, repairs, etc.) is worth $0.00. Additionally, but not accounting for management costs right now, you're assuming you will want to be the PM for the entire length of ownership, and / or you're assuming you'll see appreciation that will increase the rents giving you the ability to step aside and pay a PM. Just something to come to terms with if you want to go that route.
Hi Nate W. For Utah those numbers aren't bad, and with our growth projections here any of those would be good long term holds. I noticed that you mention that you prefer new properties, which is all I invest in and what I always advocate for my clients to buy. The value of having brand new properties and the time saved in dealing with renovations and repairs can not be overstated.
I don't know the ages of the structures you are currently looking at but there are plenty of brand new off-market rental options in Northern Utah County (best appreciation projections in the state, and probably the entire Southwest) that run the same or better numbers as the options you've identified in SL and WAS Counties. Please let me know if you would like more information about that.
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