Should I continue to spend money on a Colorado Vacation Rental each year
or is it time to finally purchase my SKI HOME in Colorado?
For many this is an emotional process and the thought of owning resort real estate in Colorado is a dream come true.
The baby boomers started the trend, investing in second homes for vacationing or future retirement in the early 2000s, with 36 percent of all homes purchased in 2004 serving as investment or vacation properties, according the National Association of Realtors. Even through the tough economic crisis we have seen over the past 5 years, owing a vacation rental continues to be a realistic option. And, owning that dream home can come with some nice financial advantages, IF you are prepared and realistic about what you can afford and look at options in maximizing rental incomes while minimizing expenses.
I hear this Rent vs. Buy question often as a professional with experience in both vacation rentals and resort real estate.
Let me start with some analysis on our current resort real estate market. Location is key in finding resort real estate that is also a good investment. As we found in the housing crisis of 2008, not all vacation areas will continue to rise in value. For example, southern Florida, a popular vacation home location, took a hard hit during the most recent housing downturn and is not yet showing signs of recovery. Other areas saw downturn, but continue an over-all trend towards the positive.
What I have seen in the ski resort real estate markets of Colorado, real estate in Breckenridge, Vail and the surrounding areas, historically runs in 10 year cycles. The height of our last cycle for Summit County real estate was 2007/2008, with a decline over 2009 - 2012. While prices have declined, they have not plummeted and in my opinion, we are at about 2006 pricing right now. Recent trends appears that the market will start to recover in 2013 and begin another upward cycle.
Of course, for every negative, there is a positive. In the wake of the global recession, many key vacation spots have real estate markets that are ripe for rental investment. I believe Breckenridge and Vail resort real estate is currently at the best investment value we will probably see as we move forward. The key is to think futuristic. Resort real estate is not a stock or a bond and should be in your long term portfolio in order to take advantage of the benefits.
If you are considering owning a vacation rental property or resort real estate in Colorado,
let me take you through a few prep steps that may help you maximize your time and investment!
(do this BEFORE you arrive on vacation!)
Step 1 - Determine Your Location
Define what area that would be your primary choice for owning property. Consider locations you have vacationed in before and are familiar with first. What is your favorite ski mountain in Colorado? Where do you like to stay when you come to visit, mountain side, in town, secluded cabin location? Also, consider the accessibility of your resort real estate. Can you reach in the summer and the winter. If you are going to use as a vacation rental, is there adequate airports, roads, and transportation for potential guests to reach you? In most cases, folks start with their personal favorite vacation rental of the past and use this as a baseline for defining what they would want if they were purchasing resort real estate.
Step 2 - Become Informed About the Local Real Estate Market
Research the current market conditions in your chosen area. Look for properties currently on the market via online websites (for Summit County Real Estate, you can access all properties in the MLS here), in the newspaper and/or local advertising in the area. Check the rental prices for similar size vacation rentals and resort real estate to get a feel for the rental potential.
Step 3 - Understand Your Financial Situation
As with any real estate purchase, start with your homework to see what you can expect to afford. Work out your actual expected yearly rental income (if you need help, please contact us), taking into considering potential rental incomes, as well as expenses and possible tax implications. Talk with multiple vacation rental management companies in your desired area as management costs vary greatly, from do it yourself, to 12% commissions (see our rental management program) to up to 55% going to the rental management company is some locations - OUCH!
Step 4 - Check Your Credit
Check your credit report to make sure you are in a good position to take out a mortgage. Look at your debt rations and compare your yearly mortgage payments with your yearly expected rental income. Evaluate your finances to see whether you have other funds available to make up potential gaps if your rental income does not completely cover your mortgage payments. Consult a mortgage professional (or multiple mortgage professionals) to review your financial situation and second home loan opportunities. Touch base with your tax accountant to discuss any tax advantages or implications.
Step 5 - Find Local Professionals To Assist You
Now that you have an idea of what you want and what you can afford, enlist a local expert to help you find the perfect resort real estate for you. You will have limited time in the area to search for your vacation rental property, so look for a real estate professional that is knowledgeable in your area, familiar with vacation rental properties and most importantly, one that PREVIEWS HOMES PRIOR TO YOUR ARRIVAL. This will allow you to focus on the best potential homes for your needs.
We hope this information is helpful. Please contact us if we can be of assistance in helping you find your Mountain home!