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I am trying to gauge the state of residential real estate in the Colorado ski areas especially in Breckenridge, Keystone, Vail and Aspen.
I am thinking of investing in a ski resort condo as a potential investment but only if the current prices are reasonable and there is a potential for capital gain.
I have spoken to several real estate agents in the area and they have all assured me that this is the best time to buy now and the prices will be going up by a significant margin by next year. One real estate agent told me that this is because all the rich and well employed folks are rushing to invest in mountain properties -so I cannot use any national statistics to gauge the status of mountain real estate....sounds reasonable enough
I would like to ask anybody actually living in the Colorado mountain resorts if they have an opinion one way or another regarding what direction residential real estate prices in the resort areas will be moving in?
I gently ask the OP if he/she always takes financial advice from real estate agents?
Not really seeking financial advice...just trying to understand the general price level of the market and the potential for upside. Real Estate markets are notoriously opaque so you have to depend on a number sources - including real estate agents for a general idea.
I live in Vail, and have lived in the Aspen area. Real Estate isn't going anywhere fast up here. There are an insane amount of houses for sale, in short sale status or in foreclosure. It will take a few years to sell through the surplus. There are some good deals, but if you search this forum on investing in ski country you will get some sage advice from people who do own up here and aren't trying to make a commission off of you. There is no shortage of slope side rental units in the Vail area, it's a very cut throat market and management fees along with maintenance and inevitable damages generally negate any potential profit. For a primary residence I think it's a good time to buy in the next year or so, as an investment, even during the boom years most people didn't make much, they just had a place to go vacation when they wanted to.
Real Estate agents in Vail, I always found will tell you the market is going up and you must buy now! All the people that did that back in 2005 are in the hole now. I just find it funny that people are "rushing" to buy properties. HAHAHA! Right! If so all the real estate agents wouldn't be waiting tables as a side job and there would not be a back log of 5 years of properties on the market. Some stuff sits on the market for years and years and owners are desperate and enough in a financial hole they wont drop prices cause they bought so high. I have family in real estate in Vail and the market is dead and has much further to drop.
What is getting sold is foreclosure property and not a lot else.
I don't see the market going up for 10-20 years in any of these towns, as they have built billions of dollars in real estate from 1999-2009 and a lot of it is in foreclosure, bankruptcy or taken a big haircut. The much vaunted Ritz Carlton in Bachelor Gulch is bankrupt. There is a whole new condo complex in Avon of 50 condos was dead empty and had to do a fire sale this year. The Westin is pretty much teetering. All the new places in Vail are struggling.
I think the people that made money in these towns is the people that bought raw land for $100-$1000 an acre back in the 1960's and 70's and flipped it later for astronomical prices. The money has already been made.
One issue I have with these things as investments is the average age of skiers is going up and due to costs a lot of younger people are not taking it up. The younger generation is smaller in size and doesn't have money. The older boomers with money already have their place and wont be buying anymore. Also I think people have come back down to reality and seen that having a place in the mountains they hardly use is a luxury they cannot afford.
The other thing is that these condos bleed money. You have to have someone to manage them, with management fees often being 50% of rent. Then you have to maintain them, renovate them, keep them up to date. Then you have pay taxes, utilities, security and other costs. Then in terms of capital gains you have to factor in inflation as well, which people often fail to do. To me buying something in $250K in 1990 and it sells for $500K now, after 20 years of all the above expenses, you have actually lost your shirt.
The only people I know that have made money on these places are those that bought in decades ago and aggressively manage their own places as almost a full time job. The ones that buy it and think it will run itself are the ones that lose big.
A part of the Colorado mountain economy has been built on suckers that buy "investment" real estate, which is why any real estate agent in the mountains has books of properties up for sale. I personally think mountain real estate in these major ski towns is priced way beyond it's actual value and has a long way to fall.
Find me a real estate agent that has ever said the market is going down more and to hold off buying. To them it is always going up and you must buy now!
Real Estate agents in Vail, I always found will tell you the market is going up and you must buy now! All the people that did that back in 2005 are in the hole now. I just find it funny that people are "rushing" to buy properties. HAHAHA! Right! If so all the real estate agents wouldn't be waiting tables as a side job and there would not be a back log of 5 years of properties on the market. Some stuff sits on the market for years and years and owners are desperate and enough in a financial hole they wont drop prices cause they bought so high. I have family in real estate in Vail and the market is dead and has much further to drop.
What is getting sold is foreclosure property and not a lot else.
I don't see the market going up for 10-20 years in any of these towns, as they have built billions of dollars in real estate from 1999-2009 and a lot of it is in foreclosure, bankruptcy or taken a big haircut. The much vaunted Ritz Carlton in Bachelor Gulch is bankrupt. There is a whole new condo complex in Avon of 50 condos was dead empty and had to do a fire sale this year. The Westin is pretty much teetering. All the new places in Vail are struggling.
I think the people that made money in these towns is the people that bought raw land for $100-$1000 an acre back in the 1960's and 70's and flipped it later for astronomical prices. The money has already been made.
One issue I have with these things as investments is the average age of skiers is going up and due to costs a lot of younger people are not taking it up. The younger generation is smaller in size and doesn't have money. The older boomers with money already have their place and wont be buying anymore. Also I think people have come back down to reality and seen that having a place in the mountains they hardly use is a luxury they cannot afford.
The other thing is that these condos bleed money. You have to have someone to manage them, with management fees often being 50% of rent. Then you have to maintain them, renovate them, keep them up to date. Then you have pay taxes, utilities, security and other costs. Then in terms of capital gains you have to factor in inflation as well, which people often fail to do. To me buying something in $250K in 1990 and it sells for $500K now, after 20 years of all the above expenses, you have actually lost your shirt.
The only people I know that have made money on these places are those that bought in decades ago and aggressively manage their own places as almost a full time job. The ones that buy it and think it will run itself are the ones that lose big.
A part of the Colorado mountain economy has been built on suckers that buy "investment" real estate, which is why any real estate agent in the mountains has books of properties up for sale. I personally think mountain real estate in these major ski towns is priced way beyond it's actual value and has a long way to fall.
Find me a real estate agent that has ever said the market is going down more and to hold off buying. To them it is always going up and you must buy now!
I can't thank you enough for this excellent post (I will keep hitting the rep button for you as often as I can). Clearly you have researched moutain real estate for a long time and have come to the right conclusions. I am going to follow your lead and stay off these properties. What continues to amaze me is the enormous hype that goes into promoting these largely ridiculously priced properties. One look usually tells you that most of these properties are very poorly built with inferior materials (one property I looked at even had drop ceiling tiles like in some warehouse). Not to mention the Association fees are upwards of $400 and approaching that of the mortgage itself. All my spreadsheets kept telling me the ROI or cash flows made no sense at all - only for the RE agents to tell me about how all their other clients are making boatloads of money and laughing (or possibly skiing) all the way to the bank!
I can't thank you enough for this excellent post (I will keep hitting the rep button for you as often as I can). Clearly you have researched moutain real estate for a long time and have come to the right conclusions. I am going to follow your lead and stay off these properties. What continues to amaze me is the enormous hype that goes into promoting these largely ridiculously priced properties. One look usually tells you that most of these properties are very poorly built with inferior materials (one property I looked at even had drop ceiling tiles like in some warehouse). Not to mention the Association fees are upwards of $400 and approaching that of the mortgage itself. All my spreadsheets kept telling me the ROI or cash flows made no sense at all - only for the RE agents to tell me about how all their other clients are making boatloads of money and laughing (or possibly skiing) all the way to the bank!
wanneroo is right on the money, and you've figured out what a scam most Colorado resort condo real estate deals are. Since most of the Colorado resort economy has been built on these scams in the last 20-30 years, it's not hard to figure out what the bad economic outcome is going to be for much of Colorado as the Ponzi scheme collapses. The parallels between that and the collapse of the silver mining economy of Colorado in 1893 are chilling. It only took most of Colorado about a half-century to get over that collapse. The collapse of the Colorado resort real estate economy will likely take that long to get over, as well. Of course, you won't hear the real estate people say that, nor will you hear it from some of the incessant promoters on this forum, but economies built on bull**** and hype usually don't last, and Colorado's resort real estate economy is surely one of those. And, as far as I'm concerned, good riddance.
I met a local investor last week who buys foreclosures and short sales in COLO SPGS and Pueblo. It's NOT for the faint of heart.
He gave an example of a $760k property near Elizabeth (on the plains) with acreage, his son bid low and got it for $480k.
He bought a short sale here in COLO SPGS, listed at $80k, he put in a lowball bid and got it for $16k, but the process eventually took two years. He'd forgotten about it, but the listing agent called him one day and said....you still interested in this one...
He had other similar stories, buying properties that were under $100k to start with and usually getting them for $15-20K.
At these prices he gets positive cash flow from the start.
His daughter went to college for 4 years, he bought a foreclosed condo unit, she lived free, rented the extra BR to another student, then sold for a slight profit after she graduated. The thousands he saved on rental housing for her and the profit on the property PAID her tuition in full. It's all about being smart with your money.
He hit on several key points:
- You need a network of real pro's on your side; Mortgage wizard, handyman, engineer for foundation inspections, etc.
- Always works with the LISTING agent, who bend over backwards to help him.
- No CPA, they charge too much, he uses "enrolled agents" who do his IRS-1040 for about $1k less per year than a CPA.
I've a pal who owns fourplexes in COLO SPGS. After a tenant vacated recently, it was found out the tenant was a hoarder; they took four small dumpster loads of trash out of there before they could clean and paint, etc. The toilet was so stained that nothing could clean it.
Being a landlord at the lower levels is not for the faint of heart; I won't touch it and I don't recommend it to anyone. At the upper levels it too is fraught with booby traps as explained in the link that Wanneroo posted (Thanks!).
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I can't thank you enough for this excellent post (I will keep hitting the rep button for you as often as I can). Clearly you have researched moutain real estate for a long time and have come to the right conclusions. I am going to follow your lead and stay off these properties. What continues to amaze me is the enormous hype that goes into promoting these largely ridiculously priced properties. One look usually tells you that most of these properties are very poorly built with inferior materials (one property I looked at even had drop ceiling tiles like in some warehouse). Not to mention the Association fees are upwards of $400 and approaching that of the mortgage itself. All my spreadsheets kept telling me the ROI or cash flows made no sense at all - only for the RE agents to tell me about how all their other clients are making boatloads of money and laughing (or possibly skiing) all the way to the bank!
Depends on the contractor, some properties are well built, others not so well and you can see that in Vail, which only has real estate going back 50 years. Some places have aged well, others are horrible. Probably the same as any place.
At the lower end of the market, I think the hard part is the transient population, with a constant turn over from renters in and out seasonally sometimes. So these places get a lot of wear and tear. With my old company and their employee housing units that were built in 1999 or so, I know one building was renovated twice, the first time after a tenant thought he'd play a joke and activate the sprinkler system, which caused $150K in flood damage alone and then there were the renovation costs of 15 units.
On the more medium range of the market if you are catering to vacation rentals by tourists, you have to have someone market it and promote it to keep cash flow coming in. And then also someone to clean and maintain the place. I think the hard thing there is doing that marketing and then trying to keep the place in a presentable condition.
There are just so many issues and so many costs to take into account, I'd never recommend it unless you are prepared to make it your onsite full time job.
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Excellent Post!
