I purchased one of my Park City rental properties in 2016 for $440,000. The monthly rental income steadily rose, as did the HOA fees. The value also appreciated significantly. In January, I decided that the value exceeded the amount of rental income it was generating, especially when factoring in the HOA dues. Finding a rental in Park City that will generate 5% ROI is difficult, which is my goal with my rental properties. So, I started to investigate other markets.
After speaking with Jayme Angell, my property manager with Summit Sotheby’s International Realty Property Management, I decided that a good location to move my money would be a single-family home in Salt Lake City. I could garner a higher rent, avoid HOA dues, and still own a property poised for appreciation.
The location I chose is a neighborhood called “Sugarhouse,” which is near the University of Utah and Westminster University. It’s also a lovely residential neighborhood with 1920’s bungalows on tree-lined streets. The economy in Salt Lake City is booming, which means qualified renters abound.
House Hunting with My Sotheby’s Buyer’s Agent
The distance from the Summit Sotheby’s International Realty office in Park City to the Summit Sotheby’s office in Sugarhouse is only about 35 minutes. I could have easily searched for homes myself and negotiated an offer. But the market is completely different.
In fact, the market is quite hot for the type of property I was looking for and I didn’t want to take a chance of overpaying, flubbing an inspection, or losing out on multiple offers. I called on one of my colleagues and referred myself to him.
I closed on my Park City condominium a few days before we met to look at homes. I was doing a 1031 Exchange, so I had 45 days to identify 3 possible properties and 6 months to close on one of them to defer my nearly $400,000 gain.
I looked at five homes and narrowed my selection to the top two. The price differential was about $40,000. I asked my property manager to evaluate the rental income on each of these homes and she said they would rent for about the same amount. My real estate agent told me the lower priced home was in a slightly better neighborhood. This made my decision easy, and we wrote an aggressive offer on the lower priced home.
The Benefits of Using a Buyer’s Agent
My colleague, because he’s such a rockstar, ordered all the inspections at the same time we wrote the offer. In Salt Lake City, methamphetamine testing and sewer scopes are two routine tests we generally don’t order in Park City. I wouldn’t have had the resources to schedule all these inspections within four days.
And it was a good thing those inspections were lined up because I was competing against another cash offer! I was able to offer a six-day due diligence deadline and a 10-day close. The cute little house was mine!
The inspections revealed a few minor issues. Nothing major, like methamphetamine, but some items that would cost money to remedy, like a broken window. My colleague leveraged our quick close to obtain a generous credit.
I closed on the house last week. I purchased a washer, dryer, microwave, and refrigerator by trading emails with a trusted salesperson at RC Willey. My home will be ready to rent next week once the appliances arrive. I’ll increase my net income by about 40% per month, and I have around $100,000 leftover. (I’ll need to pay capital gains taxes on the leftover funds.)
Would I have been able to find this home, negotiate the multiple offers and obtain the credit on my own? I don’t think so. My colleague more than earned his commission and I got a great deal. I can put my 1031 exchange money to work within a couple of weeks of selling my condo, which is important to me.
I’m a Park City real estate expert, but I’m not an expert in the Salt Lake City market. It is important to hire the best professionals you can find, whether it’s an attorney, CPA, financial planner, property manager, or real estate agent. In fact, even the RC Willey salesperson saved me a half day of driving and shopping for appliances. Who you work with matters! Find the best professionals and give them your loyalty.
1 Comment
My grandsons are attending the UofU – a Senior and Junior in the Fall, but looking for a new place as soon as school is our in April . They are looking for a new rental – currently at the Covey Apartments on South Temple. What are you asking for your rental price? Deposit? First and last month??? Have to mention that they are good kids :). The Junior will be studying in France on semester abroad for the Fall semester, but still will be coming back to live in their new place. Thanks for any information. Also, my granddaughter is also at the U and may be looking for a new place and would be renting with her cousins. She will be a Junior, as well.