The real estate blog.

They say that all real estate is local. Of course right now the underlying credit process has problems nationally, but for Salt Lake real estate the market is better. One indicator that demonstrates this is rents. In the most bubblicious parts of the country rents have declined as unsold homes flood the rental market and condo towers are converted to apartments.

Despite a rise in the number of new homes for sale in Salt Lake, rents in 2007 increased 8.8%. Vacancy rates declined significantly as well, meaning real estate investors in Utah should be doing quite well. Rents are expected to rise again this year.

Vacancies in Salt Lake County fell from a high of 10.9 percent in December 2002 to 4.5 percent at the end of last year, the lowest in more than 10 years.

The apartment market is considered fully rented when the vacancy rate is 5 percent.

Higher rents are good for investors and they can also push home buying fence sitters into making a purchase. Lower interest rates and a softer housing market will help as well despite the stricter credit requirements.

Even though the situation looks solid now, I suspect the rental landscape may shift this year, particularly if we see a rise in foreclosures. So far, Utah has seen a significant decline over the past two years, but high levels of inventory in Utah County could change that.

Let’s consider real briefly another rental market in bubblicious California. I got an email yesterday from someone seeking advice on two properties that were being used as rentals. The owner was behind one payment and wanted to do a deed in lieu of foreclosure to get rid of the properties. Both units are currently rented, with one tenant set to move out in a week, while the other wanted to stay until the end of the year. The owner wanted to know how much time the tenants had and suggested keeping the rents without paying the mortgage.

This owner had some other tax questions as well and my advice was to consult an attorney in California. In response to the rental questions I replied that collecting rent with no intent to pay the mortgage is illegal and shouldn’t be considered. Secondly, renters have no rights when a lender repossesses and typically have 30 days to move out, usually losing deposits to their now insolvent landlord.

However, the question from this reader has me thinking about renters and lease option purchasers of potentially distressed properties here in Utah. As more inventory comes on the market here, it would be wise for renters to run a credit check on their landlords when renting a private home. This advice does not apply to corporate owned apartment buildings. Renters should screen their landlords as much as landlords screen renters. This is also true of those considering lease option deals. You don’t want to lose your deposits because your landlord is under water on their mortgage. Proof of on time payment of the last six mortgage bills should also be requested.

The rental landscape in troubled areas of the country is far different than it is in Utah, which indicates to me we’re still in pretty good shape. The mortgage crisis is far from being resolved, so I expect to see more problems surface in the Utah real estate market. For now, it’s a good time to be a landlord.