Salt Lake City multifamily investors?

[Kevin OBrien]

Hi everyone,

I'm looking to see what the trends are in the Salt Lake City, UT market for multifamily apartments. I had a broker tell me that everything is going for 5% cap or lower. Is this your experience in this area? What are some reasons you are investing in this city as opposed to the ones I see so many others in: Phoenix, Tampa, Dallas, etc?

Thank you

[Brian Burke]

It’s true, Kevin.  But that’s not unique to SLC. Quality multifamily assets in most growth markets are in the 4’s to low 5’s. Even not-so-good assets are under a 6 in most growth markets. 

Having said that, cap rate is not a measurement of investment performance so the fact that cap rates are low doesn’t mean that there isn’t money to be made. The reasons people (myself included) are buying in these markets is because they have job growth, income growth, and population growth.  These drivers are pushing rents and are likely to continue to do so.  A growing income stream is more valuable than a static or shrinking income stream, which means that cap rates compress.