You recently purchased some real estate as your primary residence in Layton, UT. You purchased this home because real estate in Layton, UT is moderately priced. You also purchased the home for its location between Salt Lake City, UT, where you work and Ogden, UT, where your business partner and roommate works full time. You also like Layton, UT for its solid schools and closeness to the ski resorts in the Ogden Valley.
While living in Layton, UT and talking with your neighbors, you discover that most of them commute to either Salt Lake City, UT or Ogden, UT. You also notice that a fair amount of the residential real estate is inhabited by renters. With this anecdotal information, your roommate and you conclude that now may be a good time to purchase an income property in Layton, UT.
There are certain things to consider when purchasing an income property. First you must decide what type of income property you would like to purchase – commercial or residential. Commercial income properties are generally more complicated to evaluate. You have to consider rental rates, usually on a per square foot, and how best to structure a lease (percentage rent, inclusion of utilities, etc.). You should also consider any sales of commercial space and the availability of finances if the property will be purchased by cash. Working with a commercial broker familiar with the area you want to purchase will provide the best results.
Purchasing residential real estate as income property is usually more straight forward. Residential real estate is usually the most abundant type of real estate in a given locality, which makes it a good income property type to purchase anywhere. However, in some cases residential real estate is the minority land use in a given locality. In such cases, residential real estate may be worth more or less depending on the surrounding use. Rental rates can be determined by observing rates in advertisements as well as by contacting a local real estate agent. As Layton, UT is primarily a bedroom community for both Ogden, UT and Salt Lake City, UT, residential real estate is probably the best type of income property to purchase in Layton, UT.
The next items to consider are property values and financing. To determine the value of residential real estate as an income property, you should know the occupancy rates for residential, as this will help you establish what the risk of purchase is, also known as the capitalization rate. Additionally, you must determine your annual income from rental rates minus what you expect to spend as operating expenses (repairs, yard work, etc.) Conventional financing is usually available for purchasing residential real estate for income purposes.
With all of this in mind, your roommate and you decide to purchase a townhouse in Layton, UT as an income property. You research the area and determine that residential real estate is the easiest to purchase and most lucrative in Layton, UT. You research the area on your own, determine your rental rates, operating costs and an estimate of risk to get you to an approximate investment value for the property you want to purchase. Then, with the help of a real estate agent, present an offer for the property based on your perceived investment value. Your offer is accepted, and now your roommate and you are officially landlords in Layton, UT with eyes on your next property.