Real estate investors who are considering real estate investment in Utah often ask, how do I get started? or, what are the best cities for real estate investment in Utah?
Investing in the Utah real estate market requires research and planning on your part if you want to be successful. And the same thing goes for investing in any new market. In this article I’ll give you some insider tips for successful real estate investment in Utah. As a real estate lender, not only do I review new Utah real estate investment opportunities weekly, but I have a comprehensive knowledge of the Utah real estate market as a whole.
Utah’s economic growth and stability, combined with a growing population, are the primary reasons that real estate investors are investing in the Utah real estate market. In this Utah real estate investing guide, I will provide a general overview of real estate investment in Utah to help you decide if it’s for you.
I will start with a few key factors that make investing in the Utah real estate market an attractive choice for real estate investors. I will also point out a few factors that deter real estate investors from entering the Utah real estate market. I will discuss the best cities for real estate investment in Utah. And then finally, this guide will help you identify a few legal considerations for real estate investment in Utah.
Overview of Real Estate Investment in Utah
Utah’s Economic Growth and Stability
Utah’s economy has seen explosive population growth since 2010 and it spiked right after the pandemic in 2020. With its rapid population trajectory, combined with the current lack of affordable housing, many out-of-state investors have been drawn to real estate investment in Utah.
Utah had the lowest unemployment rate in the nation in 2022, due in part to a regulatory environment that is favorable to small businesses. The low unemployment rate and favorable business climate have spurred all sorts of new real estate investment in Utah.
Real estate investors are also able to diversify within the Utah real estate market by investing in different property types such as: storage units, residential land development, and short term rentals.
Benefits of Investing in Utah’s Real Estate Sector
Investing in the Utah real estate market offers numerous benefits for real estate investors. Utah is landlord-friendly as compared with California which is tenant-friendly.
Demand for housing in Utah has been steady since 2010 with low vacancy rates. Property values have also seen steady appreciation since 2010. The real estate market in Utah shows promising forecasts for future growth too, which provides real estate investors the potential for above average returns.
Analyzing Utah’s Real Estate Market
Identifying Promising Areas for Investment in Utah
Utah has several geographic areas that have strong population growth projections, which point to an increasing demand for housing. Some of these geographic areas include, Tooele County, Summit County, Morgan County, Emery County, Weber County, Cache County, Duchesne County, Washington County, and Grand County.
Property Types and Market Demand
Because each of these geographic areas has its own unique factors, and also because there are a diverse range of property types to choose from, you really need to decide “where” and “what,” before you make any real estate investment in Utah.
For example, some of the areas I’ve listed are tourist destinations, so real estate investors who are focusing on short term rentals would start by looking in those areas. Some areas in Utah are still very rural and have low housing inventory, but projections show future growth. These areas will attract real estate investors who are targeting all property types including fix and flips, long term rentals, or residential spec construction.
By carefully researching the different geographic areas in Utah and measuring current and future market demand, a real estate investor can determine if a particular property type would be a fit for that area. For example, in a city with a large number of apartment complexes, a self storage facility may be a desirable property type in that city.
Utah Rental Market Analysis
The rental market in Utah is driven by the factors already mentioned including: population growth, job opportunities, and a robust tourism industry. By obtaining a thorough rental market analysis from a local real estate broker or property manager, you can identify areas with high rental demand, areas with rental rates that cash flow, and areas with potential for rental income growth.
Unfortunately for investors in long term rental properties, ever since 2016 when Utah property values really started to increase rapidly, rental rates didn’t rise as fast as prices. And then prices spiked, from the end of 2020 through the spring of 2022, making it even harder for investors in long term rentals to find properties with cash flow.
At the time this article was written, it was difficult to find a rental property in Utah that cash flowed. For this reason, many real estate investors in Utah have purchased rental properties in recent years with the goal of future value appreciation, rather than with an expectation of cash flow.
Factors to Consider Before Investing in Utah
The Legal Considerations for Real Estate Investment in Utah
Before diving into real estate in Utah you must first have an understanding of the legal considerations for real estate investment in Utah. For example, the regulatory bodies that govern businesses and real estate in the state. The Division of Real Estate governs all things real estate and mortgage in Utah. And the Utah Division of Corporations governs all things business. Familiarize yourself with Utah real estate laws, its property ownership laws, landlord-tenant laws, and property management regulations.
What individual name or business entity name will you be doing business in Utah under? Are you setting up a Utah business entity, or are you operating under a foreign business entity that should be registered in Utah? Consult with a CPA that understands your tax goals and can suggest the right type of business entity structure that would be best for you.
Utah is in the top 10 states with the lowest property taxes. The Utah State Tax Commission is the entity where you file and pay your income taxes. Find a CPA that has experience working with real estate investors and can provide advice on tax strategies based on your specific real estate investment goals.
Additionally, explore any tax incentives or exemptions available for certain types of investments, such as historic properties or renewable energy projects.
A knowledgeable realtor in Utah is the type of advisor that can help you navigate Utah real estate investment opportunities. But consult with a real estate attorney on more complex real estate matters such as complicated contracts or partnership agreements, title, land, and development, are just a few areas where legal advice is essential.
Short Term Rentals (STRs) in Utah are regulated in Utah all the way down to the local level. They can be regulated by the County, but in some cases it’s left up to the municipality, i.e. town. And then any short term rental may also be subject to the jurisdiction of the individual Homeowners Association (HOA) where the property is located. Always do careful research to make sure STRs are allowed at the properties you are targeting for short term rental investment purposes.
Financing Options and Strategies
How will you fund your real estate deals in Utah? To have multiple financing options is crucial for success in real estate investment in Utah and in any real estate market.
There are a variety of financing avenues for purchasing real estate in Utah, including traditional mortgages and hard money loans. But you must first figure out what your investment strategy is, and what your long term goals are for a property. Then take your goals to a good mortgage broker, or other seasoned financing pro.
Corey Dutton, a private money lender based in Utah, is one of those seasoned pros who’s both a mortgage broker and a private money lender. Professionals like Corey can help you decide how you will fund your purchases of investment properties in Utah based on your short term and long term goals.
The real estate market in Utah is competitive. Motivated sellers may sell properties at a discount but only to buyers with cash, or fast funding hard money loans. Unless you’re planning to come in and purchase with all of your own cash, you should consider getting preapproved with a hard money lending company before you start your search for real estate investment properties to buy in Utah.
The best Utah real estate investment opportunities, like anywhere, never last long. In order to compete in a competitive real estate market, you need to be ready to purchase with all cash. But most real estate investors don’t have large amounts of cash on hand. For this reason, most real estate investors use hard money loans to purchase real estate investment properties and then either sell or refinance to pay off the loans.
Hard money lenders in Utah are your best source for fast loan approval and funding to give you a competitive advantage. Make friends with a good mortgage broker, and a good hard money lender, in Utah. They can both give you advice on how to best finance your properties and accomplish your real estate investing in the Utah real estate market. A lot of traditional mortgage brokers don’t understand how private money loans work so make sure you also get to know a good hard money lender in Utah.
Top Tips for Successful Real Estate Investment in Utah
Build a Strong Network of Professionals and Team of Advisors
Seek the expertise of real estate agents, attorneys, and tax advisors who specialize real estate when investing in the Utah real estate market. They can guide you through the intricacies of local regulations, assist with property transactions, and ensure compliance with applicable laws.
Collaborating with local real estate professionals can provide you with valuable insights when investing in any new market. Connect with local property managers, contractors, and title companies, lenders who have experience in the Utah market. They can provide not only guidance, but also potential investment opportunities.
Building relationships with professionals ensures you have a team to support your investment journey in Utah that can help you navigate any challenges that may arise. How do you network with, and learn from, local real estate professionals? Consider joining a local chapter of any Utah Real Estate Investor Club, or local Real Estate Investor Association, there are several scattered across the major geographic areas in Utah.
Understand Legal and Tax Considerations of Real Estate Investing in Utah
Having a solid team of professional advisors is key to your success. Real estate attorneys, experienced real estate brokers, and seasoned tax professionals are a few of the types of advisors that you need on your “team” to help you accomplish your goals in real estate investing in Utah. Without them, you are just finding information on the internet somewhere and trying to do it all yourself. Never cut corners or cheap out when it comes to the right professional advice.
Conduct Thorough Market Research
Thorough market research is the foundation of any successful real estate investment. Make sure you carefully analyze historical trends, that you evaluate current market conditions, and then make future projections of profits, income, etc. Your numbers work, or they don’t work. And if the numbers don’t work for what you want to do with the property, then move onto the next deal quickly. The sooner you make a decision to proceed with the investment property purchase or not, the closer you’ll be to the right one.
In Utah, you need to look for areas with potential for job growth, city center initiatives favoring growth, and expansion of infrastructure. Identify neighborhoods or cities that show potential for appreciation from high rental demand. Whatever your exit strategy is for the real estate investment property, all of these factors play an important role in your success in a particular neighborhood or location.
Implement Effective Property Management Strategies
Efficient property management is crucial for optimizing returns and maintaining the value of your investments. Whether you choose to self-manage, or hire a professional property management company, establish effective systems for tenant screening, rent collection, maintenance, and lease agreements. Good property management ensures a profitable operation by minimizing vacancies, and saving money where possible, while also staying on top of maintenance.
Best Cities for Real Estate Investment in Utah
Salt Lake City: Growth Drivers, Investment Opportunities
Salt Lake County is where the capital, Salt Lake City, is located. Salt Lake City is one of the fastest growing cities in Utah for multifamily (apartment construction) in recent years. With several colleges and universities, and 3 ski resorts, Salt Lake City has seen a steady demand for housing over the past 10 years.
If you can find a rental property in Salt Lake County at the right price where the rental numbers work, take it down. There are a lot of older, dated homes in Salt Lake City, which presents future opportunities for fix and flips or other value add plays. That is, if you can purchase the properties at low enough prices.
Because of the high demand for housing in Salt Lake City, a recently renovated, well designed home can often demand multiple offers. Margins have been getting tighter in recent years with so much competition among real estate investors in Utah for both fix and flip, and rental investment properties in Salt Lake City, Utah.
Salt Lake County has a robust job market with a growing population. There has been a revitalization of areas of downtown Salt Lake City in recent years with the development of new residential and commercial. But many multifamily real estate investors wonder if the multifamily market is saturated with new inventory in Salt Lake City.
If Salt Lake City is saturated with new construction and multifamily properties, maybe a better play is converting commercial properties to affordable housing, or workforce housing. Land prices are always a factor that real estate investors need to monitor in new development projects, especially when developing affordable housing or workforce housing. And with land prices at historically high levels in Salt Lake County at the time this article was written, these types of projects don’t prove as profitable as high density, multifamily projects.
Park City: Tourism and Rental Potential
Summit County is renowned for its world-class ski resorts and vibrant tourism industry. It attracts visitors from around the world, offering excellent opportunities for vacation rental investments and second home ownership. Park City, the cash cow city for Summit County, hosts major events like the Sundance Film Festival and large scale summer events and festivals that draw visitors. For this reason, Park City made my list of the best cities for real estate investment in Utah. Additionally, Park City’s charm and natural beauty make it an appealing location for luxury residential properties for use as short term rentals, as fix and flip investments, or spec construction.
Provo & Orem, UT: Student Housing & Household Formation
Utah County has been one of the fastest growing counties in Utah in recent years, and among the fastest in the nation. According to U.S. Census data, Utah County made the top 10 list of U.S. counties that saw the most growth during the pandemic.
Provo and Orem are two sister cities in Utah County that made the list of the best cities for real estate investment in Utah. These were two of fastest growing cities in the entire U.S. during the pandemic.
Provo is home to Brigham Young University where student housing has been historically, very highly regulated. Changes to the BYU Student Housing Policy that went into effect in the fall of 2022, have opened up more opportunities for real estate investors near the BYU campus.
And then post graduation, college students in Provo and Orem want to stay locally and raise their families. For this reason, new family formation also drives the housing demand in Utah County.
Lehi: Technology Industry Influence
The presence of a highly educated workforce and a culture of innovation both contribute to Utah’s economic growth. Lehi has a thriving technology sector, often referred to as, “Silicon Slopes.” Because of the rapid growth in Lehi, Utah in recent years, real estate investors can explore both residential and commercial acquisition and development.
Saint George, UT: The Migration Capital of Utah
There was a lot of migration during the 1st year after the COVID-19 pandemic started. And in 2022 U.S. Census data showed that one the metros in the U.S. that saw the most growth between July 1, 2020 through July 1, 2021 was Saint George, Utah.
Saint George is not just a migration destination, but it’s also a destination for retirees because of its warm climate, and it’s also a vacation destination for tourists because it’s near 3 national parks. Because of its broad appeal, Saint George, Utah definitely made my list of the best cities for real estate investment in Utah.
Utah has landlord-friendly laws, low vacancy rates, and strong demand for housing that has been steadily growing since 2010. The real estate market in Utah shows promising forecasts for future growth too, which gives real estate investors an opportunity for future appreciation.
But to take advantage of Utah’s real estate investment potential you need a comprehensive understanding of your target counties and cities, and you need to decide what property types you plan to focus on. Whether your chosen property types are residential fix and flip, spec construction, long term rentals, land development, or commercial industrial, you need to know if there’s a demand for that property type in your areas of focus.
There are also legal considerations, tax considerations, and the need to find financing. And then finally, build a network in the real estate investing community in Utah and use a qualified team of professional advisors to guide your journey.
Still thinking you want to do real estate investment in Utah? Reach out to us to discuss your real estate investment goals and we can help you figure out the best way to fund them.