Utah County Rental Market

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Utah County Rental Market

Kristyn Morgan
Investor 路 Utah County Area 路 Member since 2020 路 11 posts 路 4 votes

We are looking at investing in our first "buy and hold" rental property in Utah County. Our thoughts are a 3-4 bedroom single family home. Originally we were primarily looking at Lehi, Springville or Mapleton, but I am curious about potential growth further south in areas like Payson or Salem. We are leaning towards new construction due to lower repair costs in the first years and the fact that the community seems to value newer over older:)

I would love any insight local investors might have--particularly in the current climate. 

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Duane Richards
Cedar Hills, UT 路 Member since 2019 路 64 posts 路 43 votes
6y

@Kristyn Morgan, welcome to the Utah market. My wife and I are newbies, and have gone from 0 to 4 SFR's this year in Utah County. We put money down on a new townhome in Sept 2019 (after doing a ton of reading on BP, using rental calculators, etc.), supposed to close in March 2020, but COVID pushed it to May. With the quarantine, we worried about the whole thing and probably listed our unit at too low of a rental price point. However, because of the area (Highland), we had tenants lined up for 45 days waiting to move in. The area was so popular, we put earnest money down on a second one (being built) from the builder in April, which just closed in September. Also had a renter lined up for 30 days waiting to move in.

We are about to close on two more (invested in an OZ at the end of 2019) in a different area (Provo), all while COVID is in full swing in Utah. We've had tenants lined up on these as well for almost 30 days now. If the seller would just get their stuff in order, we would have closed in July LOL!

Would love to connect! Good luck with everything and your continued REI successes!

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  • Ray Loveless
    Investor 路 Highland, UT 路 Member since 2018 路 70 posts 路 23 votes
    5y

    Utah County has been great for me. You may not cash flow the first two or so years but after that it's all in the green cuz rents are going up as well. I bought a 4-Plex 5 years ago. It has appreciated an average of $3,500 a month for the Last 5 Years. Now it is cash flowing great. I would put that up against any investment in Ohio.. wink wink 馃槈 

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  • Kristyn Morgan
    OP
    Investor 路 Utah County Area 路 Member since 2020 路 11 posts 路 4 votes
    5y

    Thanks so much everyone! We are under contract for a house in Vineyard and feel really great about it. I'm hoping it is the first of many, but I still have a lot to learn. 

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  • Ray Loveless
    Investor 路 Highland, UT 路 Member since 2018 路 70 posts 路 23 votes
    5y

    thanks Kristen.  Just curious.. is there any specific reason why you are choosing to rent single family home over small multifamily buildings. Better renters? Any other reasons? 

    -Ray

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  • Duane Richards
    Cedar Hills, UT 路 Member since 2019 路 64 posts 路 43 votes
    5y

    @Ray Loveless I'm guessing it's because multi-family units seem over priced and sell so quickly here. I know you mentioned picking one up 5 years ago, but my wife and looked and looked and after failing to find ones that would meet our criteria, opted for SFH (townhomes in particular) for now. Our next step, we want to move towards multi, so we continue to scout for deals.

    @Kristyn Morgan good luck in Vineyard! I'll be interested to get your update once it's all said and done!

    1Reply
  • Kristyn Morgan
    OP
    Investor 路 Utah County Area 路 Member since 2020 路 11 posts 路 4 votes
    5y

    @rayloveless Honestly--it was a decision that my husband and I could both feel good about it:) He was more hesitant than I to start on this journey and we felt it was more in our comfort zone at this time. (I wish I had a more "professional" answer:) Also, our plan is to move to Utah County in the next several years and potentially build. If that is what we end up doing, we would have a house already there to live in in the interim. I also did some research in talking with property managers in Utah County and it seemed pretty apparent there was a shortage of 3-4 bedroom single family rental homes in the area. With the switch to more remote working and schooling, it seemed like a good gamble. 

    I do have a question though--how to you best figure out the property tax rate for a rental in Utah County? I don't know if I am just doing it wrong but I don't seem to be able to find a concrete answer. (Other than it appears that the tax amount would be about twice what it would be if this were my primary residence).

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  • Duane Richards
    Cedar Hills, UT 路 Member since 2019 路 64 posts 路 43 votes
    5y

    @Kristyn Morgan, do you mean the actual property tax from the county and state? It won't be any different than if you lived in it yourself. Interest rates change on your loan if it's an "investment" property. You can look at different city web sites to track down percentages, but they're all based on valuation (not appraised value). For example, our Highland TH appraised for $429k, but the tax appraisal came through the other day at $212k, with a "residential exemption" of -$95,400, not even sure what that is. However, the tax rates I've snapshotted for you below to get an idea. You can call the city (Vineyard or Orem?) to get rates for most of these I believe.

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  • Kristyn Morgan
    OP
    Investor 路 Utah County Area 路 Member since 2020 路 11 posts 路 4 votes
    5y

    @Duane Richards Thank you! This helps plus I emailed the assessors office for some clarification as well. Apparently if it a primary residential property (as opposed to a second home) it qualifies to be taxed at 55% of the assessed value. (I was in a mild panic when I read that non-primary residences were taxed at 100%!) Thank you so much for all your help! We close in a couple of weeks.

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  • Ray Loveless
    Investor 路 Highland, UT 路 Member since 2018 路 70 posts 路 23 votes
    5y

    You can also look on Utah counties website if you want the exact tax information for a specific property. They have a parcel map which shows all the properties and the tax information.

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  • Hyrum Stonehocker
    Contractor 路 Saint Joseph, MO 路 Member since 2019 路 17 posts 路 2 votes
    5y

    @Kristyn Morgan

    I am also in Utah County and it is a great place to be, but yes it is definitely inflated and can be difficult to find a property that will cash flow at all from the start. We just bought a house in Payson on KSL For sale by owner and got it for about 50k below appraised value! Also I build homes and if anyone is interested in putting up a new build SFH or small Multi Fam let me know and let's have a discussion! Best of luck to you.

    0Reply
  • Becca Summers
    Real Estate Agent 路 Highland, UT 路 Member since 2015 路 407 posts 路 272 votes
    5y

    quick thing on the tax rule there's a form that the title company should give you that lets you declare it as an investment property that will have long-term renters to make sure you get the right tax break.

    1Reply
  • Ray Loveless
    Investor 路 Highland, UT 路 Member since 2018 路 70 posts 路 23 votes
    5y

    Very interesting. Is there a place I can look in the county records to make sure that I am getting the primary resident discount,

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  • Kristyn Morgan
    OP
    Investor 路 Utah County Area 路 Member since 2020 路 11 posts 路 4 votes
    5y

    @rayloveless

    This is what I received from the county assessors office:

    http://www.utahcounty.gov/Dept/Assess/resexempt.html

    This page explains that if you have a rental and have the renters on a yearly lease, you can count the property as your Primary Residence. With it being your Primary Residence, you can claim it and qualify for the Primary Exemption towards the total owed on your property tax. The amount showed under the Tax History tab in the previous link will show you what the taxes are; this amount includes the Primary Exemption discount.

    1Reply
  • Brandon Pace
    Investor 路 Centerville, UT 路 Member since 2020 路 61 posts 路 47 votes
    5y

    @Duane Richards Thanks for sharing. I just purchased a townhome in Davis County, near my residence. I would like to buy another but my debt to income as well as my down payment bank is diminished. How have you financed your townhome investments? I don鈥檛 want to wait another year for rental income to give lenders comfort to loan more. Are there other ways to finance these that you have found successful?

    0Reply
  • Duane Richards
    Cedar Hills, UT 路 Member since 2019 路 64 posts 路 43 votes
    5y

    @Brandon Pace unfortunately, all our financing has been our own capital at 20-25% down per unit. We liquidated some other investments to diversify, but we are in the same position now. We really want to move on more properties, but if you're not house hacking where you can get in at 5% down, it's more of a waiting game. We are hoping our cash flow and appreciation may put us in a position for another purchase next year, either through saving up and/or HELOC/refi on existing properties to roll forward to increase our portfolio.

    We are looking for a unit or two that would be scheduled to "be built" sometime in mid-2021, as the prices keep rising. Hopefully by the time the new build is complete, we "should" be able to come up with the deposit, finance it and close. We've thought about rehabs where we might be able finance more of it based on ARV, but for now, we aren't going to stray from our model.

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  • Brandon Pace
    Investor 路 Centerville, UT 路 Member since 2020 路 61 posts 路 47 votes
    5y

    Looks like we are in the same boat except that I am looking in Davis County. Good luck! Let's keep in touch. 

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