What You Need to Know About Multifamily Investing in Salt Lake City

Utah’s real estate market has been supercharged by the COVID-19 pandemic, driven by historically low interest rates and low unemployment rates. The state’s housing market is first in the nation for pace of job growth and features low unemployment and mortgage rates, minimal mortgage delinquencies, and low state and local taxes. All these trends portend a strong housing market in Utah.

Salt Lake City is the center point of this growth and recovery. Utah’s capital city saw the second-largest increase in home sale prices in the country – a jump from $385,000 in September 2020 to $490,000 in September 2021.

Prices have risen so quickly that Provo, Salt Lake City, and Ogden were all recently ranked among the top 10 of the most overpriced housing markets in the country. While the meteoric growth in prices isn’t expected to continue, this trend has given real estate investors equity in SFR properties while opening the door for multifamily investments in the future.

The Salt Lake City market is rife with opportunity for real estate investors looking for investment properties in Utah and holds the chance for different investment strategies to be successful.

Salt Lake City’s real estate market is a great place for investors looking to buy and hold investment properties. This investment strategy works well for properties with rental values in the mid-range, all the way up to homes in the luxury market. This strategic investment method may not lead to as much cash-on-cash value, but it tends to bring in more stable tenants with higher income, better credit scores, and a longer tenancy.

 

Why Salt Lake City is Attractive to Investors

 

Salt Lake City is the economic and cultural hub of Utah and the Intermountain West. It’s one of the country’s fastest growing cities with approximately 198,000 residents in the city, SLC is consistently ranked as one of the best cities to live and retire. It has also become one of the best cities for millennial home buyers, young professionals, tech and STEM-related job growth, and business and careers.

With one of the best business environments and economies in the nation, Salt Lake City is a popular choice for industries looking to start or expand a company because of its business-friendly environment, foreign trade zone, government incentives, and development-ready sites.

As the state capital, county seat of Salt Lake County, and largest city in the four-county Wasatch Front metropolitan area, Salt Lake City’s economy employs 111,000 people. The largest industries are educational and financial services, information technology, and outdoor industries. The city’s highest paying industries are mining, quarrying, oil and gas extraction, agriculture, forestry, fishing, hunting, mining, and utilities.

Perhaps the most impressive thing about Salt Lake City’s economy is its unemployment rate. Pre-COVID lockdowns – March 2020 – Salt Lake City’s unemployment rate sat at 2.8%. By April 2020, when most of the country was on lockdown, the city’s unemployment rate had spiked to nearly 11%.

In May 2021, the unemployment rate had dropped to pre-pandemic levels In September 2021, the city’s unemployment rate had fallen to less than 2%. For investors, Salt Lake City’s unemployment rate shows a quickly rebounding economy, which means they have great potential for profit.

 

Salt Lake City’s Real Estate Market is Hot

 

Salt Lake City has one of the hottest housing markets in the country. Along with Seattle, Denver, and several California cities, Salt Lake City has one of the fastest moving housing markets, with equally aggressive price spikes.

The Salt Lake City real estate market has enjoyed a great run for the better part of a decade. In the nine years real estate in Salt Lake City has taken to recover from the Great Recession, home values have nearly doubled without demand waning. Perhaps even more important is the momentum being leveraged in 2021.

The Salt Lake City housing market experienced a brief setback in the first quarter of 2020 when the pandemic was declared but has since thrived. In fact, real estate has improved dramatically, which begs the question: Is it a good time to buy a house in Salt Lake City?

With the right exit strategy, now is the perfect time to invest in the Salt Lake City real estate market. Specifically, the new market landscape looks to lean heavily in favor of long-term investors, and those who position themselves well now will be glad they did in just a few short years.

 

Salt Lake City’s Multifamily Market is Ripe for Investment

 

Multifamily real estate investing has been on fire this year. In October 2021, the Multifamily Production Index increased five points to 53 while the Multifamily Occupancy Index increased by five points, up to 75—the highest reading since the inception of the index in 2003.

MPI measures builder and developer sentiment about current conditions in the apartment and condo market. MOI measures the multifamily housing industry’s perception of occupancies in existing apartments.

NAHB’s Multifamily Council Chairman Justin MacDonald said in a recent interview that the increases are indicative of the strong demand and limited inventory of all types of housing which are keeping occupancy strong in multifamily properties across the country.

“We have seen robust production of new multifamily properties, although developers continue to deal with very significant supply-side challenges, like finding enough labor, materials and land to build on,” said McDonald.

Salt Lake City’s multifamily market is no exception.

Multifamily rental growth in Salt Lake City ranks 23rd of 98 markets nationwide. On a year-over-year basis, Salt Lake City multifamily rents increased 18% from $1,243 in October 2020 to $1,467 in October 2021.

In 2020, more than 5,000 units were added to the city’s existing multifamily stock. According to the Yardi Matrix fall multifamily report, Salt Lake City had 13,636 units under construction as of August 2021. By August 2022, more than 7,500 units are projected to be completed.

Despite the number of multifamily units under construction, Salt Lake City’s rental market has a supply and demand disconnect.

The market for available rentals in Utah’s capital is tighter than ever, and as a record number of apartment buildings are being built, real estate experts say it could be a year or more before the new housing supply makes a dent in the city’s rental market.

Even with a tight market and rental increases across all classes, Salt Lake City is relatively affordable for renters – a huge plus for investors. Even with rent increases, Salt Lake City’s renter population isn’t being priced out, which creates longevity in tenancy and additional income for investors.

 

Investment Opportunities in Salt Lake City

 

Despite low inventory, increasing rents, and increasing home prices, Utah real estate investors with strong investment strategies can still profit. Investors looking for multifamily investing opportunities in Salt Lake City have plenty of options considering the market is booming.

Salt Lake City continues to grow – both in population and industry – and investors are creating solutions to combat the low inventory with multifamily investments, new construction homes and built to rent communities.

Don’t miss out on Salt Lake City’s red hot real estate market because of funding. Lima One Capital is the nation’s premier lender for real estate investors, and we’re the clear choice to fund your multifamily projects.

You have several options when it comes to multifamily lenders, but when you work with Lima One, you get access to a robust product suite, competitive rates and terms, and a true partner. If you’re interested in our multifamily bridge loan or our new permanent multifamily financing, contact Lima One to learn more.

We’re different from other hard money lenders in Utah. We have one of the most diverse product suites in the industry, which allows us to help investors reach success no matter their investment strategy. From the initial application to the loan payoff, our lending experts will be there every step of the way.

Get started today and scale your rental property portfolio with Lima One, the nation’s premier lender for real estate investors.

 

Salt Lake City By the Numbers

$538,601

Median home values of Salt Lake City homes

$490,000

Median home sale prices increased from $385K to $490K – an increase of 27% YOY

1,119

The number of active listings in Salt Lake City have decreased to 1,119 – a 63% decrease YOY

21

The median days on the market have decreased from 31 days to 21 days YOY

Comerica Park in Detroit, Michigan

Recently Funded Deals

Charleston South Carolina real estate investment case study