Buying a vacation rental property in Buena Vista.... (Aspen, Vail: appointed, 2010)

[joshbparker]

I'm considering buying a house in the BV area to use as an investment / vacation house, and I'm wondering if anyone on this board has information as to vacancy / fill rates for similar properties. My thinking is that, rather than allocating cash solely into a 457 or some other traditional saving programs for my kids (age 1 & not-yet-born), I could invest in a mountain property that will appreciate over the investment lifespan (18 - 22 years), hopefully provide positive annual cashflow, and most improtantly allow for some mountain recreation for my family (when it's not being used in as rental pool). BTW- I've ruled out Summit & the other major ski counties because my price range ($200k - $275K) means a condo, which means HOA fees, and my cashflow model shows that the profitability takes a huge hit if those monthly fees are raised. Plus my suspicion is that the Ark Valley is the next big Colorado mountain boom area... although the model I built is very conservative (average 2% home value appreciation over 20 years).

I've done quite a bit of research so far - I know the 20 year demographic projections for the area, I've obviously puled the City-Data info, and I've built a comprehensive spreadsheet model that accounts for taxes, depreciation, amortization, etc. I'm aware that there will be seasonal aspects to a rental property , and I built that into the model as well. I probably could get some more comprehensive info from a realtor, but I'm not ready for the hassle yet- looking at 2010 to commit. We're not quite ready financially and I think the market will continue to get a little softer up there.

The questions I have for this forum are:
- Does anyone have an idea what the expected vacancies would be for a house rental in the Ark Valley?
- Seasonally better in the winter (Monarch skiers) or in the summer (rafters / peak baggers / fishermen)?
- Does anyone work with a property management group up there; and if so, which ones are the most reputable?

Thanks in advance for any information...

[Sockeye]

Investing in vacation property in the Arkansas Valley might have been a good idea before the burst of the speculative RE bubble. I don't see it reinflating anytime soon. All the next "Last Great Places" will probably be shelved indefinitely, and the more mature, overbuilt resort towns served by nearby airports like Vail, Crested Butte, and Aspen will, and are, offering tourists deals that can't be beat by the more rural mountain towns.

[joshbparker]

Good point about the availability of regional airports.

As for speculative bubbles, I'd be considerably disappointed if I had invested before the bubble burst -wouldn't I be sitting on negative equity right now, with BV home prices dipping 5% in 2008?

I've considered the possibility of flat growth of home values. In fact, even at 0% appreciation in the 20 year horizon, post-bubble-burst, the model still suggests a modest return of 30% from the cashflows of the rental business. And given that horizon, I don't think that's likely. As a comparison, I pulled the nationwide Home Price Index from '75 to '95 (pre-RE bubble, and a period which saw its share of recessions), and that averaged about 0.7% annually. I think it's reasonable to assume that Colorado mountain property would do slightly better than that. I'm not looking to make a quick buck on the long-gone double-digit appreciation rates of the bubble. I'm looking for a place in the mountains where my family can spent time together, and is a reasonably safe place to invest money.

So it really comes down to vacancies rates. And I know about VRBO.com; it's a decent barometer, but since owners also block out weeks on their own calendars, it's hard to gauge what the actual rental percentages are...

[Dreaming of Hawaii]

Josh, we have a house in BV that we rent on a full-time basis. Our property manager also handles vacation rentals. The rental market has been up and down with the economy. We charge $1,300 per month, which is on the high end, for a 3 bedroom, 2 bath house, so that gives you some idea of possible income. Our first renter, who stayed for a year and a half, is a retiree building his own house in the area. The market was looking really strong with the planned opening of the Climax mine north of Leadville, and all available rentals were taken. However, the mine put their plans on hold, so now the rental market is weak.

As far as vacation rentals, you need a house with great views or located on the Arkansas River or Chalk Creek.

If you email me privately I can give you our property manager's name and phone number.