I. What is going on LOCALLY:
Utah’s economy is positioned for a strong recovery.” Gov. Jon Huntsman Jr. stated in the SL Trib. 3/30/2009
Utah, has been focusing on trying to reduce tax burdens, and IT has been ranked: In the TOP 5 States, as…..,
THE NUMBER 1: most competitive state, in the nation.
1. Utah
2. Colorado
3. Arizona
4. Virginia South Dakota
Why is this important locally? And what does that mean?
They found that “states with a high and rising tax burden are more likely to suffer through economic decline,
WHILE those with lower and falling tax burdens are more likely to enjoy an economic growth”. (Utah)
“Top performing states, (like the 4 I just mentioned) keep taxes, spending, and regulatory burdens low.
Economic competitiveness drives: income, population and job growth in the states.
This was stated in the Wall Street Journal by senior economics writer and Jonathan Williams, director of the Tax and Fiscal Policy Task Force for ALEC)
Unemployment in Utah verses Unemployment Nationally.
1. The national unemployment is at 9.5% with some states in the mid to high teens.
2. UTAH is at 5.6% which is comparably speaking, NOT BAD
NATIONALLY FORECLOSURES:
From Jan to June 2009, foreclosures were up over 37% over what they were the 2nd have of 2008 (July-Dec). However, when we compare the first 6 months of 2008 to the first 6 months of 2009, foreclosures were up over 87%.
In Phoenix the market of distressed properties make over 70% of the sales, or 7 out of 10 homes sold.
SHORT SALES and FORECLOSURES is Utah
In June, 2009, the Salt Lake Board of Realtors reported that 1 out of every 7 homes listed, for sale or under contract, in Salt Lake Country, is a short sale which is about 15% of the homes sold. (That is double of what it was a year ago.)
National statics show that 31% of sales in June were distressed properties.
(Nationally: existing homes sales, in June, were up 3.6%)
SUPPLY of HOMES
1. Nationally we have 8.8 month supply of homes.
2. SL: we have a 7 month supply of homes.
a. Where 5 months ago, we had over an 11 month supply of home. We have dropped almost 5 months of available inventory.
Reason? Probably case may also be the stimulus packages and lower interest rates.
II. What product or investment is good in our area?
That depends on if you are looking for a short term investment or a long term investment.
1. For example: Long term investment might be LAND!
If purchased in the Path of growth, the appreciation is above all, hands down the highest!
However, the draw backs of a long term investment rather than a short term, is that you are focusing on, the return at the end of the investment instead of the monthly cash flow. AND, you usually have to put about 50% down unless you can get the seller to carry the contract for less down (20%)
A friend of mine purchased 13 acres in 1991 for $215,000. In 2007 it appraised for 7.5 million. 5-10 faster than any home.
III. SFH: If your looking for a short term investment, short sales and REO properties that are under $200,000 still make good rentals, with monthly cash flow, great tax benefits, and are easier to turn over than a multi-unit or commercial building. Rents have gone down a little, but are still good. Depending on the area.
IV. 2-4 plex: In 2-4 plexes, much like condos, you are competing with apts for tenants. While they are a good start for an owner occupied investment property, they are not as liquid as a SFH. However, you do get the advantage of having your tenants help you pay the mortgage where you live.
V. Multiunit’s: Right now getting a loan on a multiunit over a 4 plex or on a commercial unit, is much more difficult and requires around 20% down. Even with 20% down, most of the returns are not much higher than a 6-8% cap rate.
III. What do investors need to know?
What are your goals: Short term or Long term?
TIPS:
1. Determine your goals: Are they: short term (monthly cash flow), long term (appreciation)
2. Get financially prepared first:
a. Consider holding costs, tax implications, cash flow potential, vacancies, properties that won’t sell.
b. Have reserves (get a partner if you don’t have one and be prepared to ride out any market cycle
3. Buy and Hold. In a distressed market, this is a smart move. Gives the property the opportunity to appreciate over time. Pay down mortgage is a great place to be as an investor.
4. Find the best deal. Builders over build = high inventory and slashed prices
5. Look for emerging markets (sales are starting to go upward, loan defaults begin to fall)
6. Have an exit strategy. Keeps you from making a quick sale. Talk to a tax account about the 1031 exchange.
7. Investment analysis software; Good investment; help analyze your investment for cash flow and return. (I like the CCIM software) Certified Commercial Investment Member
8. Look for what your return will be: (at least: 3-5% on SHF & condos,)( 7-8% on 3-4 units)
9. Buy in the path of progress (jobs, economic growth) that is moderately priced. That way you get a tenant that can make the payments, but not in a position to buy.
10. Multifamily units are harder to sell. The value is in the (NOI) net operating income. If interest rates go up faster than rents, the value can go down.
11. Protect your assets from lawsuits. Hold property in LLC or other legal entity.
12. Don’t over look deductions when analyzing the property: tax deductions for depreciation and expenses, mileage etc.
WHERE IS OUR MARKET HEADED?
There are 3 ways to determine this
1. What is the job growth in the state
2. What is the unemployment rate? High, low, or stable
3. Is our available inventory increasing or decreasing?
The job growth in the state:
We have not escaped losses or jobs in Utah, however many recent market trends suggest companies may begin hiring by the end of the year. That’s earlier than previous predictions. Job recruiters say they are seeing an increase in companies looking for employees. However, many still are looking for temporary workers.
The unemployment rate at a 5.6% compared to the national 9.5% rate, it is an indication that the state’s economy may be flattening out. I’m not saying that the market is HOT; however, I am saying that it is picking up.
Is our inventory increasing or decreasing?
Salt Lake Board of Realtors released new statistics last Tuesday that homes sales were down only 2% from the same time last year, in the 2nd Quarter in Salt Lake, Davis, Utah, Weber and Tooele counties. And in Utah County, home sales were actually up nearly 15%.
Nationally there is an 8.8 month supply of homes,
Where as in Salt Lake we have a 7 month supply of homes. 5 months ago, we had over an 11 month supply of homes, so we have dropped almost 5 months of available inventory.
WHY IS IT GREAT TO INVEST IN SALT LAKE CITY
Unemployment is low
Growth and buildings are still going up
Cost of living is low
Utah is still the 5th best among all states in terms of appreciation over a 5 year period.
A report by the American Legislative Exchange Council, said that “Utah’s low taxes and controlled spending, give it the most competitive economic environment in the nation.
WHY DO I LIKE LIVING HERE?
It is a great place to raise a family, and its recreational activities are next to none in the nation. I personally love the weather and the ability to go from the mountains to the desert in only a few hours!
It was also rated in Forbes Magazine, said “America Best States to Live” It said that residents enjoy their jobs, express deep optimism about future and manage to stay healthy. Residents reported a high level of satisfaction in: work environment, emotional health, and local communities.
And Four Utah towns where listed in Money’s magazine, as best place to live in the United States.”
Rankings were based on: availability of good jobs, crime rates, schools and affordable housing.
Farmington (#14), Draper (#22) Bountiful (#71) and Lindon (#74)
