Vacation rental in So. Utah or long-term rental on Wasatch Front?

Question

Hi! I'm new to Bigger Pockets and the RE investing world. My husband and I had a rental for a couple years and now we have some cash from the sale of that house and want to use it to get another rental property. After looking some in the Salt Lake/ Wasatch Front area, there doesn't seem to be obvious or plentiful opportunities for cash flow (although from reading, I've heard they are out there, but harder to find and maybe leaner than before). We have thought of getting a vacation rental property in the St. George area instead. Any experience with this would be helpful so we can decide which direction to pursue. I'm not sure what the different cities in Southern Utah allow and which ones are best for renting. Is the Hurricane or Washington area better than Santa Clara? Is a town-home in a resort specific community with pools better than a regular house? Is there a threshold of guests allowed per unit that rents better?

Any advice from your experience would be appreciated. Thank you! Melanie

Any advice from your experience would be appreciated. Thank you!  Melanie

Justin Morgan · Answer

@Melanie Schmidt

St George only allows STR in certain communities that meet Nightly rental zoning and other rules.  These rentals are getting saturated big time and owners are not even braking even at this point.   It’s a lifestyle play, NOT an investment... PERIOD!

Santa Clara and Ivins are about the same as St George with regs.

Hurricane also has communities that allow STR and other then that they issued 48 permits YEARS ago and you can’t add any new rentals, plus the waiting list is twice that long.

If you get outside the cities and into the county the regs are much more loose and you will find some good options.

I rent STR in Kanab and Brian Head town resort.  Fully licensed and we do good.  The management is much more, (we self manage), but we also play the lifestyle card with STR.

Douglas Larson · Answer

Hi @Melanie Schmidt and welcome to BP.

I did some "lifestyle investments" in Park City, UT when I first moved here. Buying right and having good management is really the key to making it work. If you talk to a few reputable management companies or even local AirBnB co-hosts you can get a realistic picture of the opportunities in the area you'd like to buy.

When I look back with 20/20 hindsight, it's obvious that the best play for me is really to buy solid, cashflowing properties that I can manage easily and use the profits to vacation wherever I choose. My "boring" SFRs along the Wasatch Front are really great cash cows. When I had the Park City properties, the extra hassle of working my vacation around non-peak times and managing my managers took a lot of the fun out of the "lifestyle" properties. That's just my 2 cents.

Duane Richards · Answer

Hi @Melanie Schmidt,

My wife and I went down there in August, looking at STRs for our "first" investment. After interviewing a few property managers down there (fees from 25-45% of gross rents - ouch!), we found that they are still filling most rentals at higher occupancy rates than a lot of other destinations in spite of the saturation of rentals in the short-term areas. However, the competition had gotten so intense (saturated as previously mentioned) that nightly rates have dropped significantly. With purchase prices climbing so quickly, the rent to value ratios have dropped as well, making it difficult to cash flow with anything short term.

There is still a decent market for SFH long-term, but the prices again are prohibitive compared to rental rates. We find that they're almost as bad as our home market here in Utah County.

Good luck to you and your future investments!

Duane

Sofia Sharkey · Answer

@Justin Morgan hi Justin, you information was very helpful. I too am looking to move to Southern Utah and start a few STRs down there. I would love to connect with you and get peek your brain as I do my research. I’ll send you a DM

Melanie Schmidt · Answer

@Justin Morgan I'll PM you. Thanks!

Justin Morgan · Answer

@Melanie Schmidt.  glad that I could help, maybe a little.

We lifestyle the heck out of Brian Head and it they do well.

If your interested in Kanab I have a turn key ready rental... 2 houses on 1 acre.  Interested?  $370k

I don’t visit Kanab and I need the equity out.

Melanie Schmidt · Answer

@Duane Richards, that information is so valuable. Thank so much for sharing! The property management fees and the rising purchase prices seem to make STR in southern Utah a no-go for us right now then. And if the SFH long-term rentals are similar to Utah county, then I'll just stick closer to home (Salt Lake county).

Again, thank you for sharing what you found out in your search, I really appreciate it!

Melanie Schmidt · Answer

@Douglas Larson, thank you so much for your input! That is very wise insight, I can see that trying to use a property for your own purposes would get hard when trying to work around paying guests. That makes sense that it would be better to get income from an easier to manage and better cash flow property and then use it to vacation on your own terms.

I'm ok with a vacation rental property OR a regular rental property as long as they cash flow well. I thought that maybe the vacation rental properties were providing more cash flow in this market, but it seems like that may not be the case.

I guess I just need to keep looking for a good deal.

Thanks so much for your advice!

Melanie Schmidt · Answer

@Justin Morgan Thank you, your reply is immensely helpful! I do admit, the lifestyle play is a very real perk that we wouldn't mind having. But going into this solely for the benefits of a vacation property to use, without it bringing in cash flow probably wouldn't work for us right now.

That is eye opening that many people in St George are not even breaking even. Yikes! Perhaps I'll look a little more in the county or in areas such as Kanab (I LOVE Kanab!) and Brian Head to see if something there makes sense for us.

Thank you so much for your help!

Vacation rental in So. Utah or long-term rental on Wasatch Front?

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